Chapter 12: Consolidation: Non-Controlling Interest Review Questions

ACCT6005 Company Accounting Tutorial Questions
Module 3 Chapter 12: Consolidation: non-controlling interest

Review questions
1. What is meant by the term ‘non-controlling interest’ (NCI)? (LO1)
NCI is the term used for the ownership interest in a subsidiary other than the parent.
It is defined in AASB 127/IAS 27 as:
 The equity in a subsidiary not attributable, directly or indirectly, to a parent.
2. Explain whether the NCI is better classified as debt or equity. (LO1)
The main argument for the NCI being classified as equity is that it better fits the definition of equity. The
subsidiary has no present obligation in relation the NCI so the NCI does not meet the definition of a
liability.
Some writers argue that NCI should be disclosed separately from equity an liabilities – the “mezzanine”
treatment. This argument relates to the utility of financial statements in relation to the user group, the
parent shareholders. It is argued that this form of presentation provides more relevant information to
the parent shareholders.
3. Explain whether the NCI is entitled to a share of subsidiary equity or some other amount.
(LO1)
If the NCI is classified as equity, it is entitled to a share of consolidated equity. Note that consolidated
equity is basically subsidiary equity adjusted for the effects of intragroup transactions – that is, realised
subsidiary equity.
If it were classified as a liability of the subsidiary then the calculation of the NCI would be based on the
obligation held by the subsidiary.
4. How does the existence of an NCI affect the business combination valuation entries? (LO2)
There is no effect. However if the full goodwill method is used, the recognition of the subsidiary’s
goodwill is made via a BCVR entry. In contrast, where the partial goodwill method is used, goodwill is
recognised in the pre-acquisition entry.
Why? The BCVR entries, apart from that for goodwill, are prepared because of the requirement of AASB
3/IFRS 3 to show the identifiable assets and liabilities of the acquiree at fair value. The determination of
fair value is not affected by the parent’s ownership in the subsidiary.
Suggested Solutions taken from the Solutions Manual to accompany Leo, Knapp, McGowan, Sweeting (2018).
Company Accounting, 11th edition, Wiley Australia
5. How does the existence of an NCI affect the pre-acquisition entries? (LO2)
The pre-acquisition entry eliminates the investment account recorded by the parent and the pre-
acquisition equity of the subsidiary, as well as recognising any gain on bargain purchase.
The consideration transferred reflects the amount paid by the parent for its share of the equity of the
subsidiary. The first effect then on the pre-acquisition entry is that the equity eliminated is only the
parent’s share. The second effect is that the gain on bargain purchase recognised is only that relating to
the parent’s share of the equity of the subsidiary.
6. Why is it necessary to change the format of the worksheet where a NCI exists in the group?
(LO2)
The AASB require the disclosure of the equity of the group, as well as the relative proportions of the
parent and the subsidiary. For a wholly owned subsidiary situation, the final column in the worksheet
represents the group position which is also the parent’s position, as there is no NCI. Where an NCI exists,
having determined the group position, the equity must be divided into parent share and the NCI share.
Hence, the worksheet must have additional columns to divide the group equity into the relative shares
of the parent and the NCI. This is done by calculating the NCI share and subtracting it from the group
equity so that the final column is then the parent entity’s share.
7. Explain how the adjustment for intragroup transactions affects the calculation of the NCI
share of equity.
The NCI does not affect the adjustment itself, as the full effects of the intragroup transaction are
adjusted for on consolidation. However, where the subsidiary records profit which is unrealised to the
group, this affects the calculation of the NCI. The NCI is entitled only to a share of consolidated equity
rather than subsidiary equity. Hence, where the subsidiary has recorded unrealised profit, the NCI share
of the recorded profit of the group must be adjusted for any of that profit which is unrealised. In the
Step 2 & Step 3 calculations of the NCI share of equity, this is a share of recorded equity. As adjustments
are made for intragroup transactions, where these transactions reflect adjustments for unrealised
subsidiary profit, an adjustment is also made to the NCI share of profit. The net result is then that the
NCI gets a share of realised subsidiary equity.
8. Explain whether an NCI adjustment needs to be made for all intragroup transactions. (LO4)
An NCI adjustment does NOT need to be made for all intragroup transactions.
An NCI adjustment only needs to be made where the adjustment is for unrealised profit recorded by the
subsidiary. Hence the transaction must be an upstream – subsidiary to parent – transaction in order for
an NCI adjustment to be made. Further the upstream transaction must relate to unrealised subsidiary
profit.
Practice questions
Question 12.1
Full and partial goodwill methods
On 1 July 2019, Rainbow Ltd acquired 80% of the issued shares of Lorikeet Ltd for $165 000. At this
date, the equity of Lorikeet Ltd was:
At acquisition date all the identifiable assets and liabilities of Lorikeet Ltd were recorded at amounts
equal to fair value. At 30 June 2021, the equity of Lorikeet Ltd consisted of:
During the 2020–21 year Lorikeet Ltd recorded a profit of $15 000.
Required
Prepare the consolidated worksheet entries at 30 June 2021 for Rainbow Ltd assuming:
(a) At 1 July 2019, the fair value of the non-controlling interest was $40 000 and Rainbow Ltd
adopts the full goodwill method.
(b) Rainbow Ltd adopts the partial goodwill method.
(a) Full goodwill method:
At 1 July 2019:
Fair value of identifiable assets and
liabilities of Lorikeet Ltd = $100 000 + $40 000 + $50 000
= $190 000
(a) Consideration transferred = $165 000
(b) NCI in Lorikeet Ltd = $40 000
Aggregate of (a) and (b) = $205 000
Goodwill = $205 000 - $190 000
= $15 000
Goodwill of Lorikeet Ltd
Fair value of Lorikeet Ltd = $40 000/0.2
= $200 000
Fair value of INA of Lorikeet Ltd = $190 000
Goodwill of Lorikeet Ltd = $10 000
Goodwill of Rainbow Ltd
Goodwill acquired = $15 000
Goodwill of Lorikeet Ltd = $10 000
Control premium – parent = $5 000
Consolidation worksheet entries at 30 June 2021:
(i) Business combination valuation entries:
Goodwill Dr 10 000
Business combination valuation reserve Cr 10 000
(Goodwill of subsidiary)
(ii) Pre-acquisition entries:
Retained earnings (1/7/20) Dr 40 000
Share capital Dr 80 000
General reserve Dr 32 000
Business combination valuation reserve Dr 8 000
Goodwill Dr 5 000
Shares in Lorikeet Ltd Cr 165 000
(iii) NCI share of equity 1/7/19:
NCI Cr 40 000
(20% of equity at 1/7/19)
(iv) NCI share of equity from 1/7/19 – 30/6/20:
Retained earnings (1/7/20)* Dr 3 000
General reserve** Dr 2 000
NCI Cr 5 000
* 20% of change in RE of $15 000
** 20% of change in GR of $10 000
(v) NCI share of equity 1/7/20- 30/6/21:
NCI share of profit Dr 3 000
NCI Cr 3 000
(20% x $15 000)
(b) Partial goodwill method:
At 1 July 2019:
liabilities of Lorikeet Ltd = $100 000 + $40 000 + $50 000
= $190 000
(b) NCI in Lorikeet Ltd = 20% x $190 000

