Non-controlling interest can be valued by using two ways:

(1) Proprotionate of share of net assets of subsidiary

(2) Full or fair value usually based on the market value of the shares held by non-con

SOLUTION:
NCI at the date of acquisition [not applicable here]
NCI at the date of balance sheet
Working-(1): Calculation of NCI at the date of balance sheet
Share of net assets or share of capital, post acquisition retained earnings or profit

Non-controlling share of share capital [$40,000 x 25%]

Non-controlling share of post-acquisition retained earnings
[10,000 x 25%]
Non-controlling interest at the year end

P Co.
 Consolidated Statement of Financial Position
As at 31st December………..
Items
Assets
Non-current assets
Property, plant and equipment
Total property, plant and equipment
Ncurrent assets
Total assets
Equity and liabilities
Equity attributable to owners of the parent
$1 Ordinary shares
Retained earnings [25,000+10,000 x 75%]

Non-controlling interest
Current liabilities
Total equity and liabilities

NOTE:
(1): 30,000 $1 ordinary shares in S Co at cost has been cancelled with the share capital of S C
(2): Proportionate percentage of share capital and retained earnings have been used to calcula

Purchase consideration: Payment made by the Parent company to buy Subsidiary

Purchase consideration + the amount of non-controlling ineterst > Fair value of the ne
The excess amount is treated as goodwill
Purchase consideration> Fair value of net assets - The amount of non-controlling inte
Fair value of net assets
Deduct the value of non-controlling interest
The remaining amount <Purchase consideration
The balance is known as GOODWILL.
ares held by non-controlling interest.

arnings or profit

10,000.00
2,500.00

12,500.00
 al Position
…..
Amount ($) Amount ($)

85,000.00
85,000.00
80,000.00
165,000.00

80,000.00
32,500.00
112,500.00
12,500.00
40,000.00
165,000.00

e share capital of S Co.

been used to calculate NCI.

uy Subsidiary

> Fair value of the net assets

non-controlling interest
SOLUTION:
Date of acquisition= 31st March ……………
Balance sheet is also given for that date (date of acquisition)
All the items in the balance sheet are pre-acquisition items.
Pre-acquisition retained earnings for Wing Co. $10,000
Investment in Wing Co.= 50,000 shares
Number of shares of Wing Co.= 50,000 shares
Percentage of share holding by Sing Co.= 50,000/50,000= 100%
So, there is no non-controlling interest
Working-(1): Calculation of net-assets of Wing Co. at the date of acquisition
By using equity method
50,000 ordinary shares $1 each
Pre-acquisition retained earnings
Net assets at the date of acquisition
Net assets acquired by Sing Co.= $60,000 x 100%= $60,000
Working-(2): Calculation of Goodwill
Purchase consideration (investment in subsidiary)
Less: Net assets acquired
Goodwill

Sing Co.
Consolidated Statement of Financial Position
As at 31st March, …………………………
Items
Assets:
Non-current assets:
Goodwill
Current assets
Total assets
Equity and Liabilities
Equity
Ordinary shares
Retained earnings

Liabilities
Total equity and liabilities

If Sing Co. purchased 40,000 shares of Wing Co.

Percentage share holding by Sing Co.= 40,000/50,000= 80%
Percentage of non-controlling interest= 100%-80%= 20%
Purchase consideration paid= $70,000
Working-(1): Calculation of net-assets of Wing Co. at the date of acquisition
By using equity method
50,000 ordinary shares $1 each
Pre-acquisition retained earnings
Net assets at the date of acquisition
Net assets acquired by Sing Co.= $60,000 x 80%= $48,000

Working-(2): Calculation of Goodwill

Purchase consideration (investment in subsidiary)
Less: Net assets acquired
Goodwill

NCI at Fair Market Value:

Continuing our example above, we will assume that the market price of
the shares was $1.25. The goodwill calculation will then be as follows:

Working-(1): Calculation of net-assets of Wing Co. at the date of acquisition

By using equity method
50,000 ordinary shares $1 each
Pre-acquisition retained earnings
Net assets at the date of acquisition

In case of Fair value, percentage on net assets is not applicable.

