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

Parent H acquired 70% of subsidiary K on 1 April 20X4. H's year end is 31 December 20X4. K's profit for the year to 31 December 20X4 was $1,200,000, accruing evenly. Goodwill is measured under the proportionate method and no impairment has arisen. What profit of K is included in consolidated profit for the year, and what is attributable to non-controlling interest?

K's results are consolidated only from the acquisition date, giving nine months of profit, $900,000. The non-controlling interest holds 30% of that post-acquisition profit, which is $270,000. Pre-acquisition profit is excluded, so the full-year figure and the $360,000 NCI share are wrong.

  1. AIncluded $900,000; NCI $270,000Correct
  2. BIncluded $1,200,000; NCI $360,000
  3. CIncluded $900,000; NCI $360,000
  4. DIncluded $900,000; NCI $630,000

Explanation

Only post-acquisition profit is consolidated: 9/12 x $1,200,000 = $900,000. NCI share is 30% x $900,000 = $270,000. Using the full-year profit would wrongly include pre-acquisition profit, and applying 30% to $1,200,000 gives $360,000.

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