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Tutorial 7- Q1

1 Group structure
J
1/1/x4 1/1/x1
Acquired 800,000 shares Acquired 60%
Pre-acq: RM500,000 Pre-acq: RM300,000
% control
= 800 / 1000 B H
= 80%

1/1/x8
RM200,000 goodwill w/o

1/10/x8
Sold all shares in B
Proceeds to be received in x9
Not recorded in accounts

Situation:
Subsidiary up to 1/10/x8
Hence, for SOCI, need to consolidate as subsidiary up to 30/9/x8
For SOFP, as at 31/12/x8, B is not a subsidiary => no consolidation

2 Goodwill b/f
J in B J in H
RM000 RM000 RM000 RM000
Consideration transferred 1,500 900
NCI (1200x20%)(1300x 405) 300 520
FV of net assets acquired
Share capital 1,000 1,000
Pre-acq 500 300
1,500 (1,500) 1,300 (1,300)

Goodwill 300 120


Goodwill w/o (200)
Goodwill remaining 100 120

However, students must note that in the case of 'J in B', this goodwill balance of RM100,000
should no longer exist as at 31/12/x8 in the SOFP since the investment was sold on 1/10/x8

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3 Gain / (loss) on disposal of B by J:
RM000 RM000 Alternative method
Disposal proceeds 3,000 Disposal proceeds 3,000
FV of net assets at date of disposal Less: Cost of investment in Butter (1,500)
Share capital 1,000 Gain at Parent's books 1,500
Retained earnings b/f 1,500
Profits up to 30/9/x8 1000 x 9/12 750 Less : realiasation of post acq. Profit
3,250 {(1500+1,000 x 9/12)-500)} x 80% (1,400)
x 80% (2,600) Goodwill written off 200
Less: goodwill remaining (100) W2
Gain / (loss) on disposal 300 To be recognised in SOCI 300

Students to note that in the case of gain / (loss) at company level, it would be computed as follows: Dr:Sales Proceeds 3,000
RM000 Dr: GRE-goodwill w/off 200
Disposal proceeds 3,000
Cost of investment (1,500) Cr: Cost of investment in Butter 1,500
Gain / (loss) on investment 1,500 Cr: GRE-realisation of profit 1,400
Cr; GRE- gain on disposal 300
4 Non-controlling interest
RM000
Net assets in H as per question 4,600
NCI - % 40%
NCI - nominal 1,840

5 Retained earnings c/f Alternative presentation


J H J B H
RM000 RM000 RM000 RM000 RM000
Retained profits b/f 2,500 2,300 Retained profits b/f 2,500 1,500 2,300
Profit for the year (or 9 mths for B) 2,000 1,700 (without dividends income) Profit for the year (or 9 mths for B) 2,000 750 1,700
Dividends income 240 2,250 4,000
Dividends paid (400) Pre-acquisition profit (500) (300)
Pre-acq (300) Dividends 240 (400)
3,300 Goodwill w/off (200) 1,750 3,300
Share of B's profit 1,400 80% 60%
Share of post-acq Gain on disposal 300
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H: 3300 x 60% 1,980 Share of H' profit 1,980
Gain on disposal of investment W3 1,500 Dividends paid (500)
Dividends paid (500)
7,720 7,720

Alternative presentation:
RM000 RM000
Retained earnings b/f
J 2,500
B - post acq (1500 - 500) x 80% 800
Goodwill impaired (200)
H - post acq (2300 - 300) x 60% 1,200
4,300
Group profit for the year - from SOCI 3,920
Less: dividends by parent (500)
7,720

Jam Group
Consolidated Statement of Comprehensive Income for the year ended 31/12/x8
RM000 RM000
Sales 5000 + (2000 x 9/12) + 4000 10,500
Cost of sales / expenses 2000 + (500 x 9/12) + 1500 (3,875)
6,625
Gain on disposal of investment in B W3 300
Profit before tax 6,925
Taxation 1000 + (500 x 9/12) + 800 (2,175)
Profit after tax 4,750

Profit attributable to
Parent 3,920
NCI - B 1000 x 9/12 x 20% 150
- H 1700 x 40% 680 830
4,750

Jam Group
Consolidated Statement of Financial Position as at 31/12/x8
RM000 RM000