First we have to value the shares of NCI at fair market value.
Then, this value is deducted from the net assets of Subsidiary to arrive net asssets acquired by

If Sing Co. purchased 40,000 shares of Wing Co.

Percentage share holding by Sing Co.= 40,000/50,000= 80%
Percentage of non-controlling interest= 100%-80%= 20%
Purchase consideration paid= $70,000
Number of shares for non-controlling interest= 50,000 shares x 20%= 10,000 shares
NCI at fair value during the acquisition= 10,000 shares x $1.25= $12,500
Parent will get the remaining portion of net assets after deducting the NCI at fair value

Net assets acquired by Sing Co.= $60,000 - $12,500= $47,500

Working-(2): Calculation of Goodwill

Purchase consideration (investment in subsidiary)
Less: Net assets acquired
Goodwill

NCI at year end:

NCI at fair value at the date of acquisition
Add: Share of post-acquisition retained earnings
NCI at year end
NCI at year end will be shown in the balance sheet or statement of financial position
$ 50,000.00
$ 10,000.00
$ 60,000.00
 $ 80,000.00
$ 60,000.00
$ 20,000.00

Position
………
Amount ($) Amount ($)

20,000.00
100,000.00
120,000.00

75,000.00
45,000.00
120,000.00
-
120,000.00
 $ 50,000.00
$ 10,000.00
$ 60,000.00

$ 70,000.00
$ 48,000.00
$ 22,000.00

rket price of
as follows:

$ 50,000.00
$ 10,000.00
$ 60,000.00

t asssets acquired by Parent

000 shares
I at fair value

$ 70,000.00
$ 47,500.00
$ 22,500.00

$ 12,500.00
$ -
$ 12,500.00
ial position
 Ping Co acquired its investment in Pong Co on 1 July 20X7 when the retain
agreed consideration was $30,000 cash and a further $10,000 on 1 July 20X9
an internally-developed brand name – 'Pongo' – which was valued at $5,000
no changes in the share capital or revaluation surplus of Pong Co sin
invoiced Ping Co for goods to the value of $2,000 and Ping Co had sent pay
Pong Co.
There is no impairment of goodwill. It is group policy to value non-controlli
date the non-controlling interest was valued at $9,000.
Required
Prepare the consolidated statement of financial position of Ping Co as at 30 Ju

SOLUTION:
Date of acquisition= 1st July 20x7
Date of balance sheet= 30 June 20x8
NCI at the date of acquisition= $9,000
Pre-acquisition retained earnings= $6,000
Contingent consideration= $10,000 payable at 1st July 20x9
Working-1: Share holding by Parent and NCI
Number of shares in Pong Co = $25,000/$1 per share=
Number of shares acquired by Ping Co= 20,000 shares
Share holding by Ping Co= 20,000/25,000= 0.80= 80%
Share holding by NCI= 100%-80%= 20%
Number of shares for NCI= 25,000-20,000=5,000 shares
Working-2: Net worth or net assets of Pong Co at the date of acquisition (1.7.20x7)
Equity basis
Share capital $1 share
Revaluation surplus
Retained earnings (Pre-acquisition)
Brand name Pongo
Net assets of Pong Co at the date of acquisition
 Net assets for Non-controlling interest at the date of acquisition
Net assets acquired by Parent (Ping Co)

Working-3: Calculation of Purchase Consideration

Cash paid
Fair value of deferred consideration
10,000×1/ 〖 (1+0.07) 〗 ^2

Purchase consideration

Fair value of deferred consideration at balance sheet date [30.6.20x8]

Fair value of deferred consideration at date of balance sheet (30.6.20x8)=

Fair value at 30.6.20x8

Fair value at 1.7.20x7
Finance cost /Discount unwond

NOTE: Deferred consideration in balance sheet at 30.6.20x8

Finance cost in income statement

Working-4: Calculation of goodwill

Purchase consideration
Less: Net assets acquired
Goodwill

Working-5: Consolidated Retained earnings

Ping Co
As per statement $ 26,000.00
Less: Pre-acquisition retained earnings
Post-acquisition retained earnings
Share of Ping Co $ 17,600.00

