Deck 12: Consolidation: Non-Controlling Interest

Question 1

According to AASB 10/IFRS 10 Consolidated Financial Statements, a non-controlling interest is classified as:

A) part of the parent entity's equity.
B) part of the group's equity.
C) a liability of the parent entity.
D) an asset of the group.

Answer 1

B

Question 2

Ownership interests in a subsidiary entity that do not belong to the parent entity are known as:

A) unowned interests.
B) non-controlling interests.
C) external equity interests.
D) non-parent interests.

Answer 2

B

Question 3

Wendy Limited paid $120 000 for 75% of Yum Limited. At the date of acquisition Yum Limited had equity as follows:
-share capital of $100 000
-retained earnings of $50 000
-other reserves of $30 000.
All of Yum Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by Wendy Limited amounted to:

A) $90 000.
B) $120 000.
C) $135 000.
D) $180 000.

Answer 3

$135 000.

Question 4

Which of the following statements is incorrect?

A) The calculation of the NCI is not affected by profits or losses relating to intra-group transactions.
B) The NCI is entitled to a share of the group's consolidated equity.
C) The NCI is a contributor of equity to the consolidated group.
D) The NCI is entitled to a share of the subsidiary's equity adjusted for the effects of profits or losses made on intra-group transactions.

Question 5

Fisher Limited acquired 75% of the share capital and reserves of Man Limited for $150 000. The equity of Man Limited consisted of share capital of $100 000 and reserves of $60 000. All assets and liabilities were recorded at fair value except plant and equipment which were recorded at $10 000 below fair value. The company tax rate was 30%. The partial goodwill method is adopted by the group. The amount of goodwill acquired by Fisher Limited in this business combination was:

A) $17 000.
B) $24 750.
C) $30 000.
D) $112 500.

Question 6

When presenting a consolidated statement of comprehensive income, the non-controlling interest is shown as:

A) a separate component of each individual line item.
B) a separate portion of profit or loss attributable to the non-controlling interest.
C) part of the total revenue of the group.
D) part of the total expenses of the group.

Question 7

Mooloolaba Limited owns 90% of the share capital of Maroochydore Limited. Maroochydore Limited paid a dividend of $40 000 during the financial period. The adjustment entries in the consolidation worksheet for the dividend include which of the following?

A) DR Dividend revenue $36 000
B) DR Dividend revenue $40 000
C) DR Dividend payable $36 000
D) DR Dividend receivable $40 000

Question 8

King Limited paid $220 000 for 70% of Prince Limited. At the date of acquisition Prince Limited had share capital of $200 000 and retained earnings of $100 000 and all of Prince Limited's assets and liabilities were recorded at fair value. The fair value of identifiable net assets acquired by King Limited amounted to:

A) $154 000.
B) $210 000.
C) $300 000.
D) $220 000.

Question 9

Where the NCI is measured at fair value at acquisition date, which of the following methods is being used?

A) Partial goodwill method
B) Fair value method
C) Full goodwill method
D) NCI goodwill method

Question 10

Jack Limited acquired 80% of the share capital and reserves of Jill Limited for $300 000. Share capital was $200 000 and reserves amounted to $100 000. All assets and liabilities were recorded at fair value except buildings which was recorded at $20 000 below fair value. The fair value of the NCI at the date of Jack's acquisition was $70 000 and the full goodwill method is adopted by the group. If the company tax rate was 30%, the total goodwill in relation to this business combination amounts to:

A) $44 800.
B) $48 800.
C) $11 200.
D) $56 000.

Question 11

The non-controlling interest columns on a consolidation worksheet are used to:

A) adjust the amounts that have been recorded for intragroup revenue transactions.
B) adjust the amounts that have been recorded for intragroup services.
C) eliminate the recorded amounts of the non-controlling investment in the subsidiary.
D) compile the amounts of non-controlling interest and parent share of particular line items.

Question 12

Alexandra Limited acquired 80% of the share capital and reserves of Heads Limited for $300 000. Share capital was $200 000 and reserves amounted to $100 000. All assets and liabilities were recorded at fair value except buildings which was recorded at $20 000 below fair value. If the company tax rate was 30%, and the partial goodwill method was adopted, the NCI share of equity at the date of acquisition was:

A) $48 800.
B) $62 800.
C) $64 000.
D) $60 000.

Question 13

Which of the following statements is incorrect?

