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CA Intermediate · Advanced Accounting · AS 21 Consolidated Financial Statements

Aarav Ltd acquired 80% of the equity shares of Bhargav Ltd on 1 April 2025 for ₹10,40,000. On that date Bhargav's equity share capital was ₹10,00,000 and its reserves were ₹2,00,000. On 31 March 2026 Bhargav's reserves stood at ₹4,00,000, with share capital unchanged. Which pair correctly gives the goodwill on consolidation and the minority interest at 31 March 2026?

Goodwill is ₹80,000 and minority interest is ₹2,80,000. Goodwill is the cost of ₹10,40,000 less 80% of acquisition-date net assets of ₹12,00,000. Minority interest is 20% of the closing net assets of ₹14,00,000, because it includes the minority's share of post-acquisition reserves.

  1. AGoodwill ₹80,000; minority interest ₹2,80,000Correct
  2. BGoodwill ₹80,000; minority interest ₹2,40,000
  3. CCapital reserve ₹80,000; minority interest ₹2,80,000
  4. DGoodwill ₹2,40,000; minority interest ₹2,80,000

Explanation

Net assets at acquisition are 10,00,000 + 2,00,000 = ₹12,00,000, and Aarav's 80% share is ₹9,60,000. Goodwill is 10,40,000 − 9,60,000 = ₹80,000. Minority interest at the balance sheet date is 20% × (10,00,000 + 4,00,000) = ₹2,80,000. The ₹2,40,000 option wrongly uses net assets at acquisition date. The ₹2,40,000 goodwill option ignores pre-acquisition reserves.

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