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Hi,
I have a question on a consolidated income statement, can someone please explain to me how to deal with the provision for unrealised profit and also how to calculate the goodwill (particularly for the NCI) as the question is quite unclear with regards to the information on those two items.Thanks!
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well with respect to urp firstly u have to eliminate any transaction made between the sub and the parent..eliminating means that u have to deduct the gross amount of the transaction from sales as well as cogs.secondly for any unrealised profits u have to add the amount of urp in the cogs and deduct it from the closing stock while making ur sfp..remember all this has to be done for the post acquisition period only. With regard to the goodwill of nci.the question specifically asks for nci s goodwill when the examiner wants it to be computed.and also states that for the cost of investment of the nci the share price of the sub should be used..from this u can then deduct ur fv of netassets acquired into ncis holding to compute ur goodwill..
Thanks cuid3. So in this particular question, for the Nci cost of investment I should just calculate 20% of the $20million ordinary shares?
In regards to the goodwill impairment, it said “it is group accounting policy to carry out a goodwill impairment test every year. In the current year it is equal to one-fifth of goodwill. This write-off is treated as an administrative expense” So once the goodwill has been calculated then the Impairment would equal one-fifth of the total goodwill?
and lastly in the question, the table for inter-co trading shows that the sub already had a profit of $10m in inventory at the start of the year and it grows by $10m (to $20m) by the end of the year, the goods sold were worth $40m. how do you deal with this since it is four years after the date of acquisition?
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