A) Under the partial goodwill method, the NCI is measured at fair value at acquisition date.
B) Under the partial goodwill method, the NCI is measured as a proportion of the net fair value of the subsidiary's identifiable assets and liabilities at acquisition date.
C) Extra columns are added to the consolidation worksheet to divide the group's equity into the NCI share and the parent's share.
D) The adjustments for intragroup transactions are the same whether the subsidiary is wholly owned or whether there is an NCI in the subsidiary.

Question 14

If a subsidiary is not wholly owned by the parent there are two ownership interests which are known as the:

A) parent and non-parent interest.
B) parent and non-group interest.
C) parent and non-controlling interest.
D) group and non-group interest.

Question 15

Under the conceptual framework for international financial reporting a non-controlling interest fits the definition of:

A) a liability.
B) an equity item.
C) an asset.
D) an expense.

Question 16

Beach Limited is a subsidiary of Golden Limited. When Golden acquired its 70% interest in Beach, the retained earnings of Beach Limited were $40 000. At the beginning of the current period, Beach Limited's retained earnings had increased to $100 000. Beach also earned profit of $20 000 during the current period. The NCI's share of the equity of Beach Limited at reporting date is:

A) $36 000.
B) $30 000.
C) $6000.
D) $84 000.

Question 17

When presenting a consolidated statement of financial position, the non-controlling interest is:

A) not separately disclosed.
B) presented as a separate component of total assets and total liabilities.
C) presented separately within the equity section.
D) shown as a separate portion of net assets.

Question 18

A consolidated statement of comprehensive income discloses the non-controlling interest as:

A) a separate component of revenue.
B) a separate component of profit before tax and a separate component of tax expense.
C) a separate component of each line item of revenue and expense.
D) a separate portion of profit or loss attributable to the non-controlling interest.

Question 19

According to AASB 10/IFRS 10 Consolidated Financial Statements, the term 'non-controlling interest' is defined as:

A) equity in a parent that is owned, directly or indirectly, by a subsidiary.
B) the equity in the parent entity other than the portion owned by the subsidiary entity.
C) the equity in the economic entity other than that which can be attributed to the subsidiary entity.
D) equity in a subsidiary not attributable, directly or indirectly, to a parent.

Question 20

AASB 12/IFRS 12 Disclosure of Interests in Other Entities requires disclosure of which of the following for each subsidiary that has a non-controlling interest?

A) Accumulated non-controlling interests of the subsidiary at the end of the reporting period.
B) The proportion of ownership interests held by non-controlling interests.
C) The subsidiary's principal place of business.
D) All of the options are correct.

Question 21

Where a subsidiary is partly owned by a parent and an NCI, any goodwill arising in the acquisition analysis is required to be allocated between that attributable to the parent and that attributable to the NCI.

Question 22

Which of the following statements is correct?

A) The entry to reflect the NCI share of equity at acquisition date changes every year that consolidated financial statements are prepared.
B) The NCI is entitled to a share of consolidated equity.
C) To calculate the NCI share of equity, the subsidiary's equity at the end of the reporting period is divided into five parts.
D) The NCI is not entitled to a share of consolidated equity.

Question 23

The NCI is entitled to a share of the consolidated equity of the group.

Question 24

Happy Ltd holds a 60% interest in Valley Ltd. On 1 July 2018 Valley Ltd sold a depreciable non-current asset to Happy Ltd at a profit before tax of $10 000. The remaining useful life of the asset at the date of sale was 4 years and the tax rate is 30%. The impact of the above on the NCI share of profit for the year ended 30 June 2019 is:

A) debit $2800.
B) credit $2800.
C) debit $2100.
D) credit $2100.

Question 25

Which of the following is not one of the 3 steps in calculating the NCI's share of the recorded equity of the subsidiary?

A) Determine NCI share of the changes in equity in the current period.
B) Determine the NCI share of equity of the subsidiary at acquisition date.
C) Determine the NCI share of the subsidiary's equity between the date of acquisition and the beginning of the current period.
D) Determine the NCI share of the subsidiary's equity prior to the date of acquisition.

Question 26

A non-controlling interest is entitled to a share of which of the following items? I Equity of the group entity at acquisition date
II Current period profit or loss of the subsidiary entity
III Changes in equity of the subsidiary between acquisition date and the beginning of the financial period
IV Equity of the subsidiary at acquisition date

A) I, II and III only
B) I and II only
C) II, III and IV only
D) III only

Question 27

Where a partly owned subsidiary has a dividend declared but not yet paid at balance date, the NCI share of equity is reduced by the NCI share of the dividend and the dividend payable to the NCI is eliminated.

