ACCA FR · Chapter 12 · Question 10 of 13
Ermine Co acquired 75% of Stoat Co. NCI was measured at its fair value of $2,400,000 at acquisition. Since then Stoat Co's retained earnings have increased by $2,000,000. Since acquisition, extra depreciation on fair value adjustments totals $100,000, unrealised profit on goods Stoat Co sold to Ermine Co still in inventory is $50,000, and goodwill has been impaired by $300,000. What is the NCI in the consolidated SFP?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $2,787,500
Explanation
NCI = fair value at acquisition $2,400,000 + 25% of adjusted post-acquisition profits [$2,000,000 - $100,000 - $50,000 = $1,850,000], which is $462,500, less 25% of the goodwill impairment ($75,000) = $2,787,500. Under the fair value method, goodwill impairment is shared between group and NCI in their ownership proportions.
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