= $38 000
Goodwill of Rainbow Ltd = $203 000 - $190 000
= $13 000
There is no BCVR entry as only parent goodwill is recognised
Goodwill Dr 13 000
Shares in Lorikeet Ltd Cr 165 000
NCI Cr 38 000
Entries (iv) and (v) are the same as for the full goodwill method.
Question 12.2
Full goodwill and partial goodwill methods
Swamp Ltd acquired 90% of the shares (cum div.) of Tortoise Ltd on 1 July 2018 for $237 000. At this
date, the equity of Tortoise Ltd consisted of:
At acquisition date all the identifiable assets and liabilities of Tortoise Ltd were recorded at amounts
equal to fair value. Tortoise Ltd had recorded a dividend payable of $10 000, which was paid in August
2018, and goodwill of $5000.
At 30 June 2019, the equity of Tortoise Ltd consisted of:
During the 2019–20 year Tortoise Ltd recorded a profit of $20 000.
Required
Prepare the consolidated worksheet entries at 30 June 2020 for Swamp Ltd assuming:
(a) At 1 July 2018, the fair value of the non-controlling interest was $25 000 and Swamp Ltd
adopts the full goodwill method.
(b) Swamp Ltd adopts the partial goodwill method.
(a) Full goodwill method:
At 1 July 2018:
liabilities of Tortoise Ltd = $125 000 + $30 000 + $80 000 (equity)
- $5 000 (goodwill)
= $230 000
(a) Consideration transferred = $237 000 – 90% x $10 000 (div. payable)
= $228 000
(b) NCI in Tortoise Ltd = $25 000
Goodwill = $253 000 - $230 000
= $23 000
Goodwill of Tortoise Ltd
Fair value of Tortoise Ltd = $25 000/0.1
= $250 000
Fair value of INA of Tortoise Ltd = $230 000
Goodwill of Tortoise Ltd = $20 000
Goodwill recorded = $5 000
Non-recorded goodwill = $15 000
Goodwill of Swamp Ltd
Goodwill of Tortoise Ltd = $20 000
Control premium – parent = $3 000
Consolidation worksheet entries at 30 June 2020:
Goodwill Dr 15 000
(Unrecorded goodwill of subsidiary)
Asset revaluation surplus Dr 27 000
Goodwill Dr 3 000
Shares in Tortoise Ltd Cr 228 000
NCI Cr 25 000
NCI Cr 4 000
(v) NCI share of equity 1/7/19- 30/6/20:
NCI Cr 2 000
(10% x $20 000)
(b) Partial goodwill method:
At 1 July 2018:
liabilities of Tortoise Ltd = $125 000 + $30 000 + $80 000
- $5 000 (goodwill)
= $230 000
(a) Consideration transferred = $237 000 – 90% x $10 000 (div. payable)
= $228 000
(b) NCI in Tortoise Ltd = 10% x $230 000
= $23 000

