P4.

1
1) Show the consolidation adjustments for P Co and its subsidiary S Co for the year ended 30 J

Case Facts
P Co issued 2,000,000 of its own shares (FV of $10 per share) and paid $6,000,000 in cash to acq
Fair value of non-controlling interest is $2,800,000. NCI measured at fair value on acquisition da
Tax rate is 20%.

Book Value Fair Value

Plant and Equipment 2,000,000 1,800,000
Investment Property 10,000,000 15,000,000
In-process R&D 0 6,000,000
Inventory 500,000 750,000
Contingent Liabilities 0 (90,000)
Fair Value Differential of S Identifiable Net Assets before tax

Deferred Tax Liability on Fair Value Differential

Fair Value Differential of S Identifiable Net Assets After Tax

Share Capital of S at acquisition date

Retained Earnings of S at acquisition date
Fair Value Differential of S Identifiable Net Assets After Tax
Fair Value of identifiable net assets of S - 100%
Fair Value of identifiable net assets of S - 90%
Fair Value of identifiable net assets of S - 10%

Investment by P in S
Fair value of Non controlling interests
Total consideration paid by P and NCI
Less: Fair value of identifiable net assets of S -100%
Goodwill on consolidation (P and NCI)

Consideration paid by P to buy 90% of S

Less: 90% x Fair value of identifiable net assets of S
Goodwill on consolidation (P)
 Fair value of non-controlling interests on acquisition
Less: 10% x Fair value of identifiable net assets of S
Goodwill on consolidation (NCI)

Check goodwill
Goodwill on consolidation (P)
Goodwill on consolidation (NCI)
Goodwill on consolidation (P and NCI)

1) Why do we allocate goodwill to NCI?

We are using the fair value method to account for NCI.
2) Why is the ratio of goodwill different from the ratio of voting rights?
Because P Co paid a control premium.

CJE1
01/07/20x1 Dr Share Capital 10,000,000
Dr Retained Earnings 1,200,000
Dr Investment Property 5,000,000
Dr In-process R&D 6,000,000
Dr Inventory 250,000
Dr Goodwill 8,832,000
Cr Contingent Liability
Cr Plant and Equipment
Cr Investment in S
Cr Non-controlling interest (B/S)
Cr Deferred Tax Liability
To eliminate the investment in S

Explanation
1)
FRS103:23 - acquirer shall recognize a contingent liability if "present obligation that arises from
value can be measured reliably."
e) The reported amount of contingent liabilities was deemed reliable and met the recognition c

a) The remaining useful life of plant and equipment as at 1 July 20x1 was ten years. (BV = 2,000,00
CJE2
 30/06/20x2 Dr Accumulated Depreciation 20,000
Cr Depreciation expense - P/L
Depreciation of fair value differential for Plant and equipment for 20x1

b) As of 30 June 20x2, the fair value of in-process R&D was reliably assessed at $5,500,000.
CJE3
30/06/20x2 Dr Impairment loss on In-process R&D - P/L 500,000
Cr Accumulated Impairment loss (In-process R&D)
Recognition of impairment loss for In-process R&D

Explanation
1) We will recognize an impairment loss (P/L) on in-process R&D because the fair value has decrea
2) FRS36:8 - An asset is impaired when its carrying amount exceeds its recoverable amount.
3) FRS36:10a - an entity shall "test an intangible asset with an indefinite useful life or an intangible
available for use for impairment annually by comparing its carrying amount with its recoverable

Assuming a cost model is used, FRS38:74 - After initial recognition, an intangible asset shall be
4) cost less any accumulated amortisation and any accumulated impairment losses.

c) 90% of the inventory was sold by 30 June 20x2 and the balance 10% was deemed as impaired o
CJE4
30/06/20x2 Dr Cost of Goods Sold - P/L 225,000
Cr Inventory
Reduction in fair value differential due to selling of inventory

The fair value model is to be adopted for investment property in the consolidated financial stat
20x2, the fair value of IP was $16,000,000. S Co incorrectly applied the cost model (without dep
d) the investment property in its separate financial statements.

CJE5
30/06/20x2 Dr Investment Property 1,000,000
Cr Fair value gain - P/L
Increase in fair value of Investment Property
 uniform accounting policy for the group
Assumption
1) We assume S did not recognize Investment Property at fair value in its separate books.

f) Approximately 10% of entity goodwill was deemed to be impaired as of 30 June 20x2.

CJE6
30/06/20x2 Dr Impairment of Goodwill - P/L 883,200
Cr Goodwill
Being the impairment of goodwill

g) Tax rate is 20%. Recognize tax effects on fair value adjustments.

CJE7
30/06/20x2 Dr Tax Expense - P/L 59,000
Cr Deferred Tax Liability
Tax effects on fair value adjustments

Explanation
1) An increase in tax expense has resulted from an increase in the total amount of fair value
differential.
2) The effect of impairment of goodwill is not taken into account for this calculation.

S Co earned annual profit after tax of $2,000,000 for the year ended 30 June 20x2. There were n
h) changes in equity during the two years.
CJE8
30/06/20x2 Dr Non-controlling interests (P/L) 135,280
Cr Non-controlling interests (B/S)
To allocate the net income of S to non-controlling interests

Relevant FRS
1) FRS110:B94 - An entity shall attribute the profit or loss and each component of other
comprehensive income to the owners of the parent and to the non-controlling interests.
2. Perform an analytical check on the balance of non-controlling interests as at 30 June 20x2.

Listing of CJE method to compute NCI (B/S)

Fair value of Non-controlling interests at acquisition date (given)
Adjusted net income of S allocated to non-controlling interests
Non-controlling interests (B/S) at 30/06/20x2

Analytical check (independent proof of balances) of NCI (B/S) at 30/06/20x2

Share capital of S as at 30/06/20x2 - 100%
Retained Earnings of S at 30/06/20x2 - 100%
Book value of net assets of S as reported - 100%

Unamortized fair value differential of Plant and Equipment

Unamortized fair value differential of Investment Property
Unamortized fair value differential of In-process R&D
Unamortized fair value differential of Inventory
Unamortized fair value differential of Contingent Liabilities
Total - unamortized fair value differential before tax
Tax rate
Total - unamortized fair value differential after tax

Fair value of identifiable net assets of S - 100%

NCI 10% share of fair value of identifiable net assets of S

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of S
Goodwill on consolidation (NCI)
Less: Impairment of goodwill (NCI share -10%)
NCI share of unimpaired goodwill at 30/06/20x2

NCI (B/S) at 30/06/x2 under the analytical check method

 Note 1

FRS36:C6 - If a subsidiary, or part of a subsidiary, with a non-controlling interest is itself a cash-g

unit, the impairment loss is allocated between the parent and the non-controlling interest on th
1) as that on which profit or loss is allocated.
We should allocate impairment loss based on 10% (NCI) and 90% (P Co).
S Co for the year ended 30 June 20x2.

aid $6,000,000 in cash to acquire 90% of the shares in S Co on 1 July 20x1.

t fair value on acquisition date.

