Topic_12_Practice_Questions_Solutions

Topic_12_Practice_Questions_Solutions - 1 Week 12 11 Oct....

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1 Week 12 11 Oct. (JK) Lecture Topic 12 Consolidation: Indirect Ownership Interests Determine direct and indirect ownership interests in a group with multiple levels of subsidiaries Describe how direct and indirect ownership interests are utilised in the non- controlling interest allocation Prepare consolidation journal entries for the direct and indirect non-controlling interest Prepare comprehensive consolidation worksheet Tutorial Questions: Picker et al, Ch.26 DQ1 Exercise 26.3 Practice Questions: Picker et al, Ch.26 DQ2, DQ3, DQ4 Exercise 26.4 Exercise 26.5 journals Chapter 26: Consolidation: indirect ownership interests DISCUSSION QUESTIONS 2. Explain the difference in the calculation of the direct and indirect NCI. Direct NCI receive a share of all equity of the subsidiary while indirect NCI receive a share of only post-acquisition equity. In adjusting the NCI for the effects of intragroup transactions, generally there is no difference between INCI and DNCI. However where dividends are paid/payable by a subsidiary containing an INCI, adjustments are necessary to ensure no double counting occurs.
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2 3. Why does the indirect NCI receive a share of only post-acquisition equity? Assume: 80% 60% A Ltd B Ltd C Ltd A Ltd 80% A Ltd 48% DNCI 20% DNCI 40% INCI 12% The DNCI in B Ltd receives a share of the whole of the equity of B Ltd which includes equity relating to the asset “Shares in C Ltd”. This asset reflects the assets of C Ltd that were on hand in C Ltd at the date B Ltd acquired its shares in C Ltd. The pre-acquisition equity of C Ltd also relates to these assets. As the DNCI receives a share of the equity of B Ltd relating to these assets, and as the DNCI in B Ltd is the same party as the INCI in C Ltd, to give the DNCI a share of all the equity of B Ltd as well as the INCI in C Ltd getting a share of the pre-acquisition equity of C Ltd would double-count the share of equity to the NCI. As the investment account “Shares in C Ltd” only relates to the pre-acquisition equity of C Ltd, the INCI is then entitled to a share of the post-acquisition equity of C Ltd. 4.
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This note was uploaded on 10/31/2011 for the course ACCT 2542 taught by Professor Knapp during the Three '11 term at University of New South Wales.

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Topic_12_Practice_Questions_Solutions - 1 Week 12 11 Oct....

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