Goodwill of Swamp Ltd = $251 000 - $230 000
= $21 000
Goodwill recorded – parent share = 90% x $5 000
= $4 500
Unrecorded goodwill – parent share = $16 500
There are no BCVR entries for goodwill. Under the partial goodwill method only the parent’s share of
goodwill is recognised. This is done in the pre-acquisition entry.
Goodwill Dr 16 500
Shares in Tortoise Ltd Cr 228 000
NCI Cr 23 500
Entries (iv) and (v) are the same as in Part A.
Question 12.3
Partial goodwill method, gain on bargain purchase
Black Ltd acquired 90% of the shares of Swan Ltd for $107 600 on 1 July 2019. At this date the equity
of Swan Ltd consisted of:
At acquisition date all the identifiable assets and liabilities of Swan Ltd were recorded at amounts
equal to fair value.
At 30 June 2020, the equity of Swan Ltd consisted of:
During the 2019–20 year Swan Ltd recorded a profit of $15 000. The transfer to general reserve was
from retained earnings existing at 1 July 2019.
Required
Prepare the consolidated worksheet entries at 30 June 2020 for Black Ltd assuming Black Ltd adopts
the partial goodwill method. (LO3 and LO5)
Partial goodwill method:
At 1 July 2019:
liabilities of Swan Ltd = $80 000 + $40 000
= $120 000
(b) NCI in Swan Ltd = 10% x $120 000
= $12 000
Gain on bargain purchase = $120 000 - $119 600
= $400
There is no BCVR entry as a gain on bargain purchase occurred.
Gain on bargain purchase Cr 400
Shares in Swan Ltd Cr 107 600
* 90% x $40 000
Transfer to general reserve Cr 9 000
(90% x $10 000)
NCI Cr 12 000
NCI Cr 1 500
(10% x $15 000)
General reserve Dr 1000
Transfer to general reserve Cr 1 000
(10% x $10 000)