Share of non-controlling interest

Less: Finance cost -$ 612.00

Consolidated retained earnings $ 42,988.00

Working-6: NCI at the date of balance sheet

NCI at the date of acquisition $ 9,000.00
Post-acquisition profit from Pong Co $ 4,400.00
NCI at the date of balance sheet $ 13,400.00

Ping Co
Consolidated Statement of Financial Position
As at 30th June 20X8
Items Amount ($)
Assets:
Non-current assets:
Property, plant and equipment 90,000.00
Goodwill 6,734.00
Brand name 5,000.00
Total non-current assets
Current assets:
Inventory 11,000.00
Receivables 23,000.00
Cash [2,000 + Cash in transit 2,000] 4,000.00
Total current assets
Total assets
Equity and Liabilities
Equity attributable to owners of parent
Ordinary shares of $1 each 45,000.00
Revaluation surplus 12,000.00
Retained earnings 42,988.00

Non-controlling interest
Liabilities:
Non-current liabilities:
Deferred consideration
Current liabilities:
Trade payables
Total equity and liabilities
NOTES:
(1) Investment in Pong Co for 20,000 shares has been cancelled
(2) Owed by Ping and owed to Pong are inter-company transaction and therefore they
cancelled and balance is added with the cash as cash in transit.
(3) Ordinary share capital of Pong Co is cancelled.
(4) Revaluation surplus of Pong Co is cancelled.
(5) Pre-acquisition retained earnings is cancelled.
(6) Deferred consideration has been shown in the balance sheet.
(7) Unwound discound has been deducted from earnings as finance cost.

Unrealised profit:
If there is any inter-company transactions regarding the sales or purchase of goods and if ther
unsold stock is available, the profit included in unsold stock is known as unrealised profit.

Unrealised profit will be deducted from stock/inventory and it also be deducted from retained

HOMEWORK: Do it and submit it in google classroom.

 when the retained earnings of Pong Co stood at $6,000. The
on 1 July 20X9. Ping Co's cost of capital is 7%. Pong Co has
alued at $5,000 at the date of acquisition. There have been
f Pong Co since that date. At 30 June 20X8 Pong Co had
Co had sent payment in full but this had not been received by

e non-controlling interest at full fair value. At the acquisition

g Co as at 30 June 20X8.

25,000 shares

n (1.7.20x7)

$ 25,000.00
$ 5,000.00
$ 6,000.00
$ 5,000.00
$ 41,000.00
 $ 9,000.00
$ 32,000.00

$ 30,000.00
$ 8,734.00 [1.7.20x7]

$ 38,734.00

10,000×1/ 〖 (1+0.07) 〗 ^1
$ 9,346.00

$ 9,346.00
$ 8,734.00
$ 612.00

$ 9,346.00
$ 612.00

$ 38,734.00
$ 32,000.00
$ 6,734.00

Pong Co
$ 28,000.00
$ 6,000.00
$ 22,000.00
-$ 17,600.00
$ 4,400.00
-$ 4,400.00
$ -
$ -

Amount ($)

101,734.00

38,000.00
139,734.00

99,988.00
13,400.00

9,346.00

17,000.00
139,734.00
and therefore they are

goods and if there any

realised profit.

cted from retained earnings.

SOLUTION:
P Co.
Consolidated Statement of Profit or Loss
For the year ended 31st December, 20X6
Particulars
Sales revenue
Less: Cost of sales
Gross profit
Less: Administrative expense
Profit before tax
Less: Income tax expense
Profit for the year
Profit attributable to:
Owners of the Parent [21,000+8,000 x 75%]
Non-controlling interest [8,000 x 25%]
 P Co.
Consolidated Statement of Changes in Equity [Extr
For the year ended 31st December, 20X6
Particulars Capital Retained earnings
Beginning balance as at 1st January 20X6 -
[87,000 + 17,000 X 75%; 17,000 X 25%] 99,750.00
Profit for the year 27,000.00
Balance as at 31st December 20X6 - 126,750.00

INTRA-GROUP TRADING
Suppose in our earlier example that S Co had recorded sales of $5,000 to P Co during 2
from outside suppliers at a cost of $3,000. One half of the goods remained in P Co's inve
Prepare the revised consolidated statement of profit or loss.

