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IAI Actuarial Core Principles · Business Finance · Construction and features of company accounts and reports

On 1 April, Vihaan Ltd acquired 75% of Zenith Ltd. Zenith's retained earnings were ₹4,00,000 at acquisition and ₹7,00,000 at the year end. Non-controlling interest is measured at proportionate share of net assets, and Zenith's share capital is ₹10,00,000 with no other reserves or fair value adjustments. Ignoring goodwill impairment, what is the closing non-controlling interest in the consolidated balance sheet?

The closing non-controlling interest is ₹4,25,000, being 25% of Zenith's year-end net assets of ₹17,00,000 (share capital ₹10,00,000 plus retained earnings ₹7,00,000). It equals 25% of acquisition net assets plus 25% of post-acquisition profit.

  1. A₹4,25,000Correct
  2. B₹3,25,000
  3. C₹5,50,000
  4. D₹4,00,000
  5. ₹2,50,000

Explanation

Zenith's net assets at year end = 10,00,000 + 7,00,000 = 17,00,000. NCI = 25% × 17,00,000 = 4,25,000. Check: opening NCI share 25% × 14,00,000 = 3,50,000 plus 25% of post-acquisition gain 3,00,000 = 75,000, total 4,25,000. The 3,25,000 figure wrongly uses only 25% of the retained earnings.

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