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Hello,
My query relates to a step disposal where control is retained and more particularly the treatment of a fair value increase in the sub’s net assets at acquisition date, when calculating the adjustment to NCI arising from a step disposal
I came across a question where a parent originally held a 70% interest, and then sold a 10% interest to end up with 60% (i.e. no loss of control )
At the date of acquisition of the Subsidary, there was a fair value increase to its net assets and the Group has chosen to value NCI at fair value. This is all fine.
But when the solution calculated the increase required to NCI to allow for the step disposal, the fair value increase to the Sub ‘s net assets was added in when calculating NCI share of Fair value of net assets at the date of the step disposal….this puzzles me..
I know we reduce NCI share of net assets for any post acq depreciation arising from a fair value increase at date of acquisition, but to my mind the actual fair value increase does not impact on the NCI balance…
Is the journal for a fair value increase to a Sub’s net assets at acq date, when the group values NCI at fair value at acquisition date not Dr Assets, Cr Cost of Control/Goodwill………there is no credit to NCI!!!!
Any guidance you could provide would be appreciated
There is no consistency in the calculation – the standard is not very clear.
They give the credit in the exam if you demonstrate that you have to compare cash received with the change in the NCI and that the difference goes to reserves not the SPLOCI.
Remember that you can still get full marks on the calculation if they agree with the approach – the numbers don’t have to agree.
I can’t imagine why FV adjustment was incorporated (unless they are calculating NCI as % of net assets) – an approach that went out with Noah’s Ark!
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