Question 28

Currimundi Ltd holds a 60% interest in Beach Ltd. Beach Ltd purchases inventories from Currimundi Ltd during the year for $30 000. The inventories originally cost $21 000. At the end of the year 80% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction includes a debit of which of the following?

A) Nil
B) $2016
C) $504
D) $5040

Question 29

The NCI share of different categories of equity is required to be separately disclosed on the face of the consolidated statement of financial position.

Question 30

A non-controlling interest in the net assets of a subsidiary consists of the non-controlling interest's share at the date of the business combination:

A) less 100% of any post-acquisition dividends paid.
B) less the parent's share of any post-acquisition dividends paid or declared.
C) plus a share of the changes in the subsidiary's equity since the business combination.
D) less the non-controlling proportionate share of changes since the combination.

Question 31

Non-controlling interests in the equity of a subsidiary at the date of acquisition are reflected in Step 1 of the NCI allocation process.

Question 32

Which of the following statements is incorrect?

A) The NCI is unaffected by the existence of any gain on bargain purchase.
B) The NCI share of equity at acquisition date is adjusted for its share of any gain on bargain purchase.
C) Any gain on bargain purchase is recognised in the pre-acquisition entry.
D) The pre-acquisition entry only adjusts for the parent's share of the pre-acquisition equity.

Question 33

When preparing consolidated financial statements, any profit or loss that arises in relation to the intragroup transfer of services is regarded as:

A) immaterial and does not get adjusted on a consolidation worksheet.
B) immediately realised.
C) unrealised.
D) having no impact on the non-controlling interest, and so ignored for consolidation reporting.

Question 34

During the current year, a partly owned subsidiary has made a transfer from a general reserve to retained earnings. Which of the following lines would appear in the NCI consolidation entry relating to the current year transfer?

A) CR NCI
B) CR Retained earnings
C) DR General reserve
D) DR Transfer from general reserve

Question 35

The full effects of transactions between entities within a group are eliminated on consolidation, regardless of the existence of an NCI.

Question 36

The NCI is a contributor of equity to the group.

Question 37

Because it is necessary to distinguish between the parents share and the NCI share of equity in the consolidated financial statements, extra columns are added in the consolidation worksheet to divide the group equity into the NCI share and the parent's share.

Question 38

Moffatt Ltd holds a 60% interest in Beach Ltd. Beach Ltd sells inventories to Moffatt Ltd during the year for $20 000. The inventories originally cost $14 000. At the end of the year 80% of the inventories are still on hand. The tax rate is 30%. The NCI adjustment required in relation to this transaction includes which of the following?

A) DR NCI $1344
B) DR NCI share of profit/(loss) $1344
C) DR NCI $1920
D) CR NCI $1344

Question 39

The consolidated statement of comprehensive income must separately disclose the consolidated profit for the period attributable to equity holders of the parent and the NCI.

Question 40

Where a subsidiary is partly owned by a parent and an NCI, both the BCVR entries and the pre-acquisition entries are adjusted to reflect only the parent's share of the subsidiary's equity balances.

Question 41

A current year transfer by a partly owned subsidiary of a pre-acquisition balance from the general reserve to retained earnings is ignored when preparing the NCI journals as there has been no change in total equity.

Question 42

Where a subsidiary records a gain on the intragroup sale of a non-current depreciable asset to another entity within the group, NCI adjustments are required in relation to both the gain on sale as well as the consequential depreciation adjustments resulting from the group's continued use of the asset.

Question 43

Consequential depreciation adjustments in relation to assets that were the subject of an upward business combination valuation adjustment must be taken into account when calculating the NCI share of post-acquisition movements in the subsidiary's equity.

Question 44

The calculation of the NCI share of equity at a point in time is done in three steps.

Question 45

For transactions involving intragroup services, it is assumed that the profit is realised by the group immediately on payment within the group. Therefore, no NCI adjustments are made on consolidation in relation to such transactions.

Question 46

The NCI is unaffected by the existence of any gain on bargain purchase.

Question 47

The NCI is not allocated a share of any BCVR balances where business combination valuation entries are recorded on consolidation, rather than in the subsidiary's books.

Question 48

The effect on consolidated current year profit of all intragroup transactions involving a partly owned subsidiary must be reflected in Step 3 of the NCI allocation process.

Question 49

The entry to reflect the NCI share of acquisition date never changes.

Question 50

A gain recorded by a subsidiary on the sale of a non-current asset to another entity within the group will result in a debit adjustment to the NCI share of current year profit.