NCI valuation of Robertas and Ingrida question

“I was wondering why Ingrida’s ‘opening retained earning’ for 1/1/09 at $20000 were excluded?”

How have you reached that conclusion?

When Robertas acquired 75%, ask yourself “From whom did Robertas acquire those Ingrida shares?”

So 75% of the pre-acquisition profits have automatically been accounted for because Robertas compensated the former shareholders when Robertas bought the shares

Now then, cast your mind back to day 1 on the F3 introductory course. Are you there yet … in that dim and distant past when every minute of every day there was new stuff coming at you

One of the really important bits of new stuff was the “fundamental accounting equation” and it goes like this:

Net Assets = Shareholders’ Equity

Do you remember that?

And shareholders’ equity comprises share capital + reserves (including retained earnings)

And when we computed the nci as having a value proportionate to their shareholding, that meant that we were valuing the nci as 25% of shareholders’ equity

And that 25% included their share of the Ingrida share capital AND their share of the Ingrida reserves (including the retained earnings)

Is that better?

No problem and you’re welcome