Question 12.4
Full goodwill method, multiple years
On 1 July 2019, Huntsman Ltd acquired 90% the issued shares of Spider Ltd for $140 300. At this date
the equity of Spider Ltd consisted of $100 000 share capital and $50 000 retained earnings. All the
identifiable assets and liabilities of Spider Ltd were recorded at amounts equal to fair value except for
plant for which the carrying amount of $80 000 (net of accumulated depreciation of $40 000) was
$3000 less than the fair value. The plant was estimated to have a further 3-year life. The fair value of
the non-controlling interest was $15 500. Huntsman Ltd uses the full goodwill method.
The following annual results were recorded by Spider Ltd following the business combination:
The other items of comprehensive income relate to the gains on land of Spider Ltd that are recorded
at fair value under the revaluation method of measurement. The group transfers the revaluation
reserves to retained earnings when an asset is sold or fully consumed.
The tax rate is 30%.
Required
Prepare the consolidation worksheet entries for the preparation of consolidated financial statements
of Huntsman Ltd for each of the years ending 30 June 2020–23. (LO3)
90%
Huntsman Ltd Spider Ltd
Huntsman Ltd 90%
NCI 10%
Acquisition analysis
1 July 2019
Net fair value of identifiable assets
and liabilities of Spider Ltd = ($100 000 + $50 000) (equity)
+ $3 000 (1 – 30%) (plant)
= $152 100

(b) Non-controlling interest = $15 500
Goodwill = $155 800 – $152 100
= $3 700
Goodwill of Spider Ltd
Fair value of Spider Ltd = $15 500/0.1
= $155 000
Fair value of INA of Spider Ltd = $152 100
Goodwill of Spider Ltd = $2 900
Goodwill of Huntsman Ltd
Goodwill of Spider Ltd = $2 900
Control premium = $800
(a) Consolidation worksheet entries - 1 July 2019:
Accumulated depreciation - plant Dr 40 000
Plant Cr 37 000
Deferred tax liability Cr 900
Goodwill Dr 2 900
Goodwill Dr 800
Shares in Spider Ltd Cr 140 300
(iii) NCI share of equity at 1 July 2019:
Business combination valuation reserve Dr 500
NCI Cr 15 500
(10% of balances at 1 July 2019)
(b) Consolidation worksheet entries - 30 June 2020:
Plant Cr 37 000
Depreciation expense Dr 1 000
Accumulated depreciation - plant Cr 1 000
(1/3 x $3 000 p.a.)
Deferred tax liability Dr 300
Income tax expense Cr 300
Goodwill Dr 2 900
(ii) Pre-acquisition entry:
Goodwill Dr 800
NCI Cr 15 500
(iv) NCI share of equity: 1 July 2019 - 30 June 2020:
NCI share of profit Dr 730
NCI Cr 730
(10% [$8000 – ($1 000 - $300))
Asset revaluation surplus Dr 200
NCI Cr 200
(10% x $2 000)
(c) Consolidation worksheet entries - 30 June 2021:
Plant Cr 37 000

Accumulated depreciation - plant Cr 2 000
(1/3 x $3 000 p.a. for 2 years)
Retained earnings (1/7/20) Cr 300
Goodwill Dr 2 900
Goodwill Dr 800
NCI Cr 15 500
Retained earnings (1/7/20) Dr 730
NCI Cr 930
(RE: 10% ($8 000 – [$1 000 - $300])
ARS: 10% x $2 000
This entry is the combination of the previous year’s entries for NCI for 1/7/19 – 30/6/20.
(v) NCI share of equity: 1 July 2020 - 30 June 2021:
NCI Cr 830
(10% ($9 000 – [$1 000 - $300])
NCI Cr 300
(10% x $3000)
(d) Consolidation journal entries - 30 June 2022:
Depreciation expense - plant Dr 1 000
Transfer from business combination
valuation reserve Cr 2 100
Goodwill Dr 2 900
Goodwill Dr 800
Transfer from business combination reserve Dr 1 890
NCI Cr 15 500
Asset revaluation surplus Cr 500
NCI Cr 2 060
RE: 10% ($8 000 + $9 000 – $1 400 plant)
ARS: 10% ($2 000 + $3 000)
This entry is the combination of the previous year’s entries (no. iv & v) for NCI for 1/7/19 – 30/6/21.
NCI Cr 930
(10% [10 000– ($1000 - $300)])
valuation reserve Dr 210
Business combination valuation reserve Cr 210
(10% x $2 100 plant)
NCI Cr 400
(10% x $4 000)
(e) Consolidation journal entries - 30 June 2023:
Goodwill Dr 2 900
Goodwill Dr 800
NCI Cr 15 500
Asset revaluation surplus Cr 900
NCI Cr 3 600
RE: 10% ($8 000 + $9 000 + $10 000)
ARS: 10% ($2 000 + $3 000 + $4000)
This entry is the combination of the previous year’s entries (no. iv & v) for NCI for 1/7/19 – 30/6/22
NCI Cr 1 100
(10% x $11 000)
NCI Cr 500
(10% x $5 000)
Question 12.5
Partial and full goodwill methods
On 1 July 2019 Sugar Ltd acquired 90% of the shares of Glider Ltd for $435 240. At this date the equity
of Glider Ltd consisted of share capital of $300 000 and retained earnings of $120 000. All the
identifiable asset and liabilities of Glider Ltd were recorded at amounts equal to fair value except for:
The plant was considered to have a further 10-year life. All the inventory was sold by 30 June 2020.
The tax rate is 30%. Sugar Ltd uses the partial goodwill method.
During the 2019–20 period Glider Ltd recorded a profit of $30 000.
Required
(a) Prepare the consolidation worksheet entries for the preparation of the consolidated
financial statements of Sugar Ltd at 30 June 2020.
(b) Prepare the consolidation worksheet entries if Sugar Ltd used the full goodwill method,
assuming the fair value of the non-controlling interest at 1 July 2019 was $47 700.
90%
Sugar Ltd Glider Ltd
Sugar Ltd 90%
NCI 10%
At 1 July 2019:
and liabilities of Glider Ltd = $300 000 + $120 000 (equity)
+ $15 000 (1 – 30%) (land)