(FV-BV)
(200,000)
5,000,000
6,000,000
250,000
(90,000)
10,960,000

(2,192,000) = 20% of Fair Value Differential (before tax)

8,768,000 A

10,000,000 (Given)
1,200,000 (Given)
8,768,000 A
19,968,000 B
17,971,200
1,996,800

26,000,000 ($10 per share * 2,000,000 shares) + $6,000,000 cash

2,800,000 (Given)
28,800,000
(19,968,000) B
8,832,000 C

26,000,000
(17,971,200)
8,028,800 D
 2,800,000
(1,996,800)
803,200 E

Ratio
8,028,800 D 90.91%
803,200 E 9.09%
8,832,000 D+E = C

ts?

90,000
200,000
26,000,000
2,800,000
2,192,000

obligation that arises from past events and its fair

e and met the recognition criteria in IFRS3.

as ten years. (BV = 2,000,000, FV = 1,800,000)

Workings
 Fair value differential (FV-BV)
20,000 Depreciation of FV differential
pment for 20x1 =(FV differential / 10 years of useful life)

essed at $5,500,000.
Workings
Fair Value at Acquisition date
500,000 Fair Value at year-end date
CJE adjustment

use the fair value has decreased.

recoverable amount.
e useful life or an intangible asset not yet
amount with its recoverable amount."

an intangible asset shall be carried at its

ment losses.

was deemed as impaired on 30 June 20x3.

Workings
Fair value differential of inventory
225,000 90% of inventory (adjustment)
Fair value differential remaining

e consolidated financial statements. As at 30 June

he cost model (without depreciation) to measure

Workings
Investment Property in S's books
1,000,000 Adjustment in IP from CJE1
Fair value at acquisition date
 Fair value at 30/06/x2
Adjustment needed
its separate books.

s of 30 June 20x2.
Workings
Goodwill (of P and NCI)
883,200 Impairment (10%)

Workings
Depreciation of fair value differential for Plant and Equipment
Impairment of In-process R&D
59,000 Reduction in fair value differential of inventory
Revaluation of investment property to fair value
Total - subsequent amortization of fair value adjustment
Tax rate
l amount of fair value Reduction (increase) in tax expense

his calculation.

30 June 20x2. There were no dividends or other

Workings
Net profit of S Co (after tax)
135,280 Add: Depreciation expense for Plant and Equipment
Less: Impairment loss on R&D
Less: Cost of goods sold
Add: Fair value gain on investment property
mponent of other Less: Impairment of Goodwill
controlling interests.
Less: Tax expense
Total net profit after consolidation entries

Amount attributable to NCI (10%)

terests as at 30 June 20x2.

2,800,000 CJE1
135,280 CJE8
2,935,280

/06/20x2 Workings
10,000,000 (given)
3,200,000 =1,200,000+2,000,000
13,200,000 A

(180,000) =(9 years left/10 years useful life) x -200,000

6,000,000 =5,000,000+1,000,000
5,500,000 =6,000,000-500,000
25,000 =10% x (750,000-500,000)
(90,000) (given)
11,255,000
20%
9,004,000 B

22,204,000 A+B =13,200,000 + 9,004,000

2,220,400 C =22,204,000 x 10%

2,800,000
(1,996,800)
803,200 (shown above - cell f39)
(88,320) Note 1 =10% x 883,200
714,880 D

2,935,280 C+D
ling interest is itself a cash-generating
on-controlling interest on the same basis
,000,000 cash
 -200,000 CJE1
-20,000
of useful life)

6,000,000 CJ1
5,500,000 (given)
-500,000

250,000 CJE1
-225,000 =0.9*250,000
25,000

$10,000,000 (given - cost, no depreciation)

$5,000,000 CJE1
$15,000,000
 $16,000,000 (given)
$1,000,000

8,832,000 CJE1
883,200 =8,832,000/10

differential for Plant and Equipment (20,000) CJE2

500,000 CJE3
erential of inventory 225,000 CJE4
property to fair value (1,000,000) CJE5
zation of fair value adjustment (295,000)
20%
x expense (59,000)

2,000,000 (given)
e for Plant and Equipment 20,000 CJE2
(500,000) CJE3
(225,000) CJE4
estment property 1,000,000 CJE5
(883,200) CJE6
(59,000) CJE7
olidation entries 1,352,800

135,280
ful life) x -200,000
P4.1
1) Show the consolidation adjustments for P Co and its subsidiary S Co for the years ended

Case Facts
P Co issued 2,000,000 of its own shares (FV of $10 per share) and paid $6,000,0
Fair value of non-controlling interest is $2,800,000. NCI measured at fair value o
Tax rate is 20%.

Plant and Equipment

Investment Property
In-process R&D
Inventory
Contingent Liabilities
Fair Value Differential of S Identifiable Net Assets before tax

Deferred Tax Liability on Fair Value Differential

Fair Value Differential of S Identifiable Net Assets After Tax

Share Capital of S at acquisition date

Retained Earnings of S at acquisition date
Fair Value Differential of S Identifiable Net Assets After Tax
Fair Value of identifiable net assets of S - 100%
Fair Value of identifiable net assets of S - 90%
Fair Value of identifiable net assets of S - 10%

Investment by P in S
Fair value of Non controlling interests
Total consideration paid by P and NCI
Less: Fair value of identifiable net assets of S -100%
Goodwill on consolidation (P and NCI)

Consideration paid by P to buy 90% of S

Less: 90% x Fair value of identifiable net assets of S
Goodwill on consolidation (P)

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of S
 Goodwill on consolidation (NCI)

Check goodwill
Goodwill on consolidation (P)
Goodwill on consolidation (NCI)
Goodwill on consolidation (P and NCI)

CJE1
01/07/20x2 Dr Share Capital
Dr Retained Earnings
Dr Investment Property
Dr In-process R&D
Dr Inventory
Dr Goodwill
Cr Contingent Liability
Cr Plant and Equipment
Cr Investment in S
Cr Non-controlling interest (B/S)
Cr Deferred Tax Liability
To eliminate the investment in S

Why do we need to re-enact elimination of investment entry in subsequent year

Parent's legal entity financial statements would include investment in subsidiary

CJE2 Dr Retained Earnings

30/06/20x3 Cr Non-Controlling Interests (B/S)
Non-controlling interests share of change in retained earnings post-acquisition

Relevant FRS
FRS110:B94 - An entity shall attribute the profit or loss and each component of o
income to the owners of the parent and to the non-controlling interests.

