Beruflich Dokumente
Kultur Dokumente
Consolidation:
non-controlling interest
Chapter 21
Learning objectives
1. Discuss the nature of the non-controlling interest (NCI)
(p. 1048)
2. Explain the effects of the NCI on the consolidation process
(p. 1051)
3. Explain how to calculate the NCI share of equity (p. 1058)
4. Explain how the calculation of the NCI is affected by the
existence of intragroup transactions (p. 1071)
Non-controlling interest
explained
Nature of the non-controlling interest (NCI)
AASB 10 Consolidated Financial Statements, defines
non-controlling interest as:
equity in a subsidiary not attributable, directly or
indirectly, to a parent
As such, NCI
Is regarded as a contributor of equity to the group
Is not a liability
Receives a share of the consolidated equity and therefore
participates in the residual equity of the group
3
Non-controlling interest
explained
Acquisitions analysis
BCVR entries and pre-acquisition eliminations
substo
pre-acquisition
equitywhich
AASB 3 allows two methods
measure5 NCI,
impacts on the measurement and treatment of
Example:
A Ltd acquired 60% of B Ltd for a cost of $150,000
Equity of B Ltd comprising share capital of $100,000 and
retained earnings of $120,000. All amounts were recorded
= 150,000
at Consideration
fair value
FVINA (100,000+120,000 x 60%)
= 132,000
Goodwill
= 18,000
7
60,000
RE (120,000x60%)
72,000
GW
18,000
Share in B Ltd
150,000
Share of change
in equity in
current period
1
Acquisitio
n Date
Beginning
of current
period
Calculation of NCI share of equity is
11
End of
current
period
Lecture Illustration
Lecture example
P Ltd acquired a 60% interest in S Ltd on 1 July 2014
for $60,000
On the same date, the balance of shareholders
equity of S Ltd comprised:
Share capital
$40,000
General reserve
2,000
Retained earnings
20,000
62,000
All assets are recorded at their fair values except for
an item of plant, which had a fair value of $200,000
and a carrying amount of $180,000 (original cost
$250,000). The remaining useful life of the plant at
the date of acquisition is 5 years
12
The fair value of the NCI in S Ltd on 1 July 2014 was
Lecture Illustration
At 30 June 2016 & 2017 the equity balances of S Ltd
are:
30/6/16 30/6/17
Share capital
40,000 40,000
General reserve
3,000
3,000
Retained earnings
45,000 75,000
88,000 118,000
13
Lecture Illustration
On 1 June 2016, S Ltd sold inventory to P Ltd for
$100,000, at a profit before tax of $20,000. All
inventory is unsold at 30 June 2016. The inventory is
sold to external parties by P Ltd on 15 July 2016
S Ltd recorded a profit of $40,000 for the year ended
30 June 2017 and paid a dividend of $10,000 on 1
January 2017
Required:
Prepare all consolidation journals required at 30
June 2017 assuming the use of the partial goodwill
method
14
K45PU
Step 1: Acquisition Analysis
FVINA = [40,000+2,000+20,000+20,000x0.7 ] x 60%
= 45,600
Consideration = 60,000
GW = 14,400
15
70,000
Plant
50,000
DTL
6,000
BCVR
14,000
4,000
RE (20,000/5 x 2)
8,000
Acc Depn
DTL
12,000
3,600
ITE
RE
1,200
16
2,400
24,000
GR (2,000x60%)
1,200
RE (20,000x60%)
12,000
BCVR (20,000x0.7x60%)
GW
8,400
14,400
Shares in S
60,000
17
14,000
ITE
6,000
COS
20,000
6,000
Dividend Paid
6,000
18
16,000
GR (2,000x40%)
800
RE (20,000x40%)
8,000
BCVR (20,000x0.7x40%)
5,600
NCI
30,400
19
400
NCI
RE (45,000-20,000 x 40%)
400
10,000
NCI
NCI (20,000x0.7x40%)
10,000
5,600
RE
RE
5,600
2,240
20
2,240
16,000
NCI
16,000
1,120
1,120
5,600
NCI
5,600
4,000
21
4,000
45,000
(20,000)
25,000
6,000
5,400
2,160
23
24
40,00
0
(2,800
)
14,00
0
51,20
0
26
20,48
20,480
20,480
4,000
4,000
27
Tutorial Week 11
Chapter 21
RQ 1, 4, 5, 8
PQ 21.1(B), 21.6, 21.9, 21.11, 21.14(A)
Prepare the consolidation worksheet entries for all the practice
questions.
In-Class Test*
*if you are unable to attend the tutorial you are allocated to, please attend any one of
the six tutorials available.
All students are expected to have attempted all tutorial problems before attending
the tutorial. Specifically, the question(s) that has been bolded.
For further understanding, you are encouraged to attempt Demonstration Problem.