+ $3 000 (1 – 30%) (inventory)
+ $30 000 (1 – 30%) (plant)
= $453 600

(b) Non-controlling interest = 10% x $453 600
= $45 360
Goodwill of the parent = $480 600 - $453 600
= $27 000
(a) Worksheet entries at 1 July 2019:
Land Dr 15 000
Deferred tax liability Cr 4 500
Plant Cr 50 000
Accumulated depreciation Cr 3 000
(1/10 x $30 000)
Cost of sales Dr 3 000
valuation reserve Cr 2 100
Goodwill Dr 27 000
Shares in Glider Ltd Cr 435 240

valuation reserve Dr 1 890
NCI Cr 45 360
(iv) NCI share of equity (1/7/19 - 30/6/20):
NCI Cr 2 580
(10% ($30 000 – ($3 000 - $900) – ($3 000 – $900)))
valuation reserve Dr 210
(10% x $2 100)
(b) Full goodwill method:
NCI has a fair value of $47 700.
At 1 July 2019:
and liabilities of Glider Ltd = $300 000 + $120 000 (equity)
+ $15 000 (1 – 30%) (land)

+ $3 000 (1 – 30%) (inventory)
+ $30 000 (1 – 30%) (plant)
= $453 600

(b) Non-controlling interest = $47 700
Goodwill = $482 940 - $453 600
= $29 340
Goodwill of Subsidiary
Fair value of Glider Ltd = $47 700/10%
= $477 000
and liabilities = $453 600
Goodwill of subsidiary = $23 400
Goodwill of parent
Goodwill of subsidiary = $23 400
Goodwill of parent (control premium) = $5 940
There will need to be an additional BCVR entry:
Goodwill Dr 23 400
Business combination valuation entry Cr 23 400
The pre-acquisition entry at 1 July 2019 would change to:
Business combination valuation reserve * Dr 51 300
Goodwill Dr 5 940
Shares in Glider Ltd Cr 435 240
* $30 240 (see A. entry) + (90% x $23 400)
The step (i) NCI entry changes to:
Business combination valuation reserve * Dr 5 700
NCI Cr 47 700
* $3 360 (see A. entry)+ 10% x $23 400]
All other entries under part (a) are the same for part (b).
Question 12.6
Partial goodwill method, consolidation worksheet
Barren Ltd acquired 75% of the shares of Goose Ltd for $191 000 on 1 July 2019. At this date the equity
of Goose Ltd consisted of:
At this date all the identifiable assets and liabilities of Goose Ltd were recorded at amounts equal to
their fair values except for:
The plant was considered to have a further useful life of 10 years. The brands have an indefinite life.
The inventory was all sold by 30 June 2020. The tax rate is 30%. Barren Ltd uses the partial goodwill
method.
An impairment test was conducted in June 2020 resulting in the write off of all the goodwill of Goose
Ltd and $20 000 from the brands.
Financial information provided by the two companies at 30 June 2022 was as follows:
Required: Prepare the consolidated financial statements of Barren Ltd at 30 June 2022. (LO3)
75%
Barren Ltd Goose Ltd
Barren Ltd 75%
NCI 25%
Pre-acquisition analysis
At 1 July 2019:
Net fair value of identifiable
assets and liabilities of Goose Ltd = ($80 000 + $48 000 + $32 000) (equity)
+ $10 000 (1 – 30%) (plant)
+ $80 000 (1 – 30%) (brands)
+ $30 000 (1 – 30%) (inventory)
= $244 000

