Lecture_Topic_11_Non_Controlling_Interest_2xpage

Lecture_Topic_11_Non_Controlling_Interest_2xpage - Chapter...

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Chapter 25 Consolidation: non-controlling interest Prepared by Emma Holmes AASB 127 defines non-controlling interest as “that portion of equity of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent Recall from chapter 22, that non-controlling interests are classified as a contributor of equity to the group NCI is presented and identified within equity separately from the parent’s equity The NCI is entitled to a share of the consolidated equity. The remainder of this lecture will examine how the NCI’s share of equity is calculated Nature and calculation of NCI
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Acquisition analysis, BCVR entries and pre-acquisition eliminations ± Impact depends on the treatment of goodwill. Two options: ± Full goodwill method ± Partial goodwill method ± The investment is eliminated against parent’s share of subsidiary’s pre acquisition equity. Intragroup transactions ² The full effect of intragroup transactions are adjusted on consolidation regardless of the ownership interest held by the parent ² Dividends are an exception Effects of NCI on the consolidation process Full goodwill method • NCI measured at fair value on the basis of market price for shares not acquired by the parent. • NCI receives a share of goodwill Example: – A Ltd acquired 60% of B Ltd for a cost of $150,000 – Equity of B Ltd was $220,000 comprising share capital of $100,000 and retained earnings of $120,000. All amounts were recorded at fair value – NCI in B Ltd had a fair value of $95,000 Consideration + NCI 245,000 FVINA 220,000 Goodwill 25,000
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Full goodwill method BCVR entry DR Goodwill 25,000 CR BCVR 25,000 Pre-acquisition elimination entry DR Retained earnings 72,000 DR Share capital 60,000 DR BCVR* 18,000 CR Shares in B Ltd 150,000 100% of goodwill recognised 60% of equity balances eliminated BCVR relating to parent’s goodwill *Cost $150,000 – share of FVINA ($220,000 * 60%) = $18,000 Partial goodwill method • NCI measured at their proportionate share of acquiree’s identifiable net assets • NCI does not receive a share of goodwill Example: – A Ltd acquired 60% of B Ltd for a cost of $150,000 – Equity of B Ltd was $220,000, comprising share capital of $100,000 and retained earnings of $120,000. All amounts were recorded at fair value.
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Lecture_Topic_11_Non_Controlling_Interest_2xpage - Chapter...

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