Non-Controlling Interest

This topic has 5 replies, 3 voices, and was last updated 1 year ago by P2-D2.

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May 4, 2021 at 11:21 pm #619688
nikkydouglas
- Topics: 3
- Replies: 1
The NCI can be determined:
1. Fair Value

2. Proportionate share of net assets:
NCI% x S’s NA @ Acquisition date (as in ex. 3)

However in ex. 4, and going forward this method was used:
NCI @Acquisition date (my understanding is either method 1 or 2 as above)
add: NCI% x S’s post acquisition movement (when exactly are we supposed to add this figure, and why didn’t we add it in example 3)

Not sure what I’m missing here, can you advise?
May 6, 2021 at 10:05 am #619842
P2-D2
Keymaster
- Topics: 4
- Replies: 6115
Hi,

What you are describing is the fair value method, where we value the NCI at fair value at acquisition and then add the NCI share of post-acquisition retained earnings. This is the method that you would use in the exam.

Thanks,
May 7, 2021 at 12:24 am #619906
daphney
- Topics: 1
- Replies: 1
i had a similar problem before. what you are missing is that in example 3, we were asked to use the proportionate share of net assets method not the fair value. i think it is also worth noting that when using the proportionate share method, our net assets are determined by adding the share capital and retained earnings of the subsidiary at reporting date and NOT by adding assets and liabilities and then netting them off. i suspect it would be double counting if we were to add S’s share of retained earnings again because in example 3 we said [20%*(250 000{share capita}+900000{Retained earnings}]), so in essence we have included the subsidiary’s share of post acquisition retained earnings. i hope i’m not misleading you. Chris please confirm
May 8, 2021 at 9:12 am #620025
P2-D2
Keymaster
- Topics: 4
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Yes, we’ve never calculated the net assets of the subsidiary in any other way as opposed to using the share capital, share premium, retained earnings and other reserves.

Thanks
May 12, 2021 at 7:13 pm #620439
nikkydouglas
- Topics: 3
- Replies: 1
Okay, I saw my mix up. Thank you both so much.
May 17, 2021 at 8:09 pm #620887
P2-D2
Keymaster
- Topics: 4
- Replies: 6115
Glad you’re on top of it now and that all is clear.

Thanks
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