(b) Non-controlling interest = 25% x $244 000
= $61 000
Goodwill: parent only = $252 000 - $244 000
= $8 000
(a) Consolidation worksheet entries at 30 June 2022:
Plant Cr 16 000
Accumulated depreciation Cr 3 000
(1/10 x $10 000 p.a. for 3 years)
Retained earnings (1/7/21) Cr 600
Brands Dr 80 000
Accumulated impairment losses – brands Cr 20 000
Deferred tax liability Dr 6 000
Retained earnings (1/7/21) Cr 6 000
Retained earnings (1/7/21) * Dr 47 750
Shares in Goose Ltd Cr 191 000
* = $24 000 + $8 000 goodwill + 75% x $21 000 (BCVR – inventory)
(iii) NCI in equity at 1/7/19:
NCI Cr 61 000
(25% of balances at 1/7/19)
(iv) NCI in equity (1/7/19 - 30/6/21):
NCI Cr 1 900
RE: 25% ($60 000 - $32 000 – ($2 000 - $600) – ($20 000 - $6 000))
GR: 25% ($64 000 - $48 000)
BCVR: 25% x $21 000 (BCVR inventory)

(v) NCI in equity (1/7/21 - 30/6/22):
NCI Cr 6 425
(25% ($26 400– ($1 000 - $300)))
Financial Barren Goose Adjustments Group NCI Parent

Statements
Ltd Ltd Dr Cr Dr Cr
Sales revenue 400 000 64 000 464 000

Cost of sales 170 000 28 000 198 000
230 000 36 000 266 000

Other expenses 60 000 5 600 1 1 000 66 600
Profit before 170 000 30 400 199 400

tax
Tax expense 40 000 4 000 300 1 43 700
Profit for the 130 000 26 400 155 700 5 6 425 149 275
period
Retained 95 000 60 000 1 2 000 600 1 91 850 3 8 000 80 700
earnings
1 20 000 6 000 1 4 3 150
(1/7/21)
2 47 750
Retained 225 000 86 400 247 550 229 975

earnings
(30/6/22)
Capital 300 000 80 000 2 60 000 320 000 3 20 000 300 000
General 50 000 64 000 2 36 000 78 000 3 12 000 62 000

reserve
4 4 000
BCVR 0 0 2 47 250 7 000 1 15 750 3 21 000 5 250 4 0
56 000 1
Total equity: 591 975

parent
Total equity: 61 000 3 69 325
NCI
1 900 4
6 425 5
Total equity 575 000 230 400 661 300 74 575 74 575 661 300
Current 40 000 3 600 43 600

liabilities
Deferred tax 20 000 6 000 1 900 3 000 1 46 100

liabilities
1 6 000 24 000 1
Total liabilities 60 000 9 600 89 700
Shares in 191 000 0 191 000 2 0-

Goose Ltd
Plant 340 000 152 000 16 000 1 476 000

Accum. (100 000) (19 200) 1 26 000 3 000 1 (96 200)
depreciation
Brands 80 000 40 000 1 80 000 200 000

