NCI at acquisition date Example a Acquisition analysis full goodwill method

Nci at acquisition date example a acquisition

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NCI at acquisition date Example – (a) Acquisition analysis – full goodwill method Consideration paid 60,000 FV of NCI 38,000 98,000 Share capital 40,000 General reserve 2,000 Retained earnings 20,000 62,000 FV adjustments – increase plant (after tax) 14,000 FVINA 76,000 Goodwill 22,000 Attributable to: Parent 14,400 NCI 7,600 22,000 19 20,000 x (1 – 30%) G’will of Sub = 19,000; 95,000 (38,000 / 0.4) – 76,000 19,000 x 40% (19,000 x 60%) + 3,000 Control premium = $3,000 (22,000 – 19,000)
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NCI at acquisition date BCVR entries Example – (a) Full goodwill method DR Accum. Depn 70,000 CR Plant 50,000 CR DTL 6,000 CR BCVR 14,000 DR Goodwill 19,000 CR BCVR 19,000 Pre-acquisition entry DR Share capital 24,000 DR General reserve 1,200 DR Retained earnings 12,000 DR BCVR 19,800 DR Goodwill 3,000 CR Investment in S Ltd 60,000 20 60% of pre-acquisition equity balances eliminated E.g. BCVR $33,000 x 60% = $19,800 Total BCVR equity = $33,000 The control premium paid by P Ltd is recognised as Goodwill
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Example – (a) Step 1 NCI Entry – Full goodwill method DR Share capital 16,000 DR General reserve 800 DR Retained earnings 8,000 DR BCVR 13,200 CR NCI 38,000 NCI at acquisition date 21 40% of pre- acquisition equity balances BCVR equity of $33,000 x 40% The CR to the NCI account is equal to the fair value of the NCI as per the acquisition analysis
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NCI at acquisition date $ Cost of acquisition 60,000 Book value of net assets - Share capital 40,000 - General reserve 2,000 - Retained earnings 20,000 Total book value of net assets 62,000 Fair value adjustments - After tax increase in plant 14,000 FVINA 76,000 X %age acquired 60% 45,600 Goodwill on acquisition 14,400 22 Example (b) – Acquisition analysis – partial goodwill method
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NCI at acquisition date BCVR entries Example – (b) Partial goodwill method DR Accum. Depn 70,000 CR Plant 50,000 CR DTL 6,000 CR BCVR 14,000 Pre-acquisition entry DR Share capital 24,000 DR General reserve 1,200 DR Retained earnings 12,000 DR BCVR 8,400 DR Goodwill 14,400 CR Investment in S Ltd 60,000 23 BCVR equity of $14,000 x 60%
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Example – (b) Step 1 NCI Entry – Partial goodwill method DR Share capital 16,000 DR General reserve 800 DR Retained earnings 8,000 DR BCVR 5,600 CR NCI 30,400 NCI at acquisition date 24 40% of pre- acquisition equity balances BCVR equity of $14,000 x 40% The CR to the NCI account is equal to 40% of FVINA (76,000 x 40% =30,400) per acquisition analysis
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Topic 5 NCI share of equity subsequent to acquisition date 25
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NCI subsequent to acquisition At 30 June 2021 & 2022 the equity balances of S Ltd are: 30/6/21 30/6/22 Share capital 40,000 40,000 General reserve 3,000 3,000 Retained earnings 45,000 75,000 88,000 118,000 27 S Ltd recorded a profit of $40,000 for the year ended 30 June 2022 and paid a dividend of $10,000 on 1 January 2022
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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
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