CJE 3 Dr Accumulated depreciation - Plant and Equipment

30/06/20x3 Cr Opening Retained earnings
Cr Non-controlling interest (B/S)
Prior year depreciation of excess fair value of Plant and Equipment

CJE 4 Dr Non-controlling interest (B/S)

30/06/20x3 Dr Opening Retained earnings
 Cr In-Process R&D
Prior year impairment of In-process R&D

CJE 5 Dr Opening Retained earnings

30/06/20x3 Dr Non-controlling interest (B/S)
Cr Inventory
Prior year reduction in fair value differential due to selling of inventory

CJE 6 Dr Investment Property

30/06/20x3 Cr Opening Retained earnings
Cr Non-controlling interest (B/S)
Prior year increase in fair value of investment property

CJE 7 Dr Opening Retained earnings

30/06/20x3 Dr Non-controlling interest (B/S)
Cr Goodwill
Prior year impairment of goodwill

CJE 8
30/06/20x3 Dr Opening Retained earnings
Dr Non-controlling interest (B/S)
Cr Deferred tax liability
Tax effects on prior year fair value adjustments

a) The remaining useful life of plant and equipment as at 1 July 20x1 was ten year
CJE 9 Dr Accumulated depreciation - Plant & Equipment
30/06/20x3 Cr Depreciation expense - P/L
Depreciation of fair value differential for Plant and Equipment for 20x3

c) 90% of the inventory was sold by 30 June 20x2 and the balance 10% was deeme
CJE 10 Dr Impairment loss on inventory - P/L
30/06/20x3 Cr Allowance for Impairment of Inventory
Being the impairment of inventory

g) Tax rate is 20%. Recognize tax effects on fair value adjustments.

CJE 11 Dr Deferred tax liability
30/06/20x3 Cr Tax expense - P/L
Tax effects on fair value adjustments on plant and equipment and inventory
h) S Co earned annual profit after tax of $2,000,000 for the year ended 30 June 20
dividends or other changes in equity during the two years.
CJE 12 Dr Non-controlling interests (P/L)
30/06/20x3 Cr Non-controlling interests (B/S)
To allocate the net income of S to non-controlling interests

Relevant FRS
FRS110:B94 - An entity shall attribute the profit or loss and each component of o
income to the owners of the parent and to the non-controlling interests.

2. Perform an analytical check on the balance of non-controlling interests as at 30 June 20x

Listing of CJE method to compute NCI (B/S)

Fair value of Non-controlling interests at acquisition date (given)
Non-controlling interests share of change in retained earnings post-acquisition
Prior year depreciation of excess fair value of Plant and Equipment
Prior year impairment of In-process R&D
Prior year reduction in fair value differential due to selling of inventory
Prior year increase in fair value of investment property
Prior year impairment of goodwill
Tax effects on prior year fair value adjustments
Allocated net income of S to non-controlling interests
Non-controlling interests (B/S) at 30/06/20x3

Analytical check (independent proof of balances) of NCI (B/S) at 30/06/20x3

Share capital of S as at 30/06/20x3 - 100%
Retained Earnings of S at 30/06/20x3 - 100%
Book value of net assets of S as reported - 100%

Unamortized fair value differential of Plant and Equipment

Unamortized fair value differential of Investment Property
Unamortized fair value differential of In-process R&D
Unamortized fair value differential of Inventory
Unamortized fair value differential of Contingent Liabilities
Total - unamortized fair value differential before tax
Tax rate
 Total - unamortized fair value differential after tax

Fair value of identifiable net assets of S - 100%

NCI 10% share of fair value of identifiable net assets of S

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of S
Goodwill on consolidation (NCI)
Less: Impairment of goodwill (NCI share -10%)
NCI share of unimpaired goodwill at 30/06/20x3

NCI (B/S) at 30/06/20x3 under the analytical check method

Note 1
1) FRS36:C6 - If a subsidiary, or part of a subsidiary, with a non-controlling interest
impairment loss is allocated between the parent and the non-controlling intere
profit or loss is allocated.

We should allocate impairment loss based on 10% (NCI) and 90% (P Co).
Co for the years ended 30 June 20x3.

hare) and paid $6,000,000 in cash to acquire 90% of the shares in S Co on 1 July 20x1.
measured at fair value on acquisition date.

Book Value Fair Value (FV-BV)

2,000,000 1,800,000 (200,000)
10,000,000 15,000,000 5,000,000
0 6,000,000 6,000,000
500,000 750,000 250,000
0 (90,000) (90,000)
10,960,000

(2,192,000)
8,768,000

10,000,000
1,200,000
8,768,000
19,968,000
17,971,200
1,996,800

26,000,000
2,800,000
28,800,000
(19,968,000)
8,832,000

26,000,000
(17,971,200)
8,028,800

2,800,000
(1,996,800)
 803,200

8,028,800
803,200
8,832,000

10,000,000
1,200,000
5,000,000
6,000,000
250,000
8,832,000
90,000
200,000
26,000,000
2,800,000
2,192,000

entry in subsequent year?

investment in subsidiary balance.

200,000
200,000
rnings post-acquisition

nd each component of other comprehensive

rolling interests.

20,000
18,000
2,000
Equipment

50,000
450,000
 500,000

202,500
22,500
225,000
ng of inventory

1,000,000
900,000
100,000

794,880
88,320
883,200

53,100
5,900
59,000

1 July 20x1 was ten years.

20,000
20,000
pment for 20x3

balance 10% was deemed as impaired on 30 June 20x3.

25,000
25,000

1,000
1,000
pment and inventory
e year ended 30 June 20x3. There were no
ars.
199,600
199,600

nd each component of other comprehensive

rolling interests.

erests as at 30 June 20x3.

2,800,000 CJE 1
arnings post-acquisition 200,000 CJE 2
Equipment 2,000 CJE 3
(50,000) CJE 4
ng of inventory (22,500) CJE 5
100,000 CJE 6
(88,320) CJE 7
(5,900) CJE 8
199,600 CJE 12
3,134,880

CI (B/S) at 30/06/20x3
10,000,000 (given)
5,200,000
15,200,000 A

(160,000)
6,000,000
5,500,000
0
(90,000)
11,250,000
20%
 9,000,000 B

24,200,000 A+B

2,420,000 C

2,800,000
(1,996,800)
803,200 (shown above)
(88,320) Note 1
714,880 D

3,134,880 C+D

non-controlling interest is itself a cash-generating unit, the

e non-controlling interest on the same basis as that on which

) and 90% (P Co).

the shares in S Co on 1 July 20x1.

