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Hi everyone.
The study text says that the calculation of NCI interest in a D-shaped group is as follows:
NCI at acquisition
NCI share of post-acquisition ret earnings
Less NCI share of investment in the sub-subsidiary.I dont understand why the proportionate NCI-share of the investment in the sub-subsidiary is deducted from the NCI interest. Can anyone help me??
Thanks a lot.
Hi Just need also help… Kaplan Mock.
Complex Qn. Direct control was 30%the Indirect control is 60%*255 = 15% giving a total of 45%. I thought this was an Investment in Associate. But suprising the Answer says its a Subsidiary. Can any one tell me whyIt does not matter if effective control is less than 50% as long as the company controls its subsidiary and the subsidiary has a controlling interest in another company.
Hi evalstnqi… Thanks for clarification. But Lahore in the Kaplan example acquired 60% of Barcelona and Barcelona had acquired 25% in Kumping.. I thought the 25% is Investment in Associate which is Significant Influence. Its not control.. What about that situation? Pliz just help.
Kunming has to be consolidated as part of the Lahore Group because although the effective interest is 45% this is used only for calculations i.e Goodwill and share of post acq profits and NCI. Because Lahore controls 60% of Barcelona that 60% also controls the 25% that Barcelona has in Kunming indirectly and Lahore has 30% control of Kunming directly. I hope that this helps. Check out RCABelfast on You Tube, those lectures really help.
Hi,
sorry, I really don’t get this one.
Lahore acquires 60% of Barcellona
Barcelona acquires 25% of Kunming
Therefore there is an indirect holding of 60% * 25%. (15%)
There is also a direct holding of Kunming of 30%
Total, direct and indirect is 45%.
My issue is that Barcellona does not control Kunming (the subsidiary only have a 25% holding) so control cannot be assumed via that route and nor can it be acquired by the merged holdings (45%).
There is no combination that I can see where the group or any member of it can control Kunmings directly or indirectly.
Do you see my problem. I just cannot get my head around why Kunming is not an associate rather than a subsidiary.
Anyone got any further pointers on this one as it’s a really good mock appart from this one issue that I just can’t see as a subsidiary situation and it’s pretty fundamental to the answer
Many thanks in advance,
Shaun.
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