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Dear Mr Tutor,
In this question, they provide us the value of NCI at Option company at the date of disposal (34m).
My question is: If they do not provide, could we calculate this value based on other information provided, assuming that the total comprehensive income is equal for each month.
By the way, in separate F/S of Marchant, what is the treatment for this disposal on SoFP and in SoP/L&OCI (assume that method used is historical cost). In the F/S of Marchant provided by question, I feel that this profit has not been included.
Thank you in advance!
Hi,
Yes, we could calculate the NCI of the subsidiary being disposed of by using the standard group SFP working to calculate the NCI. We would take the NCI at acquisition and add any NCI share of the post-acquisition profits up to the date of disposal. You would have to be given much of this information within the question to help you work through the numbers.
In the individual account of Marchant we calculate a profit on disposal of the shares, so essentially accounting for the legal form of the transaction. This gain/loss on disposla is then removed on consolidation and replace with the group profit or loss on disposal.
Thanks
So, in the separate F/S of Marchant in this question, the examiner has already removed the P/L on the sale recognized in individual account? Because if he/she has not, as you explained, we must somehow calculate this P/L and remove it when consolidating (an extra working, of course).
Moreover, if in a question, P/L of disposal on separate F/S is provided (for example when a subsidiary sells minor % shares in a sub-subsidiary), then this “removed P/L” would be reduced to both parent and NCI, right?
Hi,
Correct on your first point.
On your second one there would be no impact on NCI if the disposal is recorded in the parent’s accounts as the NCI only have ownership interest in the subsidiary. You’re correct with regards what you say if the subsidiary were to dispose of an interest in a sub-subsidiary but I think this would be beyond the scope of P2
Thanks
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