Workings

= 20% of Fair Value Differential (before tax)

A

(Given)
(Given)
A
B

($10 per share * 2,000,000 shares) + $6,000,000 cash

(Given)

B
C

D
E

Ratio
D 90.91%
E 9.09%
D+E = C

Workings
Opening retained earnings 1 July 20x2 3,200,000
Less retained earnings at acquisition date (1,200,000)
Increase in retained earnings post-acquisition 2,000,000
Non-controlling interest - 10% = 200,000
Workings
Depreciation of fair value differential for Plant and Equipment (20,000)
Impairment loss on inventory 25,000
Total - subsequent amortization of fair value adjustment 5,000
Tax rate 20%
Reduction (increase) in tax expense 1,000

Workings
Net profit of S Co (after tax) 2,000,000
Add: Depreciation expense for Plant and Equipment 20,000
Less: Impairment loss on inventory (25,000)
Add: Tax expense 1,000
Total net profit after consolidation entries 1,996,000
Amount attributable to NCI (10%) 199,600

Workings

=3,200,000+2,000,000

=(8 years left/10 years useful life) x -200,000

=5,000,000+1,000,000
=6,000,000-500,000

(given)
=10% x 883,200
(1,200,000 (given) + annual after tax profit 2,000,000)
CJE 9
CJE 10
(Given)
CJE 9
CJE 10
CJE 11
P4.5 Acquisition method and non-controlling interests at fair value

P Co acquired control of Jasper Co through acquisition of 90% in the voting rights of Jasper Co on 1 July 20x2. A c
P Co elects to measure NCI at fair value on acquisition date. The fair value of NCI on 1 July 20x2 was $200,000.

The shareholders' equity of Jasper Co at acquisition date is as follows:

Share capital $ 500,000.00

Retained earnings $ 450,000.00
Revaluation reserves $ 100,000.00
$ 1,050,000.00

The financial statements of P Co and Jasper Co are shown below:

Statement of Comprehensive Income

For Year Ended 31 Dec 20x3

P Co Jasper Co
Profit before tax $ 4,000,000.00 $ 1,000,000.00
Tax $ (800,000.00) $ (200,000.00)
Profit after tax $ 3,200,000.00 $ 800,000.00
Change in revaluation reserves, after-tax $ 100,000.00
Comprehensive income $ 3,200,000.00 $ 900,000.00

Statement of Financial Position

As at 31 Dec 20x3

P Co Jasper Co
Fixed assets, net book value $ 2,400,000.00 $ 2,200,000.00
Investment in Jasper Co $ 2,000,000.00
Inventory $ 720,000.00 $ 500,000.00
Intercompany receivable $ 300,000.00
Accounts receivable $ 800,000.00 $ 550,000.00
Dividend receivable from Jasper $ 72,000.00
Cash $ 60,000.00 $ 20,000.00
$ 6,052,000.00 $ 3,570,000.00

Payables $ 712,000.00 $ 1,390,000.00

Intercompany payable $ 300,000.00
Dividend payable $ 180,000.00 $ 80,000.00
Share capital $ 1,000,000.00 $ 500,000.00
Retained earnings $ 3,860,000.00 $ 1,100,000.00
Revaluation reserves $ 500,000.00
$ 6,052,000.00 $ 3,570,000.00
per Co on 1 July 20x2. A cash transfer of $2,000,000 was made to the former owners of Jasper Co.
uly 20x2 was $200,000.

The fair and book values of identifiable net assets of Jasper Co at acquisition date is shown below:

Book Value Fair Value Remarks

Inventory $ 200,000.00 $ 250,000.00 60% sold during 20x3
Fixed Assets $ 450,000.00 $ 500,000.00 Remaining useful life at acq was 5 years
Other net assets $ 400,000.00 $ 400,000.00
$ 1,050,000.00 $ 1,150,000.00

Statement of Changes in Equity

For the year ended 31 Dec 20x3 (partial)

P Co Jasper Co Jasper Co
Retained Earnings RR
Balance, 1 Jan 20x3 $ 840,000.00 $ 400,000.00 $ 400,000.00
Comprehensive Income $ 3,200,000.00 $ 800,000.00 $ 100,000.00
Dividends declared $ (180,000.00) $ (100,000.00)
Balance, 31 Dec 20x3 $ 3,860,000.00 $ 1,100,000.00 $ 500,000.00

Question 4.5
1) Prepare the consolidation adjusting entries for the year ended 31 Dec 20x3. Tax rate was 20%.
Recognize tax effects on fair value differentials.

2) Perform an analytical check of the balance of NCI as at 31 Dec 20x3.

Question 4.6

Assume the same facts in P4.5, except that P Cp elect to measure NCI as a proportion of identifiable net assets.
hown below:

at acq was 5 years

Jasper Co
Total
$ 800,000.00
$ 900,000.00
$ (100,000.00)
$ 1,600,000.00

0x3. Tax rate was 20%.

of identifiable net assets.

 4.5

Consideration transferred by P Co.

Cash $ 2,000,000

FV differential of Jasper Co identifiable net assets

Book Value Fair Value Excess (FV-BV)
Inventory $ 200,000 $ 250,000 $ 50,000
Fixed Assets $ 450,000 $ 500,000 $ 50,000
Other net assets $ 400,000 $ 400,000 $ -
$ 1,050,000 $ 1,150,000 $ 100,000

FVINA of Jasper Co
Share capital $ 500,000 given
Retained Earnings $ 450,000 given
Revaluation reserves $ 100,000 given
FV diff of INA (after tax) $ 80,000
FVINA of Jasper Co $ 1,130,000 (100%)
$ 1,017,000 (90%)
$ 113,000 (10%)

Investment by P Co $ 2,000,000
FV of NCI $ 200,000 given
Total consideration (P & NCI) $ 2,200,000
Less: FVINA of Jasper Co $ (1,130,000)
Total Goodwill $ 1,070,000
Ratio of goodwill
Consideration paid by P for 90% $ 2,000,000
Less: 90% FVINA of Jasper $ (1,017,000)
Goodwill attributable to P $ 983,000 0.92 (P Co paid a control prem

FV NCI $ 200,000
Less: 10% FVINA of Jasper $ (113,000)
Goodwill attributable to NCI $ 87,000 0.08

1. Consolidation entries for the year ended 31 December 20x3. Tax rate was 20%.

CJE 1 Eliminate Investment (re-enactment)

Dr Share Capital $ 500,000

Dr Retained Earnings $ 450,000
Dr Revaluation Reserves $ 100,000
Dr Inventory $ 50,000
Dr Fixed Assets $ 50,000
Dr Goodwill $ 1,070,000
Cr Investment in Jasper Co $ 2,000,000
Cr Deferred Tax Liability $ 20,000
Cr Non-Controlling Interest $ 200,000
Check $ 2,220,000 $ 2,220,000

