Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Step disposal, control remains, NCI goes UP
- This topic has 3 replies, 3 voices, and was last updated 2 years ago by Stephen Widberg.
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- August 18, 2022 at 1:49 pm #663374
Luna Co acquired its 80% equity interest in Starlight Co on 1 April 20X2. Starlight Co had in issue 1,000,000 ($1) equity shares and has not issued any shares for many years. Goodwill on acquisition was correctly calculated as $320,000 but had subsequently been impaired by 15% in 20X4. Luna Co values the non-controlling interest at fair value. The fair value of the net assets of Starlight Co at acquisition exceeded their carrying amount by $200,000. This all related to non-depreciable land which is still owned by Starlight Co at 31 March 20X6.
On 1 January 20X6, Luna Co sold 100,000 equity shares in Starlight Co for $7 a share. The only reserve within equity in the individual statement of financial position of Starlight Co is retained earnings. The balance of this reserve at 1 April 20X5 was $4,658,000. Starlight Co generated a profit for the year ended 31 March 20X6 of $165,056 which accrued evenly throughout the year.Could you please help me how to account for this transaction. I understand that the cash will go up by $700,000 and NCI will also get bigger. But I am having trouble how to calculate the NCI and corresponding balancing figure? Thank you
August 18, 2022 at 7:05 pm #663389Calculate the NCI at the date of the change. Then increase it by 10/20ths Don’t forget that ACCA are mainly looking at your explanation and approach, so I would not be stressed if your answer is a bit different to the suggested answer.
September 1, 2022 at 2:33 am #6647921) NCI at acquisition date ( when control achieved ) x
2) NCI share of post acquisition reserve to date of disposal x
3) NCI at disposal date =A
4) Increase in NCI on date of disposal = (A/20) x 10
September 1, 2022 at 4:36 pm #664865🙂
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