Topic 1.

Simple SFP illustrations

Illustration example 1:

STEP 1: Working 1: Ss equity table

At Year End At Acquisition Post-acquisition

Share Capital 100 100
Retained Earnings 500 80 420
PPE 10 - 6 = 4 190 - 100 - 80 = 10 10/5yrs x 3yrs = -6
190 414

STEP 2: Working 2: G/W

FV of Consideration 200
Proportionate NCI 190 x 15% = 28.5 We use 15% (= 100% - 85% acquired)
FV of NA acquired -190 Given in the question
G/W @ acquisition 200 + 28.5 - 190 = 38.5
Impairment -4
G/W @ Y/E 34.5

STEP 3: Working 3: NCI

At Acquisition 28.5 The same figure as in Working 2

+ post acquisition 414(w1) x 15% = 62.1
At Y/E 90.6
Impairment attributable to
NCI 0
Net NCI at Y/E 90.6
STEP 4: Working 4: RE

H 1 300 Given in the question

S 414 (w1) x 85% = 352 H owns 85% of S
G/W
Impairment -4
1 648

STEP 5: Group SFP

Goodwill 34.5 (w2)

Other Net Assets 2 004 (1 400 (Hs) + 600 (Ss) + PPE adj. 4
from equity table, (w1)

Share Capital 300 Parent only
Retained Earnings 1 648 (w4)
NCI 90.6 (w3)

Illustration example 2:

Working 1: Ss equity table

At Year End At Acquisition Post-acquisition

Share Capital 200 200
Retained Earnings 2 200 520 1 680
PPE 32 40 -8
760 1 672

Working 2: G/W

FV of Consideration 800 Given in the question (Investment in S)

Proportionate NCI
FV of NA acquired
G/W @ acquisition
Impairment
G/W @ Y/E
760 (w1) x 25% = 190 (100% - 75% acquired)
-760 Given in the question
800 + 190 - 760 = 230
-25 Given in the question
205
Working 3: NCI

At Acquisition 190
+ post acquisition 1 672(w1) x 25% = 418
At Y/E 608
Impairment attributable No impairment since Proportionate
to NCI 0 method is used
Net NCI at Y/E 608

Working 4: RE

H 5 900 Given in the question

S 1 672(w1) x 75% = 1 254 H owns 75% of S
G/W All impairment attributed to H since
Impairment -25(w2) Proportionate method is used
7 129

STEP 5: Prepare Group SFP

Goodwill 205 (w2)

Other Net Assets 8 032 (5600 (Hs) + 2 400 (Ss) + PPE adj 32 (w1)

Share Capital 500 Parent only
Retained Earnings 7 129 (w4)
NCI 608 (w3)
Illustration example 3:

Working 1: Ss Equity table

At Year End At Acquisition Post-acquisition

Share Capital 100 100
Retained Earnings 500 80 420
PPE 10 - 6 = 4 190 - 100 - 80 = 10 10/5yrs x 3yrs = -6
190 414

Working 2: G/W

FV of Given in the question

Consideration 200 (Investment in S)
FV of NCI 32 Given in the question
FV of NA
acquired -190 Given in the question
G/W @
acquisition 200 + 32 - 190 = 42
Impairment -4 Given in the question
G/W @ Y/E 38

Working 3: NCI

At Acquisition 32
+ post acquisition 414(w1) x 40% = 165.6
At Y/E 197.6
Impairment attributable 40% of GW impairment attributed to NCI
to NCI 40% x 4 = -1.6 since FV of NCI method is used
Net NCI at Y/E 196
Working 4: RE

H 1 300
S 414 x 60% = 248.4
G/W 60% of GW impairment attributed to H since FV of NCI
Impairment 60% x 4 = - 2.4 method is used
1546

Group SFP

Goodwill 38 Step 2
Other Net Assets 2 004 (1 400 + 600 + PPE 4 (w1))

Share Capital 300 Parent only
Retained Earnings 1 546 (w4)
NCI 196 (w3)
Illustration example 4:

Working 1: Ss equity table

At Year End At Acquisition Post-acquisition

Share Capital 400 400
Retained Earnings 3 200 680 2 520
PPE 60 60 0
1140 2 520

Working 2: G/W

FV of Consideration 1 200 Given in the question (Investment in S)

FV of NCI 127 Given in the question
FV of NA acquired 1 140 Given in the question
G/W @ acquisition 187
Impairment -17 Given in the question
G/W @ Y/E 170

Working 3: NCI

At Acquisition 127 The same as in (w2)

+ post acquisition 252 10% x 2 520 (w1)
At Y/E 379
Impairment attributable 10% of GW impairment attributed to NCI since
to NCI 10% x 17 = 1.7 = 2 FV of NCI method is used
Net NCI at Y/E 377

Working 4: RE

H 8 800
2 520(w1) x 90% = 2
S 268
G/W 90% of GW impairment attributed to H since FV of NCI
Impairment 90% x 17 = - 15 method is used
11 053
Prepare Group SFP

Goodwill 170 (w2)

Other Net Assets 12060 (8 400 + 3 600 + 60 Land (w1))

Share Capital 800 Parent only
Retained Earnings 11 053 (w4)
NCI 377 (w3)

Topic 2. Definition of a subsidiary

Q1. A

Topic 3. Business combination basics

Q1. A
in Case of Joint venture, you are not taking over anybody, you share the control with the other
ventures.
Q2. B
Q3. C
Q4. B
Q5. A
Q6. A
Q7. A
Q8. A, B
Q9. B 2,000 + 100 = 2,100
Q10. B (given in the question)

Topic 4. Equity table

Q1. B
Q2. A
Q3. A, B, C, D, F
Q4. A
Topic 5. Simple goodwill and NCI

Q1. B
Q2a. B
Q2b. A
Q3. A
Q4. A
Q5. A, C
Q6. B

Working:

FV of Consideration 1 500
Proportionate NCI 480 (100% - 70% =) 30% of 1 600
FV of NA acquired -1 600
G/W @ acquisition 380

Q7. B (G/W 380 less impairment 50 = 330)

Q8. A
Q9. A
Q10. B

Topic 6. Reserves calculation

Q1. B
Q2. A (working: 1400 of H + (700-600)*80% of S)
Q3. A
Q4. A
Extract from past exam question (Q1 note i) - June 2009)

STEP 1: Equity table of Data

At Year End At Acquisition Post-acquisition

Share Capital 220 220
Retained Earnings 150 136 14
Other Components
of equity 4 4 0

Land 40 40

400 14

STEP 2: Calculate G/W

FV of Consideration 300
FV of NCI 86
FV of NA acquired -400
Gain on bargain
purchase -14

STEP 3: Calculate NCI

At Acquisition 86
+ post acquisition 20% x 14 = 2.8
At Y/E 88.8

STEP 4: Calculate RE

H 240
S 14 x 80% = 11.2
251.2

STEP 5: Other components of equity

H 12
S 0
12