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Additional information.
1)
At the date of acquisition all the assets and liabilities of XYZ PLC were reflected at fair value except
land which had a fair value of Rs.5,000,000 in excess of its carrying amount.
2)
ABC Group measures the NCI at its proportionate share of the acquiree’s net identifiable assets.
Required:
Prepare the Consolidated Statement of Financial Position as at 1 January 2017.
Solution
Consolidation Procedure
(a)
Restate the assets and liabilities of the subsidiary at its fair value.
This requires the adjustments of Rs.5 million to the PPE and Fair value adjustments reserve. (This
adjustment is indicated as A)
(b)
Parent's investment in the subsidiary and the parent's portion of net assets of the subsidiary are
eliminated against each other.
This require the elimination of Rs.50 million investment against the net
assets of the subsidiary
(share capital Rs.40 x 75%, retained earnings Rs.10 x 75%, fair value adjustment Rs.5 x 75%)
(This adjustment is indicated as B)
(c)
Non-Controlling Interest (NCI) in the net assets of consolidated subsidiaries
should be presented
separately under the equity in the consolidated statement of financial position
(This adjustment is indicated as C)
The amount of net assets attributable to non-controlling interests is calculated as follows.
NCI share of share capital (25% x Rs.40,000) 10,000
NCI share of retained earnings (25% x Rs.10,000) 2,500
NCI share of fair value adjustment (25% x Rs.5,000) 1,250
13,750
(d)
Goodwill on consolidation should be dealt in accordance with
SLFRS 3- Business Combinations.
(This adjustment is indicated as D)
Goodwill can be calculated as follows:
Fair value of consideration transferred
50,000
Plus
Amount of non-controlling interest (55,000*25%)
13,750
63,750
Less
Fair value of identifiable net assets
Share capital
(40,000)
Retained earnings
(10,000)
Fair value adjustment
(5,000)
Goodwill on acquisition date
8,750
