NCI subsequent to acquisition DR Accum depreciation 70,000 CR Plant 50,000 CR DTL 6,000 CR BCVR 14,000 (i) BCVR entry - revalue plant to fair value DR Depreciation expense 4,000 DR Retained earnings (Op. Bal) 8,000 CR Accum depreciation 12,000 DR DTL 3,600 CR ITE 1,200 CR Retained earnings (Op. Bal.) 2,400 (ii) Consequential depreciation adjustment for plant (including related tax effect) Partial goodwill method: Entries for the year ended 30 June 2017 Dep’n adjustment is 20,000 over 5 years 28
NCI subsequent to acquisition Partial goodwill method DR Share capital 24,000 DR General reserve 1,200 DR Retained earnings (Op. Bal) 12,000 DR BCVR 8,400 DR Goodwill 14,400 CR Investment in S Ltd 60,000 (iii) Pre-acquisition elimination entry 29
NCI subsequent to acquisition DR Share capital 16,000 DR General reserve 800 DR Retained earnings (Op. Bal.) 8,000 DR BCVR 5,600 CR NCI 30,400 (iv) Allocation of pre-acquisition equity to NCI (STEP 1) Partial goodwill method 40% of the FVINA of $76,000 30
NCI subsequent to acquisition Opening retained earnings (30/6/16) 45,000 Less: pre-acquisition retained earnings (20,000) Post acquisition retained earnings 25,000 Less depreciation adjustment (5,600) Adjusted retained earnings 19,400 X NCI share @ 40% 7,760 NCI Step 2 allocation The NCI share of opening post acquisition retained earnings is calculated as follows: Journal (ii): 8,000 – 2,400 31
NCI subsequent to acquisition NCI Step 2 allocation The movement in general reserve is $1,000 ($3,000 - $2,000) – The NCI share of this is $400 DR Retained earnings (Op. Bal.) 7,760 CR NCI 7,760 DR General reserve 400 CR NCI 400 (v) NCI share of opening post-acquisition equities ( STEP 2) 32
NCI subsequent to acquisition NCI Step 3 allocation • The purpose of this step in the NCI allocation process is to allocate a share of all current year movements in equity to the NCI • Such movements arise from: – Current year profit – Current year dividends – Current year reserve movements • Current year profits are adjusted for the consequential effects of any fair value entries N/A in this example 33
NCI subsequent to acquisition Current year profit 40,000 Depreciation adjustment (2,800) Adjusted current year profit 37,200 X NCI share @ 40% 14,880 NCI Step 3 allocation The NCI share of current year profit is calculated as follows: Journal (ii): 4,000 – 1,200 34
NCI subsequent to acquisition NCI Step 3 allocation DR NCI share of profit 14,880 CR NCI 14,880 DR NCI 4,000 CR Dividends paid 4,000 (vi) NCI share of current year movements in equity ( STEP 3) $10,000 x 40% 35
NCI and intragroup transactions Topic 6 36
NCI and intragroup transactions Intragroup transactions eliminated in full • The full effect (100%) of intragroup transactions are adjusted on consolidation – The eliminations are the same if parent has 80% or 60% ownership • In the case of dividends however the full effect depends on ownership interest – E.g. 10,000 dividend paid only 6,000 is received by parent 37
NCI and intragroup transactions Intragroup transactions where the subsidiary makes an unrealised profit • The NCI has a share of the profits that the subsidiary contributes to the group • The NCI share is based on profits after consolidation adjustments • If profits of the subsidiary are reduced on consolidation, then the NCI is likewise reduced 38
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- Accounting, NCI, Generally Accepted Accounting Principles