CJE 2 NCI share of change in RE post-acquisition

Dr Non-Controlling Interest (B/S) $ 5,000

Cr Opening Retained Earnings $ 5,000

CJE 3 NCI share of change in RR post-acquisition

Dr Opening Revaluation Reserves/OCI $ 30,000

Cr Non-Controlling Interest (B/S) $ 30,000

CJE 4 Prior year dep of excess FV of fixed asset

Dr Opening Retained Earnings $ 4,500

Dr Non-Controlling Interest $ 500
Cr Accumulated Depreciation (Fixed Asset) $ 5,000

CJE 5 Tax effect of CJE 4

Dr Deferred Tax Liability $ 1,000
Cr Opening Retained Earnings $ 900
Cr Non-Controlling Interest $ 100

CJE 6 Current year dep of FV differential of the sale of 60% inventory

Dr COGS $ 30,000
Cr Inventory $ 30,000

CJE 7 Tax effect of CJE 6

Dr DTL $ 6,000
Cr Tax Expense $ 6,000

CJE 8 Current year depreciation of FV differential of Fixed Assets

Dr Depreciation Expense $ 10,000
Cr Accumulated Depreciation $ 10,000

CJE 9 Tax effect of CJE8

Dr DTL $ 2,000
Cr Tax Expense $ 2,000

CJE 10 Allocation of current year profits

Dr Income to Non-Controlling Interest $ 76,800

Cr Non-Controlling Interest $ 76,800

CJE 11 Dividend declared by Jasper Co.

Dr Dividend Income (P) $ 90,000

Dr Non-Controlling Interest $ 10,000
Cr Dividend declared (S) $ 100,000

CJE 12 Intracompany payable/receivable

Dr Dividend payable (S) $ 72,000
Cr Dividend receivable (P) $ 72,000

CJE 13 NCI share of current year change in RR

Dr Revaluation Reserve (OCI) $ 10,000

Cr Non-Controlling Interest $ 10,000

CJE 14 Elimination of intercompany receivable/payable

Dr Intercompany Payable (Jasper Co) $ 300,000

Cr Intercompany Receivable (P Co.) $ 300,000
 Deferred tax liability on FV differentials (Tax rate 20%)
= $100000 x 20%
= $ 20,000
Deferred tax liability on FV differentials (after tax)
= $ 80,000

Co paid a control premium)

given
given
given
FV diff
FV diff

given

given

Beginning RE 20x3 $ 400,000

RE at acquisition $ 450,000
Change $ (50,000)

NCI Share (10%) $ (5,000)

Beginning RR 20x3 $ 400,000

RR at acquisition $ 100,000
Change $ 300,000

NCI Share (10%) $ 30,000

FV diff of $50,000 divided by 5 years

= $10,000 per year
Half a year = $ 5,000

$5000 x 20% tax rate

FV diff of $500,000 x 60%

FV diff of $50,000 divided by 5 years
= $10,000 per year

Unadjusted profit after tax $ 800,000 given

COGS adj. $ (30,000) CJE5
Dep adj. $ (10,000) CJE6
Tax savings of adjs. $ 8,000 CJE5+6
Adjusted profit after tax $ 768,000
NCI share (10%) $ 76,800

Dividend declared (100%) $ 100,000

NCI share (10%) $ 10,000
P share (90%) $ 90,000

Dividend payable (Jasper) is $80,000 but only $72,000 is to P

Remaining $8,000 payable to non-group parties should not be eliminated

Jasper Co RR
RR opening bal 1 Jan 20x3 $ 400,000
RR closing bal 31 Dec 20x3 $ 500,000
Change (100%) $ 100,000
P share (90%) $ 90,000
NCI share (10%) $ 10,000
2. Perform an analytical check of the balance of non-controlling interests as at 31 December 20x3.

Listing of CJE to compute NCI

FVNCI at acquisition date $ 200,000
Adjustments:
NCI share of change in RE post-acq $ (5,000)
NCI share of change in RR post-acq $ 30,000
Prior year dep of excess FV (fixed asset) $ (500)
Tax effect of above $ 100
NCI share of current year profit $ 76,800
Dividend declared by Jasper Co. $ (10,000)
NCI share of current year change in RR $ 10,000
NCI at 31 Dec 20x3 $ 301,400

Analytical check of NCI at 31 December 20x3

Share capital of Jasper Co at 31 December 20x3 (as reported)
Retained earnings of Jasper Co at 31 December 20x3 (as reported)
Revaluation reserve of Jasper Co at 31 December 20x3 (as reported)
Book value of net assets of Jasper Co (as reported)

Unammortized FV differential of Fixed Assets

Unammortized FV differential of Inventory
Total Unammortized FV differential before tax
Tax rate
Total unammortized FV differential after tax

Fair value of identifiable net assets (FVINA) of Jasper Co

NCI share of FVINA of S (10%)

Goodwill attributable to NCI
NCI at 31 December 20x3
at 31 December 20x3.

given

CJE2
CJE3
CJE4
CJE5
CJE 10
CJE 11
CJE 13

$ 500,000
$ 1,100,000
$ 500,000
$ 2,100,000 a sum of the above

$ 35,000 $50,000 x 3.5 / 5 years

$ 20,000 $50,000 x 40%
$ 55,000
20%
$ 44,000 b $55,000 x (1-20%)

$ 2,144,000 a+b

$ 214,400 x
$ 87,000 y
$ 301,400 x+y
 4.5

Consideration transferred by P Co.

Cash $ 2,000,000

FV differential of Jasper Co identifiable net assets

Book Value Fair Value Excess (FV-BV)
Inventory $ 200,000 $ 250,000 $ 50,000
Fixed Assets $ 450,000 $ 500,000 $ 50,000
Other net assets $ 400,000 $ 400,000 $ -
$ 1,050,000 $ 1,150,000 $ 100,000

FVINA of Jasper Co
Share capital $ 500,000 given
Retained Earnings $ 450,000 given
Revaluation reserves $ 100,000 given
FV diff of INA (after tax) $ 80,000
FVINA of Jasper Co $ 1,130,000 (100%)
$ 1,017,000 (90%)
NCI $ 113,000 (10%)

Investment by P Co $ 2,000,000
NCI (10% FVINA of S) $ 113,000
Less: FVINA Jasper Co (100%) $ (1,130,000)
Total Goodwill $ 983,000

1. Consolidation entries for the year ended 31 December 20x3. Tax rate was 20%.

CJE 1 Eliminate Investment (re-enactment)

Dr Share Capital $ 500,000

Dr Retained Earnings $ 450,000
Dr Revaluation Reserves $ 100,000
Dr Inventory $ 50,000
Dr Fixed Assets $ 50,000
Dr Goodwill $ 983,000
Cr Investment in Jasper Co $ 2,000,000
Cr Deferred Tax Liability $ 20,000
 Cr Non-Controlling Interest $ 113,000
Check $ 2,133,000 $ 2,133,000

