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I came across this question from Kaplan revision kit and I suppose it was modified Dec 09 exam question.
I understand the apportionment of the profit as the finance cost only incurred after the acquisition.
what I got confused about is the post acquisition profit to calculate the attribution of (subsidiary)profit to NCI.
the post acquisition profit, after deducting the finance cost, was 9500(full year profit was 21000, 11500 pre acquisition and 9500 post)
and the intra-group interest was not added back for reaching the the profit which would have been made if the interest were never charged.
I suppose the post acquisition profit should be 11500 (9500+2000)for calculating the profit attributable to NCI, because the effect of intra-group interest should be eliminated, right ?
could you kindly explain this, thank you!
Yes, it is a bit complicated but you are correct in your assumption regarding the intra-group interest.