• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

Congratulations to Jamil from Pakistan and Jeeva from Malaysia - Global Prize winners!
see all ACCA December 2022 Genius Hunt Competition winners >>

Specially for OpenTuition students: 20% off BPP Books for ACCA & CIMA exams – Get your BPP Discount Code >>

Pup -NCI post acquisition profit

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Pup -NCI post acquisition profit

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 30, 2021 at 12:06 pm #633510
    alawi sayed
    Participant
    • Topics: 152
    • Replies: 166
    • ☆☆☆

    Hello Sir,

    Why in the following exam question (I could not copy the question) the PUP at 240 k was not adjusted in the post acquisition profit of the NCI when we want to distribute the profit for the year in profit and loss

    since the Journal entry is DR Retained Earnings of Parent
    CR Inventory of the subsidiary

    the question is from Financial Reporting
    March/June 2021 exam (20/21 ,

    Answer
    Gold Co
    (a) Goodwill
    $’000 $’000 $’000
    Consideration:
    Deferred cash (90% x 16,000 x $2·42 x 0·9091) 31,680
    Shares (90% x 16,000 x 3/5 x $8·40) 69,120 ––––––––
    100,800
    Non-controlling interest (NCI) (10% x 16,000 x $3·50) 5,600 ––––––––
    106,400
    Less: FV of net assets at acquisition
    Equity shares 16,000
    Retained earnings:
    At 1 October 20X1 56,000
    1 October 20X1–1 January 20X2 (9,920 x 3/12) 2,480 58,480 –––––––
    Fair value adjustments:
    Plant 2,600
    Contingent liability (850) –––––––
    (76,230) ––––––––
    Goodwill 30,170 –––––––– ––––––––

    b) Consolidated statement of profit or loss for the year ended 30 September 20X2
    $’000
    Revenue (103,360 + (60,800 x 9/12) – 5,400 (W1)) 143,560
    Cost of sales (81,920 + (41,600 x 9/12) – 5,400 (W1) + 240 (W1) + 650 (W2)) (108,610) ––––––––
    Gross profit 34,950
    Distribution costs (2,560 + (2,980 x 9/12)) (4,795)
    Administrative expenses (6,080 + (3,740 x 9/12)) (8,885)
    Share of profit from associate (3,000 x 40%) 1,200
    Finance costs (672 + 136 (W3) + 2,376 (W4)) (3,184) ––––––––
    Profit before tax 19,284
    Income tax expense (4,480 + (2,560 x 9/12)) (6,400) ––––––––
    Profit for the year 12,886 ––––––––
    Profit attributable to:
    Owners of the parent 12,207
    NCI (W5) 679 ––––––––
    12,886 ––––––––
    Workings
    W1 – Intercompany and PUP
    Post-acquisition sales = ($600 x 9) = $5,400
    PUP = (1,200 x 25/125) = $240
    W2 – FV depreciation on plant = ($2,600/3 x 9/12) = $650
    W3 – Convertible loan – calculate liability component
    $’000 DF 8% $’000
    Liability:
    Interest (10,000 x 6%) = 600 3·993 2,396
    Principal 10,000 0·681 6,810 ––––––
    Liability 9,206 –––––– ––––––
    $’000
    Interest charge to PL:
    ($9,206 x 8%) = 736
    Interest already charged (600) ––––
    136 –––– ––––
    W4 – Deferred cash consideration
    Unwinding of discount on deferred consideration (see goodwill calculation): $31,680 x 10% x 9/12 = $2,376
    W5 – NCI
    $’000
    Silver’s profit for the year ($9,920 x 9/12) 7,440
    FV Depreciation (W2) (650) ––––––
    6,790 ––––––
    NCI share 10% 679

    September 1, 2021 at 7:12 pm #633851
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6451
    • ☆☆☆☆☆

    Hi,

    If the parent is the seller then we adjust the parents profits/retained earnings and not those of the subsidiary. The NCI only looks at the post acquisition profit of the subsidiary so the PUP adjustment will not impact this calculation given that we are adjusting the parent’s figures.

    Thanks

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

 

ACCA My Exam Performance for non-variant Applied Skills exams is available NOW

NEW! Download the ACCA Pass Guide

FREE Verifiable CPD for ACCA Members

ACCA mock exams and debrief videos

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

Donate

If you have benefited from OpenTuition please donate.

ACCA CBE 2023 Exams

Instant Poll * How was your exam, and what was the result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • cBarsoum on The Stages of an Audit – Appointment – ACCA Audit and Assurance (AA)
  • John Moffat on Revaluation Reserve – ACCA Financial Accounting (FA) lectures
  • John Moffat on Revaluation Reserve – ACCA Financial Accounting (FA) lectures
  • CHICCO.J on ACCA AB Chapter 1 – The nature and structure of organisations – Questions
  • Joanne94 on Irrecoverable Debts and Allowances Example 3 – ACCA Financial Accounting (FA) lectures

Copyright © 2023 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy