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Hi. My question is related to BBP book F3. Page 276. Question 25
Teo Co acquired 95% of the ordinary share capital of Mat Co 31 December 20X0. The following information relates to Mat Co:
20X0 20X1
$’000 $’000
Retained earnings 700 800
Revaluation surplus – 100
700 900
The fair value of the non-controlling interest in Mat Co at the date of acquisition was $45,000. What is the amount reported for non-controlling interest in the statement of financial position of the Teo Group as at 31 December 20X1?A $45,000
B $55,000
C $85,000
D $90,000The book answer is 55000, but my answer is 50000 (which doesnt have such as answer)
My workings: (800 000-700 000)*5% + 45 000= 5 000 + 45 000 = 50 000
In my opinion, in the book, revalution surplus is also added to NCI. But in BBP text book (page 431) there is like that question, but in that question revalution surplus is not added to NCII do not have the BPP Study Text (only the Revision Kit), but the NCI is the fair value at the date of acquisition plus their share of all reserves earned since the date of acquisition.
Since the revaluation reserve appeared since acquisition, then 5% of this is included as well.I cannot comment on the question on page 431 (because I do not have the book) but have you checked that the revaluation reserve did not already exist at the date of acquisition?
The mistake youve done is in the first working.
When working out the Fair value of the Net assets of the subsidiary, you subtract the total Assets at reporting date with their value at acquisition.$000s
At Rep date
RE 800
Res 100
Total 900At Acq’n
RE 700
Res 0
Total 700900-700 = 200 is the post acquisition profits of the sub
NCI=
NCI at acq’n = 45
ADD: NCI% x S’s post acq’n profits = 10
(5%*200)
NCI = 55 000
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