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ACCA Applied Skills · Financial Reporting · Preparation of consolidated financial statements for a simple group

On 1 January 20X4, Alpha acquired 80% of the equity shares of Beta for $9,000,000 when Beta's net assets at fair value were $10,000,000. Non-controlling interest is measured at fair value, which was $2,100,000 at acquisition. At 31 December 20X4, Beta's net assets are $12,000,000. Goodwill has not been impaired. What is the non-controlling interest in the consolidated statement of financial position at 31 December 20X4?

The non-controlling interest is $2,500,000. Under the fair value method it equals NCI's fair value at acquisition of $2,100,000 plus its 20% share of Beta's post-acquisition net asset increase of $2,000,000, which is $400,000.

  1. A$2,400,000
  2. B$2,500,000Correct
  3. C$4,500,000
  4. D$3,200,000

Explanation

Goodwill is not needed for the NCI figure beyond acquisition-date fair value. NCI = fair value at acquisition $2,100,000 + 20% x post-acquisition net asset increase (12,000,000 - 10,000,000 = 2,000,000) = $400,000, giving $2,500,000. Option A uses 20% of net assets only ($2,400,000) and ignores the fair value basis, which includes goodwill attributable to NCI.

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