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ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows

Omega sells 20% of its 80% subsidiary Sigma for $5m and keeps control. Sigma's net assets in the consolidated statements at the date of sale are $20m, and no goodwill is attributable to the NCI (partial goodwill method). What is the adjustment to equity attributable to owners of the parent?

Because Omega keeps control, the sale is an equity transaction. NCI increases by $4m (20% of $20m net assets) against $5m proceeds, so $1m is credited directly to the parent's equity, with nothing in profit or loss.

  1. A$1m increase, recognised directly in equityCorrect
  2. B$1m gain recognised in profit or loss
  3. C$5m increase recognised in profit or loss
  4. D$4m increase recognised directly in equity

Explanation

NCI increases by 20% x $20m = $4m. Proceeds are $5m, so the excess of $1m is credited directly to parent equity. No profit or loss gain arises because control is retained, so the profit or loss options are wrong.

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