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A
B
D
B
A
16.
17.
18.
19.
20.
A
B
C
A
B
21.
22.
23.
24.
25.
C
B
C
C
A
26.
27.
28.
29.
30.
C
A
B
A
C
31.
32.
33.
34.
B
A
B
B
Solutions:
1. D - Since S1 already holds controlling interest in S2 when P
acquired S1, the acquisition date for both S1 and S2 is on
January 1, 20x3.
2. D
3. E - Since S1 acquires S2 only after P acquired S1, the
acquisition dates are: (a) January 1, 20x1 for S1 and (b)
January 1, 20x3 for S2.
4. E
5. C
6. C (48,000 + 64,000) = 112,000 See Step 3 below
Solutions:
Step 1: Analysis of group structure
The group structure is analyzed as follows:
Ps ownership interest in S1
80%
S1s ownership interest in S2
60%
P, S1 and S2 all belong to a vertical group.
88
80%
20%
100%
Ownership over S2
Direct holdings of P in S2
Indirect holdings of P in S2 (80% x 60%)*
Total holdings of P in S2
NCI in S2 (squeeze)
Total
0%
48%
48%
52%
100%
NCI in S2
12%
40%
52%
Share capital
Ret. earnings
Totals at carrying amts.
FVA at acquisition date
Depreciation of FVA
Net assets at fair value
Acqn.
Date
320,000
120,000
440,000
NIL
440,000
S1
S2
Cons.
Net
Acqn.
Cons.
Net
Date
change Date
Date change
320,000
200,000 200,000
208,000
40,000 112,000
528,000
240,000 312,000
NIL
528,000 88,000 240,000 312,000 72,000
89
200,000
20%
40,000
(352,000) (115,200)
48,000
44,800
(9,600) (7,680)
38,400 37,120
100,000 160,000
(88,000) (124,800)
12,000 35,200
(2,400)
9,600
(8,320)
26,880
48,000
64,000
S2
Total
312,000
52%
162,240
26,880
(40,000)
149,120 264,320
Notice that the only difference in the goodwill and NCI computations
between a simple group structure and a complex group structure is the
indirect holding adjustment.
Step 5: Consolidated retained earnings
P's retained earnings Dec. 31, 20x1
Consolidation adjustments:
600,000
70,400
34,560
-
(17,280)
(Step 3)
87,680
687,680
320,000
( - )
(17,280)
302,720
91
N/A
88,000
( - )
(2,400)
85,600
S2
72,000
Consolidated
480,000
N/A
72,000
( - )
(8,320)
63,680
480,000
( - )
(28,000)
452,000
Depreciation of FVA
Owners
of P
320,000
70,400
34,560
( - )
37,440
( - )
Consolidated
320,000
88,000
72,000
( - )
Goodwill impairment
Totals
(17,280) (2,400)
407,680 15,200
(8,320)
29,120
(28,000)
452,000
(c)
(c)
(d)
NCI
in S1
N/A
17,600
( -
NCI
in S2
N/A
Shares in S1s profit before FVA (Step 6): (88,000 x 80%); (88,000 x 20%)
Shares in S2s profit before FVA (Step 6): (72,000 x 48%); (72,000 x 52%)
1,600,000
112,000
1,712,000
280,000
480,000
687,680
1,167,680
264,320
1,432,000
1,712,000
1,320,000
(840,000)
(28,000)
452,000
92
407,680
44,320
452,000
80%
60%
80%
20%
100%
Ownership over S2
Direct holdings of P in S2
Indirect holdings of P in S2 (80% x 60%)
Total holdings of P in S2
NCI in S2 (squeeze)
Total
0%
48%
48%
52%
100%
93
Share capital
Ret. earnings
Totals at carrying amts.
FVA at acquisition date
Depreciation of FVA
Net assets at fair value
Acqn.
Date
320,000
120,000
440,000
NIL
440,000
S1
S2
Cons.
Net
Acqn.
Cons.
Net
Date
change Date
Date change
320,000
200,000 200,000
208,000
112,000 112,000
528,000
312,000 312,000
NIL
528,000 88,000 312,000 312,000
-
S1
S2
400,000 200,000
(40,000)
400,000 160,000
(352,000) (149,760)
48,000
10,240
10,240
16,000
100,000 168,000
(88,000) (162,240)
12,000
5,760
Less: NCIs sh. in goodwill impairment (40,000 x 20%) (8,000)
4,000
5,760
Goodwill attributable to NCI Dec. 31, 20x1
Goodwill, net Dec. 31, 20x1
20,000
16,000
The fair values of the NCIs are determined on the subsidiaries respective
acquisition dates (i.e., Jan. 1, 20x1 for S1 and Dec. 31, 20x1 for S2).
