ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Parent P acquired 80% of S several years ago. At the reporting date S's net assets are $500,000. At acquisition, NCI was measured at its proportionate share of S's net assets, and goodwill is not impaired. What is NCI in the consolidated statement of financial position, given that S's net assets at acquisition were $380,000?
Non-controlling interest is $100,000. Under the proportionate method it equals the NCI's 20% share of the subsidiary's net assets at the reporting date, which is 20% of $500,000. Acquisition-date net assets are not used because NCI also shares in post-acquisition profits.
- A$100,000Correct
- B$76,000
- C$124,000
- D$176,000
Explanation
NCI is 20% of S's net assets at the reporting date under the proportionate method: 20% × 500,000 = 100,000. The figure of 76,000 uses acquisition net assets, ignoring post-acquisition profits. 124,000 is wrongly 20% of 500,000 plus 20% of 120,000 double counted.
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