Exam 22: Further Consolidation Issues II: Accounting for Non-Controlling Interests

Only dividends payable to the parent entity are eliminated against dividends receivable in the accounts of the parent entity.

Which of the following is not one of the stages used to determine non-controlling interest?

On 1 July 2012,Han Solo Ltd acquired 80 per cent of the share capital of Chewbacca Ltd for $500 000,which represented the fair value of the consideration paid,when the share capital and reserves of Chewbacca Ltd were: Share capital \ 300000 Revaluation surplus \ 100000 Retained earnings \ 100000 \ 500000 All assets of Chewbacca Ltd were recorded at fair value at acquisition date,except for machinery that had a fair value $20 000 greater than its carrying amount.The cost of the equipment was $40 000 and it had accumulated depreciation of $10 000.The tax rate is 30 per cent. Under the full goodwill method,what is the amount of fair value adjustment and goodwill,respectively,on 1 July 2012 for non-controlling interests in Chewbacca Ltd?

Using full goodwill method,share of goodwill attributable to the non-controlling interests is recognised in the statement of financial position as part of non-controlling interest in equity.

Differentiate 'full goodwill method' from the 'partial goodwill method' in the presence of non-controlling interests in a subsidiary.Discuss the implications of permitting the use of either method in business combinations.

Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?

In calculating the proportion of a subsidiary's profit that is attributable to owners who are not part of the group,all adjustments to the group's profit should be treated as affecting the calculation for the outside owners.

On 1 July 2012,Han Solo Ltd acquired 80 per cent of the share capital of Chewbacca Ltd for $400 000,which represented the fair value of the consideration paid,when the share capital and reserves of Chewbacca Ltd were: Share capital \ 300000 Revaluation surplus \ 100000 Retained earnings \ 100000 \ 500000 All assets of Chewbacca Ltd were recorded at fair value at acquisition date,except for equipment that had a fair value $20 000 greater than its carrying amount.The cost of the equipment was $40 000 and it had accumulated depreciation of $10 000.The tax rate is 30 per cent. Using the partial goodwill method,what is the amount of fair value adjustment and goodwill,respectively,on 1 July 2012 for non-controlling interests in Chewbacca Ltd?

IAS 1 Presentation of Financial Statements requires an entity to disclose separately in the statement of comprehensive income,profit or loss for the period attributable to non-controlling interests and owners of the parent.

When a subsidiary company that has a non-controlling interest (NCI)declares a dividend,the treatment in the consolidated statement of financial position of dividends not paid is:

Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?

Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2013.The fair value of the net assets of Nail Ltd at purchase was represented by: Share capital \ 3760000 Retained earnings 1320000 \ 5080000 Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd.During the period ended 30 June 2015,Nail Ltd paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000.Nails' opening retained earnings at the beginning of the period were $1 460 000.At the end of the period Nail Ltd declared a dividend of $90 000.There were no other inter-company transactions.Goodwill was determined to have been impaired by $19 000 during the period.Companies in the group accrue dividends when they are declared by subsidiaries. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest?

Describe the two options in measuring the non-controlling interest.

Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?

Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2014.The fair value of the net assets of Marx Ltd at purchase was represented by: Share capital \ 2140000 Retained earnings 840000 \ 2980000 Groucho Ltd paid cash consideration of $1 850 000 for Marx Ltd.During the period ended 30 June 2015,Marx Ltd paid management fees of $200 000 to Groucho Ltd and Marx had an operating profit of $530 000.Marx Ltd paid a dividend of $100 000 during the period.Groucho purchased inventory from Marx during the period for $80 000.The inventory cost Marx Ltd $56 000 and at the end of the period Groucho had 50 per cent of that inventory still on hand.Goodwill has been determined to have been impaired by $6200 during the period.Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries.Ignore tax implications. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest?

Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?

Green Ltd purchased 90 per cent of the issued capital and in the process gained control over Maroon Ltd on 1 July 2015.The fair value of the net assets of Maroon Ltd at purchase was represented by: Share capital \ 3220000 Retained earnings 740000 \ 3960000 Green Ltd paid cash consideration of $3 700 000 for Maroon Ltd.During the period ended 30 June 2017,Maroon Ltd paid management fees of $100 000 to Green Ltd and Maroon had an operating profit of $405 000.Maroon Ltd declared a dividend of $98 000 during the period.Green purchased inventory from Maroon during the period ended 30 June 2017 for $100 000.The inventory cost Maroon Ltd $85 000 and at the end of the period Green had 35 per cent of that inventory still on hand.Maroon's opening retained earnings for the period ended 30 June 2017 was $810 000.Goodwill has been determined to have been impaired by $13 600.Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries.There were no other inter-company transactions.Ignore tax implications. For the period ended 30 June 2017,what consolidation journal entries are required and what is the outside equity interest?

One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.

IFRS 10 Consolidated and Separate Financial Statements prescribes that non-controlling interests be presented in the consolidated statement of financial position as a liability.

On 1 July 2015 Harry Ltd purchased 80 per cent of the issued share capital of Wills Ltd and has control of Wills.The fair value of the net assets of Wills Ltd on that date was represented as follows: Share capital \ 2000000 Retained earnings 500000 \ 2500000 Harry Ltd paid cash consideration of $2 500 000 for Wills.Wills Ltd made an operating profit of $350 000,there were no intragroup transactions during the period ended 30 June 2016.Goodwill had been determined to have been impaired during the year by $25 000.What consolidation journal entries are required for the period and what is the non-controlling interest in equity as at 30 June 2016?