CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: Kaveri Ltd. acquired 75% of Lohit Ltd. on 1 April 20X1 and measures NCI at proportionate share. During 20X1-X2 Lohit earned a profit after tax of Rs 120 lakh and paid dividends of Rs 40 lakh. Lohit has no other comprehensive income. Goodwill on acquisition was Rs 50 lakh, and for the year the goodwill impairment was Rs 10 lakh, which the group attributes to the parent only because NCI is at proportionate share. What is the profit attributable to NCI for the year?

Profit attributable to NCI is Rs 30 lakh, being 25% of Lohit's Rs 120 lakh profit. Dividends only reduce the NCI balance, not its profit share, and with NCI measured at proportionate share the goodwill impairment is borne entirely by the parent.

ARs 30 lakhCorrect
BRs 20 lakh
CRs 32 lakh
DRs 22.5 lakh

Explanation

NCI share = 25% x subsidiary's profit of 120 = 30 lakh. Dividends do not affect profit attributable to NCI; they reduce NCI balance. Goodwill impairment is borne wholly by the parent when NCI is at proportionate share, so no deduction applies. The Rs 20 lakh figure wrongly deducts the dividend at 25% plus the impairment, and Rs 22.5 lakh wrongly uses 75%.

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