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CHAPTER 4 CHANGES IN THE COMPOSITION OF A GROUP…
The NA at DOD for calculating Gain in group in the Diana and liga question were calculated by the groups holding as a percentage of the NA of sub at DOD but in the following question of raimonda and dainius the NCI value was deducted from the sub’s NA at DOD for calculating the groups share of NA why the difference ??? I followed the NCI approach for Diana and liga but got a different answer was my answer also correct?In Diana and Liga, I have taken 75% of $700,000 net assets at date of disposal.
That would have been the same if I had instead deducted the nci share of those net assets (25%) because 25% x $700,000 is $175,000 and $175,000 deducted from $700,000 is $525,000 which is the same as 75% x $700,000
That approach works where the nci is valued on a full fair value basis that equates to a 25% nci investment being equal to one third of the parent’s 75% holding.
But that’s not going to happen in the exam!
So, with Raimonda and Dainius, there is the additional twist. In this example, the nci in Dainius has a specific value attributed to their share of the goodwill ($3,000)
Now, when we look at net assets at date of disposal, there are shares, retained earnings brought forward, retained earnings for 9 months (all of which is attributable 80% parent and 20% nci) and $23,000 goodwill of which the nci is entitled to just $3,000, NOT 20%
So in the Raimonda example it would be incorrect to take Raimonda’s share of 80% because she owns greater than 80% of the goodwill $23,000
OK?
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