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ACCA Applied Skills · Financial Reporting · Calculation and interpretation of accounting ratios and trends to address users' and stakeholders' needs

Parent P owns 80% of subsidiary S. In the consolidated statement of profit or loss for the year, group profit for the year is $500,000, of which $60,000 is attributable to the non-controlling interest. Group revenue is $4,000,000. Which figure is the group's profit margin (net profit attributable to owners of the parent as a percentage of revenue) in the year?

The margin is 11.0%. Profit attributable to the parent's owners is $440,000 (group profit $500,000 less $60,000 for the non-controlling interest), divided by revenue of $4,000,000. Using the full group profit would give 12.5% and overstate the parent's share.

  1. A11.0%Correct
  2. B12.5%
  3. C14.0%
  4. D1.5%

Explanation

Profit attributable to owners of the parent = 500,000 - 60,000 = 440,000. Dividing by revenue of 4,000,000 gives 11.0%. Using total group profit (12.5%) ignores the non-controlling interest share.

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