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Hi Mr MikeLittle
Can you explain me this differences that made in similar examples?
Rooney Co acquired 70% of the equity share capital of Marek Co, its only subsidiary, on 1 January 20X6.
The fair value of the non-controlling interest in Marek Co at acquisition was $1.1m. At that date the fair
values of Marek Co’s net assets were equal to their carrying amounts, except for a building which had a fair
value of $1.5m above its carrying amount and 30 years remaining useful life.
During the year to 31 December 20X6, Marek Co sold goods to Rooney Co, giving rise to an unrealised profit
in inventory of $550,000 at the year end. Marek Co’s profit after tax for the year ended 31 December 20X6
was $3.2m.
What amount will be presented as the non-controlling interest in the consolidated statement of financial
position of Rooney Co as at 31 December 20X6?
$1,895,000
$1,495,000
$1,910,000
$1,880,000So it was calculated in one example like this
NCI 1100-550(unrealised profit) + (3200-50)x30%=1495But in another example depreciation deducted from the overall amount of the profit.
like this 1100-550+3200×30%-50=1880I think Option 1 is correct because we have to deduct depreciation firstly from profit then multiple by the NCI %
“I think Option 1 is correct because we have to deduct depreciation firstly from profit then multiple by the NCI %”
I don’t!
I cannot see how you have arrived at $1,880,000 using these figures!
“1100-550+3200×30%-50=1880”
According to my calculator, that line equates to $1,075!
The value of the nci at date of acquisition is $1,100,000 – ie the figure given in the question – and that value of $1,100,000 is unaffected by the fair value adjustment to the building
However, that fair value adjustment does have an affect on the profits for the year ended 31 December, 2016 in that those post-acquisition profits of $3,200,000 should be reduced by the additional depreciation on that fair value adjustment ($1,500,000 / 30 = $50,000 additional depreciation)
Those same profits should be reduced by the pup on the closing inventory
So that profit figure of $3,200,000 is reduced by $550,000 pup and also by $50,000 additional depreciation = a net reduction of $600,000 and leaving us with post-acquisition retained profits of $2,600,000
The nci is entitled to 30% of that figure = $780,000 and that adds on to their value as at date of acquisition of $1,100,000 giving us an nci value at the year end of $1,880,000
Better?
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