Exam 29: Further Consolidation Issues II: Accounting for Non-Controlling Interests

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.

Non-controlling interests are allocated on a 'line-by-line' basis throughout the statement of comprehensive income.

Non-controlling interests arise when:

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

Describe the three steps involved in preparing consolidated financial statements.

Non-controlling interests are shown as equity,that is,as contributors of equity capital to the economic entity.

AASB 101 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.

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

AASB 101 Presentation of Financial Statements requires a separate line item on the face of the statement of financial position showing the non-controlling interest in equity.

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.

After eliminating the dividend payable to the parent,the balance of the dividend payable to the non-controlling interest will be:

As prescribed in AASB 10,which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?

Detail three situations where the presence of non-controlling interests means that elimination journal entries would not be the same as they would be if the subsidiary was 100 per cent owned.

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?

Discuss the three elements considered when calculating non-controlling interests.

There is no adjustment for things such as management fees when determining non-controlling interest,because:

Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd.During the period ended 30 June 2016 the operating profit of Rhymes Ltd was $680 000.Buster Ltd bought goods for $540 000 from Rhymes.The goods cost Rhymes $400 000 and at the end of the period none of this inventory was still on hand.Rhymes paid Buster a management fee of $100 000 during the period.Goodwill on consolidation was impaired by $30 000.Rhymes paid a dividend of $40 000 at the end of the period. What is the non-controlling interest in the operating profit of Rhymes Ltd?

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

Calculating the non-controlling interest (NCI)in the operating profit and opening retained earnings of a subsidiary is done by: