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Hello Mike
I was going through your answers for the Associates and JV questions and I got stuck with Eg 2. In the Consolidated RE calculation, you calculated the share of Antonas post acqn as 1/6 x 32-20, I’ve looked everywhere in the question and can’t figure out where you got the 20. However, in your lecture on the topic, you mentioned that the post acpn was calculated as NA post acqn-NA @ acpn which is £12000, that I get but I don’t know why it’s calculated differently in the course notes. Thanks.
Net assets at date of acquisition were 100 and the share capital of the JV was 80. Therefore the retained earnings at date of acquisition must have been 20
Now they are 32
so post acq retained must be 32 – 20 = 12
Better?
Thanks for making it clear Mike. I’ve got another question, if you don’t mind? In eg 4 of chapter 3 of your course notes, I really don’t know how you got the 7/15 as the group’s share of the NA in the goodwill calculation. I understood the 70%, the 2/15 and I thought that K’s share in L was 10/15 and not 7/15. Thanks.
Yes, K in L is 10/15 but what we are looking for is A’s share through K in L and that’s 70% * 10/15 = 7/15
Ok?
Thanks, I completely overlooked that little detail. I’ve got another question about the change in the composition of a group. In the NCI calculation, why did we have to use the proportionate method when the FV, £100000 was given? I thought if the FV was given, that would be the figure to use.
I don’t have the notes easily to hand, I don’t have access to a printer in the hotel and it’s extremely difficult reading these notes on an iPad.
However, I’ll have a guess at what I think you may have done. No doubt you’ll correct me if my guess is off target 🙂
Do I remember that only one of the subsidiaries was fair value and the other proportionate? Have you confused them?
Let me know, please
Actually, there was only one subsidiary, it was the Sergijus and Indra question. Where S had 55% and 2 years later, acquired a further 25%. The NCI interest in goodwill on original acquisition had been valued at £100000.
In working out the goodwill, you calculated the NCI as:
(45% × 1,280,000) + 100000. The 1280000 was the NA @ DOA.I just wondered why you had to add both the FV of NCI and proportionate value, when the FV was given or did I misunderstand the question? Thanks.
You misunderstood the question! Again, I’m batting blind (very much like the English cricket team in Sri Lanka!) but the question states that the goodwill attributable to the nci is $100,000 so we know the value of the nci investment is their proportionate share + $100,000
Ok?
I see what you mean, I did misunderstand. I thought the £100000 was the FV and not their share of the goodwill. Thanks once again and LOL at the English cricket team joke.
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