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Goodwill W2 120
Receivables on disposal of B 3,000
Sundry assets 5140 + 4800 9,940
13,060

Share capital 3,000


Group retained earnings W5 7,720
10,720
NCI W4 1,840
12,560
Liabilities 300 + 200 500
13,060

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Tutorial 7-Q2
1 Group structure
J
1/1/x4 1/1/x1
Acquired 800,000 shares Acquired 60%
Pre-acq: RM500,000 Pre-acq: RM300,000
% control
= 800 / 1000 B H
= 80%

1/1/x8
RM200,000 goodwill w/o

1/10/x8
Sold 200,000 shares in B for RM800,000
Remaining shares held = 600,000 shares
% control now becomes = 600 / 1000 = 60%
Proceeds to be received in x9
Not recorded in accounts

Situation:
This is a situation of transaction that reduces shareholdings but still control is retained
No effect on goodwill.

2 Goodwill b/f
J in B J in H
RM000 RM000 RM000 RM000
Consideration transferred 1,500 900
NCI (1200x20%)(1300x 405) 300 520
FV of net assets acquired
Share capital 1,000 1,000
Pre-acq 500 300
1,500 (1,500) 1,300 (1,300)

Goodwill 300 120


Goodwill w/o (200)
Goodwill remaining 100 120

Total goodwill in SOFP = 220

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3 Gain / (loss) on disposal of B by J:
(but only for the 200,000 shares disposed)
RM000 RM000
Disposal proceeds 800
FV of net assets at date of disposal
Share capital 1,000
Retained earnings b/f 1,500
Profits up to 30/9/x8 1000 x 9/12 750
3,250
x 20% (650)
Gain / (loss) on disposal 150 To be recognised in SOCI under OCI

Students to note that in the case of gain / (loss) at company level, it would be computed as follows:
RM000
Disposal proceeds 800
Cost of investment 1500 x 20 / 80 (375)
Gain / (loss) on investment 425

4 Non-controlling interest
B H Total
RM000 RM000 RM000
Net assets as per question 3,500 4,600
NCI - % 40% 40%
NCI - nominal 1,400 1,840 3,240

5 Retained earnings c/f


9 mths 3 mths

J B B H
RM000 RM000 RM000 RM000
Retained profits b/f 2,500 1,500 2,300
Profit for the year (or 9 mths for B) 2,000 750 250 1,700
Dividends income 240
Dividends paid (400)
Pre-acq (500) (300)
1,750 250 3,300
Share of post-acq
B: 1750 x 80% 1,400
B: 250 x 60% 150

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H: 3300 x 60% 1,980
Goodwill impaired (200)
Increase in NCI 150
Dividends paid (500)
7,720

Alternative presentation:
RM000 RM000
Retained earnings b/f
J 2,500
B - post acq (1500 - 500) x 80% 800
Goodwill impaired (200)
H - post acq (2300 - 300) x 60% 1,200
4,300
Group profit for the year - from SOCI 3,920
Less: dividends by parent (500)
7,720

Jam Group
Consolidated Statement of Comprehensive Income for the year ended 31/12/x8
RM000 RM000
Sales 5000 + 2000 + 4000 11,000
Cost of sales / expenses 2000 + 500 + 1500 (4,000)
Profit before tax 7,000
Taxation 1000 + 500 + 800 (2,300)
Profit after tax 4,700
Increase in NCI 150
4,850

Profit after tax attributable to


Parent 3,770
NCI - B 1000 x 9/12 x 20% + 1000 x 3/12 x 40% 250
- H 1700 x 40% 680 930
4,700

Profit after tax and OCI attributable to


Parent 3,920
NCI - B 1000 x 9/12 x 20% + 1000 x 3/12 x 40% 250
- H 1700 x 40% 680 930
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4,850

Jam Group
Consolidated Statement of Financial Position as at 31/12/x8
RM000 RM000
Goodwill W2 220
Receivables on disposal of B 800
Sundry assets 5140 + 3700 + 4800 13,640
14,660

Share capital 3,000


Group retained earnings W5 7,720
10,720
NCI W4 3,240
13,960
Liabilities 300 + 200 + 200 700
14,660