Accumulated 20 000 1 (20 000)
impairment
losses
Inventory 124 000 67 200 191 200

Goodwill -
Total assets 635 000 240 000 326 900 326 900 751 000
BARREN LTD
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 June 2022
Revenues:
Sales revenue $464 000
Expenses:
Cost of sales 198 000
Other expenses 66 600
264 600
Profit before income tax 199 400
Income tax expense 43 700
Profit for the period 155 700
Attributable to:
Parent shareholders 149 275
Non-controlling interest 6 425
$155 700
BARREN LTD
Consolidated Statement of Changes in Equity
for the year ended 30 June 2022
Comprehensive income for the period $155 700
Non-controlling interest $6 425
Parent shareholders $149 275
Group Parent
Retained earnings:
Balance at 1 July 2021 $91 850 $80 700
Profit for the period 155 700 149 275
Balance at 30 June 2022 $247 550 $229 975
Business combination valuation reserve:
Balance at 1 July 2021 $15 750 0
Balance at 30 June 2022 $15 750 0
Share capital:
Balance at 1 July 2021 $320 000 $300 000
Balance at 30 June 2022 $320 000 $300 000
General reserve:
Balance at 1 July 2021 $78 000 $62 000
Balance at 30 June 2022 $78 000 $62 000
BARREN LTD
Consolidated Statement of Financial Position
as at 30 June 2022
ASSETS
Current Assets
Inventory $191 200
Non-current Assets:
Property, plant and equipment
Plant $476 000
Accumulated depreciation (96 200) 379 800
Brands 200 000
Accumulated impairment losses (20 000) 180 000
Total Non-current Assets 559 800
Total Assets $751 000
EQUITY AND LIABILITIES
Equity attributable to owners of the parent:
Share capital $300 000
Other reserves: General reserve 62 000
Retained earnings 229 925
Parent Interest 591 925
Non-controlling Interest 69 375
Total Equity 661 300
Current Liabilities 43 600
Non-current Liabilities
Deferred tax liabilities 46 100
Total Liabilities 89 700
Total Equity and Liabilities $751 000

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ACCT6005 Company Accounting Tutorial Questions

Module 3 Chapter 12: Consolidation: non-controlling interest

1. What is meant by the term ‘non-controlling interest’ (NCI)? (LO1)

It is defined in AASB 127/IAS 27 as:

 The equity in a subsidiary not attributable, directly or indirectly, to a parent.

2. Explain whether the NCI is better classified as debt or equity. (LO1)

Full and partial goodwill methods

During the 2020–21 year Lorikeet Ltd recorded a profit of $15 000.

(a) Full goodwill method:

Fair value of identifiable assets and

liabilities of Lorikeet Ltd = $100 000 + $40 000 + $50 000

(a) Consideration transferred = $165 000

(b) NCI in Lorikeet Ltd = $40 000

Aggregate of (a) and (b) = $205 000

Goodwill = $205 000 - $190 000

Goodwill of Lorikeet Ltd

Fair value of Lorikeet Ltd = $40 000/0.2

Fair value of INA of Lorikeet Ltd = $190 000

Goodwill of Lorikeet Ltd = $10 000

Goodwill of Rainbow Ltd

Goodwill acquired = $15 000

Goodwill of Lorikeet Ltd = $10 000

Control premium – parent = $5 000

Consolidation worksheet entries at 30 June 2021:

(i) Business combination valuation entries:

Business combination valuation reserve Cr 10 000

(ii) Pre-acquisition entries:

Retained earnings (1/7/20) Dr 40 000

Share capital Dr 80 000

General reserve Dr 32 000

Business combination valuation reserve Dr 8 000

Shares in Lorikeet Ltd Cr 165 000

(iii) NCI share of equity 1/7/19:

Retained earnings (1/7/20) Dr 10 000

Share capital Dr 20 000

General reserve Dr 8 000

Business combination valuation reserve Dr 2 000

(20% of equity at 1/7/19)

(iv) NCI share of equity from 1/7/19 – 30/6/20:

Retained earnings (1/7/20)* Dr 3 000

General reserve** Dr 2 000

* 20% of change in RE of $15 000

** 20% of change in GR of $10 000

(v) NCI share of equity 1/7/20- 30/6/21:

NCI share of profit Dr 3 000

(20% x $15 000)

(b) Partial goodwill method:

Fair value of identifiable assets and

liabilities of Lorikeet Ltd = $100 000 + $40 000 + $50 000

(a) Consideration transferred = $165 000

(b) NCI in Lorikeet Ltd = 20% x $190 000

Aggregate of (a) and (b) = $203 000

Goodwill of Rainbow Ltd = $203 000 - $190 000

(i) Business combination valuation entries:

There is no BCVR entry as only parent goodwill is recognised

(ii) Pre-acquisition entries:

Retained earnings (1/7/20) Dr 40 000

Share capital Dr 80 000