CJE 2 NCI share of change in RE post-acquisition

Dr Non-Controlling Interest $ 5,000

Cr Opening Retained Earnings $ 5,000

CJE 3 NCI share of change in RR post-acquisition

Dr Opening Revaluation Reserves $ 30,000

Cr Non-Controlling Interest (B/S) $ 30,000

CJE 4 Prior year dep of excess FV of fixed asset

Dr Opening Retained Earnings $ 4,500

Cr Non-Controlling Interest $ 500
Cr Accumulated Depreciation (Fixed Asset) $ 5,000

CJE 5 Tax effect of CJE4

Dr Deferred Tax Liability $ 1,000
Cr Opening Retained Earnings $ 900
Cr Non-Controlling Interest $ 100

CJE 6 Current year dep of FV differential of the sale of 60% inventory

Dr COGS $ 30,000
Cr Inventory $ 30,000

CJE 7 Tax effect of CJE 6

Dr DTL $ 6,000
Cr Tax Expense $ 6,000

CJE 8 Current year depreciation of FV differential of Fixed Assets

Dr Depreciation Expense $ 10,000

 Cr Accumulated Depreciation $ 10,000

CJE 9 Tax effect of CJE 8

Dr DTL $ 2,000
Cr Tax Expense $ 2,000

CJE 10 Allocation of current year profits

Dr Income to Non-Controlling Interest $ 76,800

Cr Non-Controlling Interest $ 76,800

CJE 11 Dividend declared by Jasper Co.

Dr Dividend Income (P) $ 90,000

Dr Non-Controlling Interest $ 10,000
Cr Dividend declared (S) $ 100,000

CJE 12 Intragroup receivable/payable

Dr Dividend payable (S) $ 72,000
Cr Dividend receivable (P) $ 72,000

CJE 13 NCI share of current year change in RR

Dr Revaluation Reserve $ 10,000

Cr Non-Controlling Interest $ 10,000

CJE 14 Elimination of intercompany receivable/payable

Dr Intercompany Payable (Jasper Co) $ 300,000

Cr Intercompany Receivable (P Co.) $ 300,000
Deferred tax liability on FV differentials (Tax rate 20%)
= $100000 x 20%
= $ 20,000
Deferred tax liability on FV differentials (after tax)
= $ 80,000

given
given
given
FV diff
FV diff

given
given

Beginning RE 20x3 $ 400,000

RE at acquisition $ 450,000
Change $ (50,000)

NCI Share (10%) $ (5,000)

Beginning RR 20x3 $ 400,000

RR at acquisition $ 100,000
Change $ 300,000

NCI Share (10%) $ 30,000

FV diff of $50,000 divided by 5 years

= $10,000 per year
Half a year = $ 5,000

$5000 x 20% tax rate

FV diff of $500,000 x 60%

FV diff of $50,000 divided by 5 years

 = $10,000 per year

Unadjusted profit after tax $ 800,000

COGS adj. $ (30,000)
Dep adj. $ (10,000)
Tax savings of adjs. $ 8,000
Adjusted profit after tax $ 768,000
NCI share (10%) $ 76,800

Dividend declared (100%) $ 100,000

NCI share (10%) $ 10,000
P share (90%) $ 90,000

Dividend payable (S) is $80,000 but only $72,000 is to P

Remaining $8,000 payable to non-group parties should not be eliminated

Jasper Co RR
RR opening bal 1 Jan 20x3 $ 400,000
RR closing bal 31 Dec 20x3 $ 500,000
Change (100%) $ 100,000
P share (90%) $ 90,000
NCI share (10%) $ 10,000
2. Perform an analytical check of the balance of non-controlling interests as at 31 December 20x3.

Listing of CJE to compute NCI

NCI at acquisition date $ 113,000
Adjustments:
NCI share of change in RE post-acq $ (5,000)
NCI share of change in RR post-acq $ 30,000
Prior year dep of excess FV (fixed asset) $ (500)
Deferred tax effect of above $ 100
NCI share of current year profit $ 76,800
Dividend declared by Jasper Co. $ (10,000)
NCI share of current year change in RR $ 10,000
NCI at 31 Dec 20x3 $ 214,400

Analytical check of NCI at 31 December 20x3

Share capital of Jasper Co at 31 December 20x3 (as reported)
Retained earnings of Jasper Co at 31 December 20x3 (as reported)
Revaluation reserve of Jasper Co at 31 December 20x3 (as reported)
Book value of net assets of Jasper Co (as reported)

Unammortized FV differential of Fixed Assets

Unammortized FV differential of Inventory
Total Unammortized FV differential before tax
Tax rate
Total unammortized FV differential after tax

Fair value of identifiable net assets (FVINA) of Jasper Co

NCI share of FVINA of S (10%)

Goodwill attributable to NCI
NCI at 31 Decemeber 20x3
at 31 December 20x3.

given

CJE2
CJE3
CJE4
CJE5
CJE 10
CJE 11
CJE 13
$ 500,000
$ 1,100,000
$ 500,000
$ 2,100,000 a sum of the above

$ 35,000 $50,000 x 3.5 / 5 years

$ 20,000 $50,000 x 40%
$ 55,000
$ 0
$ 44,000 b $55,000 x (1-20%)

$ 2,144,000 a+b

$ 214,400 x
$ - y
$ 214,400 x+y
P4.11
1) Prepare consolidation and equity accounting entries for the year ended 31 December 20x

Case Facts
P Co acquired ownership interest of 90% in X Co and obtained control on 1 Janu
Share Capital of X Co was $600,000 and its retained earnings at date of acquisiti
Fair value of non-controlling interest at X Co on 1 January 20x3 was $180,000.
Tax rate is 20%.

Fixed assets
Fair Value Differential of X Identifiable Net Assets before tax

Deferred Tax Liability on Fair Value Differential

Fair Value Differential of X Identifiable Net Assets After Tax

Share Capital of X at acquisition date

Retained Earnings of X at acquisition date
Fair Value Differential of X Identifiable Net Assets After Tax
Fair Value of identifiable net assets of X - 100%
Fair Value of identifiable net assets of X - 90%
Fair Value of identifiable net assets of X - 10%

Investment by P in X
Fair value of Non controlling interests
Total consideration paid by P and NCI
Less: Fair value of identifiable net assets of X -100%
Goodwill on consolidation (P and NCI)

Consideration paid by P to buy 90% of X

Less: 90% x Fair value of identifiable net assets of X
Goodwill on consolidation (P)

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of X
Goodwill on consolidation (NCI)

Check goodwill
 Goodwill on consolidation (P)
Goodwill on consolidation (NCI)
Goodwill on consolidation (P and NCI)

CJE1
01/01/20x6 Dr Share Capital
Dr Retained Earnings
Dr Fixed assets
Dr Goodwill
Cr Investment in X
Cr Deferred Tax Liability
Cr Non-controlling interest (B/S)
To eliminate the investment in X

Why do we need to re-enact elimination of investment entry in subsequent year

Parent's legal entity financial statements would include investment in subsidiary

CJE2 Dr Opening Retained Earnings

31/12/20x6 Cr Non-Controlling Interests (B/S)
Non-controlling interests share of change in retained earnings post-acquisition

Relevant FRS
FRS110:B94 - An entity shall attribute the profit or loss and each component of o
income to the owners of the parent and to the non-controlling interests.

