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OT Notes – Chapter 4, Example 5

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › OT Notes – Chapter 4, Example 5

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 1, 2013 at 7:12 am #144275
    lsoltobaeva
    Member
    • Topics: 38
    • Replies: 72
    • ☆☆

    Dear Mike,

    I have a question regarding the W2 in the example with Rima and Saule where a proportionate method is used in calculation of goodwill.
    But the layout is confusing me. Is it necessary to add a 20% of NCI share to a consideration received?
    I was preparing last time based on Emily Wolf publication and they would use the following layout:

    Consideration paid for Saule $800,000
    less Fair value of share of NA (80%) ($680,000)
    Goodwill $120,000
    Impairment $12,000
    ————–
    $108,000

    If I use this layout on the exam, am I risking to lose marks?

    second question, if the exam question states that a proportionate method is used BUT gives the fair value of NCI at the same time, should I ignore this information? Or should I use that information in ‘your layout’ of W2? if yes, what the difference then from full goodwill method?

    Thanks,
    Louisa

    November 1, 2013 at 9:03 am #144285
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    In answer to your first question, no problem using Emile’s method. I have done it my way because that is the more likely scenario in the exam – nci will probably be involved at fair value.

    It’s difficult to see how “proportionate” could be used at the same time as fair value. However, he has done this in a couple of past questions (Andash I seem to remember was one) where he said that goodwill was calculated on a proportionate basis. So calculate the goodwill for the parent, apply proportions to arrive at goodwill for the nci, add on their share of net assets and you have the nci value at date of acquisition.

    Does that answer it?

    November 1, 2013 at 9:24 am #144288
    lsoltobaeva
    Member
    • Topics: 38
    • Replies: 72
    • ☆☆

    Thanks!
    I’ll look through Andash, and understand what you wrote 🙂

    regards!

    November 1, 2013 at 10:00 am #144289
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re welcome

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