SOLUTION:
Sales to P Co from S Co= $5,000
Cost of these sales to S Co.= $3,000
Unsold stock= 5,000/2= $2,500
Unrealised profit= $5,000/2- $3,000/2= 2,500-1,500= 1,000

P Co.
Consolidated Statement of Profit or Loss
For the year ended 31st December, 20X6
Particulars
Sales revenue
Less: Cost of sales
Gross profit
Less: Administrative expense
Profit before tax
Less: Income tax expense
Profit for the year
Profit attributable to:
Owners of the Parent [21,000+(8,000-1,000) x 75%]
Non-controlling interest [(8,000-1,000) x 25%]

P Co.
Consolidated Statement of Changes in Equity [Extr
For the year ended 31st December, 20X6
Particulars Capital Retained earnings
Beginning balance as at 1st January 20X6 -
[87,000 + 17,000 X 75%; 17,000 X 25%] 99,750.00
Profit for the year 26,250.00
Balance as at 31st December 20X6 - 126,000.00

NOTE: Intra-group sales is deducted from total sales

Unrealised profit is deducted from gross profit
Then gross profit is deducted from sales to calculate cost of goods sold
Profit or Loss
cember, 20X6
Amount ($)
113,000.00
50,000.00
63,000.00
22,000.00
41,000.00
12,000.00
29,000.00

27,000.00
2,000.00
 29,000.00

s in Equity [Extract]
cember, 20X6
NCI Total equity

4,250.00 104,000.00
2,000.00 29,000.00
6,250.00 133,000.00

0 to P Co during 20X6. S Co had purchased these goods

ned in P Co's inventory at 31 December 20X6.

Profit or Loss
cember, 20X6
Amount ($)
108,000.00
46,000.00
62,000.00
22,000.00
40,000.00
 12,000.00
28,000.00

26,250.00
1,750.00
28,000.00

s in Equity [Extract]
cember, 20X6
NCI Total equity

4,250.00 104,000.00
1,750.00 28,000.00
6,000.00 132,000.00

ods sold
SOLUTION:
P Co.
Consolidated Statement of Profit or Loss
For the year ended 31st December, 20X5
Particulars
Sales revenue
Less: Cost of sales
Gross profit
Less: Administrative expense
Profit before tax
Less: Income tax
Profit for the year
Profit attributable to:
Owners of the parent [42,600-3,600+18,000 x 60%]
 Non-controlling interest [18,000 x 40%]

Working-(1): NCI during acquisition

Share capital [1,00,000 x 40%]
Pre-acquisition R/E [40,000 X 40%]
Pre-acquisition profit from the year [6,000 x 40%]
NCI at the date of acquisition

P Co.
Consolidated Statement of Changes in Equity [E
For the year ended 31st December, 20X5
Particulars Capital
Beginning balance as at 1st January 20X6 -
NCI during acquisition
Profit for the year
Dividend paid [6,000 x 40%]
Balance as at 31st December 20X5 -
 P Co.
tatement of Profit or Loss
ded 31st December, 20X5
ars Amount ($)
230,000.00
92,000.00
138,000.00
52,000.00
86,000.00
29,000.00
57,000.00

+18,000 x 60%] 49,800.00

0 x 40%] 7,200.00
57,000.00

40,000.00
16,000.00
2,400.00
58,400.00

P Co.
tatement of Changes in Equity [Extract]
year ended 31st December, 20X5
Retained earnings NCI Total equity
81,000.00 81,000.00
- 58,400.00 58,400.00
49,800.00 7,200.00 57,000.00
- 12,000.00 - 2,400.00 - 14,400.00
118,800.00 63,200.00 182,000.00