CJE 3 Dr Opening Retained earnings

31/12/20x6 Dr Non-controlling interest (B/S)
Cr Accumulated Depreciation-Fixed assets
Prior year depreciation of excess fair value of fixed assets=400,000/10x3=120,00

CJE 4 Dr Deferred Tax Liability

31/12/20x6 Cr Opening Retained earnings
Cr Non-controlling interest (B/S)
Tax Effect of CJE 3

CJE 5 Dr Loss on disposal of fixed assets - P/L

31/12/20x6 Dr Accumulated Depreciation - Fixed assets
Cr Fixed assets
Recording disposal of fixed assets(Adjusting from X's separate accounts to Group
CJE 6 Dr Deferred Tax Liability
31/12/20x6 Cr Tax expense - P/L
Tax effect of CJE 5
Note: Total DTL of 80,000 reversed using CJE 4 and CJE 6. Since fixed assets are disposed, no fa

CJE 7 Dr Non-Controlling Interests (P/L)

31/12/20x6 Cr Non-controlling interest (B/S)
Allocate net income of X to non-controlling interests

CJE 8 Dr Dividend Income (P)

31/12/20x6 Dr Non-Controlling Interests (B/S)
Cr Dividend declared by X
Eliminate dividend declared by subsidiary

2. Perform an analytical check of the balance in non-controlling interests as at 31 Decembe

Listing of CJE method to compute NCI (B/S)

Fair value of Non-controlling interests at acquisition date (given)
Non-controlling interests share of change in retained earnings post-acquisition
Allocation of Current Year Profit to NCI
Less: NCI Share of Prior year depreciation
Less: NCI Share of Dividends declared by X
Add: Tax effect on prior year depreciation
Non-controlling interests (B/S) at 31/12/20x6

Analytical check (independent proof of balances) of NCI (B/S) at 31/12/20x6

Share capital of X as at 31/12/20x6 - 100%
Retained Earnings of X at 31/12/20x6 - 100%
Book value of net assets of X as reported - 100%

Unamortized fair value differential

Fair value of identifiable net assets of X - 100%

NCI 10% share of fair value of identifiable net assets of X

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of X
Goodwill on consolidation (NCI)

NCI (B/S) at 31/12/20x6 under the analytical check method

ended 31 December 20x6.

tained control on 1 January 20x3.

nings at date of acquisition was $600,000.
ry 20x3 was $180,000.

Book Value Fair Value (FV-BV)

1,000,000 1,400,000 400,000
400,000

(80,000)
320,000

600,000
600,000
320,000
1,520,000
1,368,000
152,000

1,800,000
180,000
1,980,000
(1,520,000)
460,000

1,800,000
(1,368,000)
432,000

180,000
(152,000)
28,000
 432,000
28,000
460,000

600,000
600,000
400,000
460,000
1,800,000
80,000
180,000

entry in subsequent year?

investment in subsidiary balance.

20,000
20,000
rnings post-acquisition

nd each component of other comprehensive

rolling interests.

108,000
12,000
120,000
s=400,000/10x3=120,000

24,000
21,600
2,400

280,000
120,000
400,000
parate accounts to Group's view)
 56,000
56,000

assets are disposed, no fair value differential thus check that no DTL left.

169,600
169,600

90,000
10,000
100,000 Given

rests as at 31 December 20x6.

180,000 CJE 1
arnings post-acquisition 20,000 CJE 2
169,600 CJE 7
(12,000) CJE 3
(10,000) CJE 8
2,400 CJE 4
350,000

CI (B/S) at 31/12/20x6
600,000 (given)
2,620,000 (given)
3,220,000 A

-B

3,220,000 A+B
322,000 C

180,000
(152,000)
 28,000 (shown above) D

350,000 C+D
Workings

= 20% of Fair Value Differential (before tax)

A

(Given)
(Given)
A
B

(Given)

B
C

Ratio
D 93.91%
E 6.09%
D+E = C

Workings for CJE 2

Opening retained earnings 1 Jan 20x6 800,000
Less: Retained earnings at acquisition date (600,000)
Increase in retained earnings post-acquisition 200,000
Amount attributable to NCI (10%) = 20,000

Workings for CJE 5 As is

X books($)
Cost of fixed assets as at 1/1/20x6 1,000,000
Less: Accumulated depreciation as at 1/1/20x6 (300,000)
Net Book Value as at 1/1/20x6 700,000
Cash on sale 300,000
Gain/loss on disposal (400,000)
 Explanation: Upon disposal of fixed assets, there would be a loss on disposal in X’ separate accou
However, from the Group’s perspective, the loss on disposal after consolidation should be $280,
than what was recorded in X books. Hence, we derive CJE 5, taking into account the reversal of c
accumulated depreciation that were recognised previously.
at no DTL left.

Workings for CJE 7 $

Net profit of X Co (after tax) 1,920,000
Less: Loss on disposal of fixed assets (280,000)
Add: Tax expense 56,000
Total net profit after consolidation entries 1,696,000
Amount attributable to NCI (10%) 169,600
To be Adjustments
Group books($) Difference($) Case Facts
On acquisition date, fair value of fixed assets of X Co was $1
1,400,000 400,000 was $1,000,000. Fixed assets had a useful life of 10 years as
(420,000) (120,000) fixed assets were disposed at a price of $300,000 to third pa
980,000 280,000
300,000 0
(680,000) (280,000)
 ss on disposal in X’ separate accounts.
fter consolidation should be $280,000 more
king into account the reversal of cost and

Note
Given
CJE 5
CJE 6
d assets of X Co was $1,400,000 while book value
seful life of 10 years as at date of acquisition. The
of $300,000 to third parties on 1 January 20x6.
P4.12
1) Prepare consolidation and equity accounting entries for the year ended 31 December 20x

Case Facts
P Co obtained control of Y Co on 1 January 20x4 by acquiring 90% interest in Y C
Share Capital of Y Co was $900,000 and its retained earnings at date of acquisiti
Fair value of non-controlling interest at Y Co on 1 January 20x4 was $120,000.
Tax rate is 20%.