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Tutorial 7-Q3
1 Group structure
J
1/1/x4 1/1/x1
Acquired 800,000 shares Acquired 60%
Pre-acq: RM500,000 Pre-acq: RM300,000
% control
= 800 / 1000 B H
= 80%

1/1/x8
RM200,000 goodwill w/o

1/10/x8
Sold 500,000 shares in B for RM2,500,000
Remaining shares held = 300,000 shares FV of remaining shareholdings = RM4.5 x 300,000
% control now becomes = 300 / 1000 = 30% = 1,350,000
Proceeds to be received in x9
Not recorded in accounts

Situation:
This is a situation of transaction that reduces shareholdings; B becomes associate company
Goodwill eliminated

2 Goodwill b/f
J in B J in H
RM000 RM000 RM000 RM000
Consideration transferred 1,500 900
NCI (1200x20%)(1300x 405) 300 520
FV of net assets acquired
Share capital 1,000 1,000
Pre-acq 500 300
1,500 (1,500) 1,300 (1,300)

Goodwill 300 2,600 120


Goodwill w/o (200)
Goodwill remaining 100 120

However, students must note that in the case of 'J in B', this goodwill balance of RM100,000
should no longer exist as at 31/12/x8 in the SOFP since B becomes associate company after 1/10/x8

3 Gain / (loss) on disposal of B by J:

03/25/2019 413224641.xlsx
RM000 RM000
Disposal proceeds 2,500
FV of remaining shareholdings 1,350 W1
FV of net assets at date of disposal
Share capital 1,000
Retained earnings b/f 1,500
Profits up to 30/9/x8 1000 x 9/12 750
3,250
x 80% (2,600)
Less: goodwill remaining (100) W2
Gain / (loss) on disposal 1,150 To be recognised in SOCI

Students to note that in the case of gain / (loss) at company level, it would be computed as follows:
RM000
Disposal proceeds 2,500
Carrying value of investment 1500 x 500/800 (938)
1,563

4 Non-controlling interest
RM000
Net assets in H as per question 4,600
NCI - % 40%
NCI - nominal 1,840

5 Retained earnings c/f


9 mths 3 mths

J B B H
RM000 RM000 RM000 RM000
Retained profits b/f 2,500 1,500 2,300
Profit for the year (or 9 mths for B) 2,000 750 250 1,700
Dividends income 240
Dividends paid (400)
Pre-acq (500) (300)
1,750 250 3,300
Share of post-acq
B: 1750 x 80% 1,400
B: 250 x 30% 75
H: 3300 x 60% 1,980
Goodwill impaired (200)
Gain on disposal of subsidiary W3 1,150
Dividends paid (500)
03/25/2019 413224641.xlsx
8,645

Alternative presentation:
RM000 RM000
Retained earnings b/f
J 2,500
B - post acq (1500 - 500) x 80% 800
Goodwill impaired (200)
H - post acq (2300 - 300) x 60% 1,200
4,300
Group profit for the year - from SOCI 4,845
Less: dividends by parent (500)
8,645

6 Investment in associate
FV of shareholdings as at 1/10/x8 W1, W3 1,350
Share of post acq SOCI, W5 75
Carrying value @ 31/12/x8 1,425

Jam Group
Consolidated Statement of Comprehensive Income for the year ended 31/12/x8
RM000 RM000
Sales 5000 + (2000 x 9/12) + 4000 10,500
Cost of sales / expenses 2000 + (500 x 9/12) + 1500 (3,875)
6,625
Gain on disposal of investment in B W3 1,150
Share of profit of associate 1000 x 3/12 x 30% 75
Profit before tax 7,850
Taxation 1000 + (500 x 9/12) + 800 (2,175)
Profit after tax 5,675

Profit after tax attributable to


Parent 4,845
NCI - B 1000 x 9/12 x 20% 150
- H 1700 x 40% 680 830
5,675

Jam Group
Consolidated Statement of Financial Position as at 31/12/x8
03/25/2019 413224641.xlsx
RM000 RM000
Goodwill W2 120
Receivables on disposal of B 2,500
Investment in associate 1,425
Sundry assets 5140 + 4800 9,940
13,985

Share capital 3,000


Group retained earnings W5 8,645
11,645
NCI W4 1,840
13,485
Liabilities 300 + 200 500
13,985

03/25/2019 413224641.xlsx