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Hi
In note 2
Marchant disposed 8% I added the Net Assets at disposal date which is 134 and the Goodwill which is 12 at that date and took 8% of it to give me the amount disposed of, however that is not how it was done in the answer.
Could u plz explain the treatement and when to use this ?
Thanks
Reagrding attributable nci for nathon..
The answer is 8.8
Why we didnt deduct an impairment of goodwill of 3 as an adjustement?
@zkaay said:
HiIn note 2
Marchant disposed 8% I added the Net Assets at disposal date which is 134 and the Goodwill which is 12 at that date and took 8% of it to give me the amount disposed of, however that is not how it was done in the answer.
Could u plz explain the treatement and when to use this ?
Thanks
Hi,
You appear to be trying to calculate a gain based on the substance and not the legal form. Marchant has recorded a gain on disposal in other income, which needs to be removed on consolidation, as on consolidation we have a change in ownership as we decrease the ownership from 60% to 52%.
To calculate the gain, based on the legal form, we have received proceeds of $18 million to which we compare to the carrying value of the investment. As the value of the 60% holding is $95 million at the date of disposal then we need to calculate the value of the 8$ that has been disposed of, hence the 8/60 x $95 million in the answer. You can then hopefully see that the $5.3 million gain is then removed from the other income in the consolidation schedule.
The change in ownership is then dealt with through the group SOCE, therefore we do not see any impact of this in the question.
Thanks
@zkaay said:
Reagrding attributable nci for nathon..The answer is 8.8
Why we didnt deduct an impairment of goodwill of 3 as an adjustement?
Hi,
The impairment of $3 million took place in the prior year, not the current year.
Thanks
@P2-D2 said:
Hi,You appear to be trying to calculate a gain based on the substance and not the legal form. Marchant has recorded a gain on disposal in other income, which needs to be removed on consolidation, as on consolidation we have a change in ownership as we decrease the ownership from 60% to 52%.
To calculate the gain, based on the legal form, we have received proceeds of $18 million to which we compare to the carrying value of the investment. As the value of the 60% holding is $95 million at the date of disposal then we need to calculate the value of the 8$ that has been disposed of, hence the 8/60 x $95 million in the answer. You can then hopefully see that the $5.3 million gain is then removed from the other income in the consolidation schedule.
The change in ownership is then dealt with through the group SOCE, therefore we do not see any impact of this in the question.
Thanks
Hi sir ,
Thanks for this amazing explanation now it makes sense
1) We should calculate the Disposal percentage from coi at ye and remove it from other income. Right?
2) then other q came. So when do we use the other method (na at ye + goodwill x disposal %)
I need to diffrentiate between the circumstance so the tratement is different.
Hi,
Glad you’ve found the explanation amazing, thanks!
1) Yes, the parent company will have calculated a gain on disposal based on the legal form (proceeds less cost of investment). This needs to be removed on consolidation to be replaced by the group profit/loss on disposal (proceeds + NCI – net assets – goodwill) that is based on substance.
2) I think the other method, although it doesn’t look 100% correct, is the calculation of the group profit/loss on disposal. Remember that when the group is disposing of the subsidiary, it is disposing of the subsidiary’s net assets and goodwill.
Thanks
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