Contingent Liabilities
Fair Value Differential of Y Identifiable Net Assets before tax

Deferred Tax Liability on Fair Value Differential

Fair Value Differential of Y Identifiable Net Assets After Tax

Share Capital of Y at acquisition date

Retained Earnings of Y at acquisition date
Fair Value Differential of Y Identifiable Net Assets After Tax
Fair Value of identifiable net assets of Y - 100%
Fair Value of identifiable net assets of Y - 90%
Fair Value of identifiable net assets of Y - 10%

Investment by P in Y
Fair value of Non controlling interests
Total consideration paid by P and NCI
Less: Fair value of identifiable net assets of Y -100%
Goodwill on consolidation (P and NCI)

Consideration paid by P to buy 90% of Y

Less: 90% x Fair value of identifiable net assets of Y
Goodwill on consolidation (P)

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of Y
Goodwill on consolidation (NCI)

Check goodwill
 Goodwill on consolidation (P)
Goodwill on consolidation (NCI)
Goodwill on consolidation (P and NCI)

CJE1
01/01/20x6 Dr Share Capital
Dr Retained Earnings
Dr Deferred Tax Asset
Dr Goodwill
Cr Contingent Liability
Cr Investment in Y
Cr Non-controlling interest (B/S)
To eliminate the investment in Y

Why do we need to re-enact elimination of investment entry in subsequent year

Parent's legal entity financial statements would include investment in subsidiary

CJE2 Dr Opening Retained Earnings

31/12/20x6 Cr Non-Controlling Interests (B/S)
Non-controlling interests share of change in retained earnings post-acquisition

Relevant FRS
FRS110:B94 - An entity shall attribute the profit or loss and each component of o
income to the owners of the parent and to the non-controlling interests.

CJE 3 Dr Contingent Liability

31/12/20x6 Cr Retained earnings
Cr Non-controlling interest (B/S)
Reversal of entry relating to provision for loss

CJE 4 Dr Non-controlling interest (B/S)

31/12/20x6 Dr Opening Retained earnings
Cr Deferred Tax Asset
Tax Effect of CJE 3

CJE 5 Dr Non-Controlling Interests (P/L)

31/12/20x6 Cr Non-controlling interest (B/S)
Allocate net income of Y to non-controlling interests
CJE 6 Dr Dividend Income (P)
31/12/20x6 Dr Non-Controlling Interests (B/S)
Cr Dividend declared by Y
Eliminate dividend declared by subsidiary

CJE 7 Dr Amount due to Y Co

31/12/20x6 Cr Amount due from P Co
Elimination of Intra-group loan receivable and loan payable

Relevant FRS

FRS110:B86(c) - eliminate in full intragroup assets and liabilities, equity, income

flows relating to transactions between entities of the group (profits or losses res
transactions that are recognised in assets, such as inventory and fixed assets, ar
Intragroup losses may indicate an impairment that requires recognition in the co
statements.

2. Perform an analytical check on the balance of non-controlling interests as at 31 Decembe

Listing of CJE method to compute NCI (B/S)

Fair value of Non-controlling interests at acquisition date (given)
Non-controlling interests share of change in retained earnings post-acquisition
Non-controlling interests share of reversal of contingent liability
Allocation of Current Year Profit to NCI
Less: NCI Share of Reversal of Deferred Tax Liability
Less: NCI Share of Dividends declared by Y
Non-controlling interests (B/S) at 31/12/20x6

Analytical check (independent proof of balances) of NCI (B/S) at 31/12/20x6

Share capital of Y as at 31/12/20x6 - 100%
Retained Earnings of Y at 31/12/20x6 - 100%
Book value of net assets of Y as reported - 100%

Unamortised fair value differential

Fair value of identifiable net assets of Y - 100%

NCI 10% share of fair value of identifiable net assets of Y

Fair value of non-controlling interests on acquisition

Less: 10% x Fair value of identifiable net assets of Y
Goodwill on consolidation (NCI)

NCI (B/S) at 31/12/20x6 under the analytical check method

ended 31 December 20x6.

uiring 90% interest in Y Co.

nings at date of acquisition was $300,000.
ry 20x4 was $120,000.

Book Value Fair Value (FV-BV)

0 (200,000) (200,000)
(200,000)

40,000
(160,000)

900,000
300,000
(160,000)
1,040,000
936,000
104,000

1,800,000
120,000
1,920,000
(1,040,000)
880,000

1,800,000
(936,000)
864,000

120,000
(104,000)
16,000
 864,000
16,000
880,000

900,000
300,000
40,000
880,000
200,000 on group balance sheet
1,800,000
120,000

entry in subsequent year?

investment in subsidiary balance.

50,000
50,000
rnings post-acquisition

nd each component of other comprehensive

rolling interests.

200,000
180,000
20,000

4,000
36,000
40,000

160,000
160,000
 108,000
12,000
120,000

90,000
90,000

abilities, equity, income, expenses and cash

oup (profits or losses resulting from intragroup
tory and fixed assets, are eliminated in full).
ires recognition in the consolidated financial

erests as at 31 December 20x6.

120,000 CJE 1
arnings post-acquisition 50,000 CJE 2
20,000 CJE 3
160,000 CJE 5
(4,000) CJE 4
(12,000) CJE 6
334,000

CI (B/S) at 31/12/20x6
900,000 (given)
2,280,000 (given)
3,180,000 A

-B

3,180,000 A+B
318,000 C

120,000
(104,000)
 16,000 (shown above) D

334,000 C+D
Workings

= 20% of Fair Value Differential (before tax)

A

(Given)
(Given)
A
B

(Given)

B
C

Ratio
 D 98.18%
E 1.82%
D+E = C

alance sheet

Workings for CJE 2

Opening retained earnings 1 Jan 20x6 800,000
Less retained earnings at acquisition date (300,000)
Increase in retained earnings post-acquisition 500,000
Non-controlling interest - 10% = 50,000

Workings for CJE 3

CJE July 20x5
Dr Contingent Liability 200,000
Cr Litigation Expense
Reversal of entry relating to provision for loss

Subsidiary Y's separate account July 20x5

Dr Litigation Expense 180,000
Cr Liability
Recognise litigation expense
 Case Facts
Due diligence carried out before acquisition revealed that Y Co was a
200,000 defendant in a litigation case in which a judgement was made in favour of the
plaintiff. As Y Co is countersuing the plaintiff, no provision had yet been
recognised as at 1 January 20x4 as the losss was not deemed probable. Based
on expected losses, a provision of $200,000 should be recognised by P Co in
accordance with IFRS 3. Y Co recognised a litigation expense of $180,000 in
July 20x5 on the final award of damages to the plaintiff by the courts.
180,000
aled that Y Co was a
nt was made in favour of the
provision had yet been
not deemed probable. Based
ld be recognised by P Co in
on expense of $180,000 in
aintiff by the courts.