94
S2
Total
312,000
52%
162,240
5,760
(40,000)
128,000 237,600
600,000
70,400
(32,000)
38,400
638,400
320,000
( - )
(32,000)
288,000
N/A
88,000
( - )
(8,000)
80,000
S2
-
Consolidated
408,000
N/A
( - )
-
408,000
( - )
(40,000)
368,000
(c)
Depreciation of FVA
Goodwill impairment
Totals
(c)
(d)
Owners
of P
320,000
70,400
( - )
(32,000)
358,400
NCI in
S1
N/A
17,600
( - )
(8,000)
9,600
NCI
in S2
N/A
( - )
-
Consolidated
320,000
88,000
( - )
(40,000)
368,000
Shares in S1s profit before FVA (Step 6): (88,000 x 80%); (88,000 x 20%)
Shares in S2s profit before FVA (Step 6): (0 x 48%); (0 x 52%)
95
1,600,000
36,000
1,636,000
280,000
480,000
638,400
1,118,400
237,600
1,356,000
1,636,000
1,128,000
(720,000)
(40,000)
368,000
358,400
9,600
368,000
96
80%
25%
30%
25%
24%
49%
51%
100%
6%
45%
51%
NCI in S2
The controlling interests and NCIs are summarized below:
S1
S2
80%
49%
Owners of P
20%
51%
NCI
100%
100%
Total
Step 2: Analysis of net assets
Share capital
Ret. earnings
Totals at carrying amts.
FVA at acquisition date
Depreciation of FVA
Net assets at fair value
Acqn.
Date
320,000
120,000
440,000
NIL
440,000
S1
S2
Cons.
Net
Acqn.
Cons.
Net
Date
change Date
Date change
320,000
200,000 200,000
208,000
40,000 112,000
528,000
240,000 312,000
NIL
528,000 88,000 240,000 312,000 72,000
97
S1
400,000
S2
360,000
400,000
(40,000)
320,000
(352,000)
(117,600)
48,000
48,000
202,400
202,400
100,000
160,000
(88,000) (122,400)
12,000
37,600
12,000
37,600
60,000
S2
Total
312,000
51%
159,120
37,600
(40,000)
156,720 274,320
600,000
70,400
35,280
-
98
240,000
105,680
705,680
320,000
( - )
( - )
320,000
N/A
88,000
( - )
( - )
88,000
S2
72,000
Consolidated
480,000
N/A
72,000
( - )
( - )
72,000
480,000
( - )
( - )
480,000
(c)
Depreciation of FVA
Goodwill impairment
Totals
(c)
(d)
Owners
of P
320,000
70,400
35,280
( - )
( - )
425,680
NCI in
S1
N/A
17,600
NCI
in S2
N/A
36,720
( - )
( - )
( - )
( - )
17,600 36,720
Consolidated
320,000
88,000
72,000
( - )
( - )
480,000
Shares in S1s profit before FVA (Step 6): (88,000 x 80%); (88,000 x 20%)
Shares in S2s profit before FVA (Step 6): (72,000 x 49%); (72,000 x 51%)
440,000
480,000
705,680
1,185,680
274,320
1,460,000
1,900,000
1,320,000
(840,000)
99
480,000
425,680
54,320
480,000
20%
B
30%
40%
D
A, B and C belong to a D-shaped (mixed) group structure. Therefore,
B and C are subsidiaries of A.
C and E are associates of B while D is an associate of C.
The controlling and NCI are analyzed as follows:
Ownership over B
Direct holdings of A in B
NCI (squeeze)
Total
100
80%
20%
100%
Ownership over C
Direct holdings of A in C
Indirect holdings of A through B (80% x 30%)
Total holdings of A
NCI (squeeze)
Total
25%
24%
49%
51%
100%
6%
45%
51%
NCI in C
The controlling interests and NCIs are summarized below:
B
C
80%
49%
Owners of A
20%
51%
NCI
100%
100%
Total
C
72,000
12,800
N/A
84,800
101
B
208,000
9,600
217,600
Total
582,400
C
112,000
12,800
124,800
Share capital
Ret. earnings (Step 1A)
Totals at carrying amts.
FVA at acquisition date
Depreciation of FVA
Net assets at fair value
Acqn.
Date
320,000
120,000
440,000
NIL
440,000
B
C
Cons.
Net
Acqn.
Cons.
Net
Date
change Date
Date change
320,000
200,000 200,000
217,600
40,000 124,800
537,600
240,000 324,800
NIL
537,600 97,600 240,000 324,800 84,800
B
400,000
400,000
(352,000) (117,600)
48,000
48,000
202,400
202,400
100,000
160,000
(88,000) (122,400)
12,000
37,600
12,000
37,600
60,000
102
C
360,000
(40,000)
320,000
240,000
B
Total
324,800
51%
165,648
37,600
(40,000)
163,248 282,768
600,000
78,080
41,552
-
119,632
719,632
320,000
( - )
( - )
320,000
N/A
97,600
( - )
( - )
97,600
C
84,800
Consolidated
502,400
N/A
84,800
( - )
( - )
84,800
502,400
( - )
( - )
502,400
(c)
Depreciation of FVA
Goodwill impairment
Totals
(c)
(d)
Owners
NCI
of A
in B
320,000
N/A
78,080 19,520
41,552
( - ) ( - )
( - ) ( - )
439,632 19,520
NCI
in C
N/A
43,248
( - )
( - )
43,248
Consolidated
320,000
97,600
84,800
( - )
( - )
502,400
Shares in Bs profit before FVA (Step 6): (97,600 x 80%); (97,600 x 20%)
Shares in Cs profit before FVA (Step 6): (84,800 x 49%); (84,800 x 51%)
103
582,400
1,600,000
300,000
2,482,400
104
1,000,000
480,000
719,632
1,199,632
282,768
1,482,400
2,482,400
1,320,000
(840,000)
22,400
502,400
439,632
62,768
502,400