Exam 13: Consolidation: Other Issues

If A Ltd owns 70% of B Ltd and B Ltd owns 60% of C Ltd, the indirect NCI in C Ltd is 18%.

Where a change in ownership interest results in the loss of control of a subsidiary:

In non-sequential acquisitions, one of the assets of the acquired subsidiary for which the carrying amount may differ from fair value is its investments in its subsidiaries.

Nambour Limited has a direct ownership interest of 70% in Noosa Limited. Noosa Limited has a direct ownership interest of 60% in Mudjimba Limited. The indirect non-controlling interest in Mudjimba Limited is:

The indirect NCI receives a proportionate share of both pre and post-acquisition equity of the subsidiary.

The accounting treatment for a group with multiple subsidiaries is not affected by the sequence in which acquisitions of subsidiaries occur.

Waratah Ltd acquired a 60% ownership interest in Bottle Brush Ltd on 30 June 20X5. On the same day, Bottle Brush Ltd acquired a 70% ownership interest in Honeydew Ltd. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7. On 1 July 20X5 Bottle Brush sold an item of plant to Honeydew for a profit of $20 000. The remaining useful life of the plant at the date of transfer was 4 years. -On 1 September 20X5, Honeydew paid a dividend of $70 000 from profits earned since 30 June 20X5. -Waratah lent $50 000 to Bottle Brush on 1 January 20X6. Interest charged on the loan for the year ended 30 June 20X6 was $2000 and for the year ended 30 June 20X7 was $4000. On 31 May 20X6 Waratah sold inventories to Honeydew for $15 000. Profit earned on the sale was $5000. Honeydew sold the inventories to external parties on 1 August 20X6. Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are: 30 June 20X6 30 June 20\times7 Waratah 100000 125000 Bottle Brush 85000 70000 Honeydew 20000 35000 The tax rate is 30%. The NCI share of profit in Honeydew for the year ended 30 June 20X7 is:

When preparing consolidation adjustment entries to effect a consolidation of a multiple subsidiary structure, intragroup transactions:

Reciprocal shareholdings exist when a parent and a subsidiary own shares in each other.

Caloundra Limited has an ownership interest of 60% in a subsidiary Aroona Limited. Aroona owns 70% of Bribie Limited. Since acquisition date the retained earnings of Bribie Limited have increased from $100 000 to $150 000. The direct non-controlling interest in the retained earnings of Bribie is:

The indirect NCI share of contributed equity is not affected by the payment of a dividend by a subsidiary.

The NCI share of equity is calculated on the recorded equity of the subsidiary.

When a parent acquires an additional interest in a subsidiary, the change in ownership interest is accounted for as an adjustment against goodwill.

Consider the following economic entity structure. $\text { PLtd }$ 80% 30% $\text { A Ltd }$ $\text { B Ltd }$ 60% The indirect NCI in B Ltd is the same group of shareholders as the:

In a group that has a multiple subsidiary structure, the indirect non-controlling interest is entitled to:

Alpha Limited acquired shares in Bravo Limited. At the time of this acquisition Bravo Limited already held shares in Charlie Limited. This form of acquisition of an indirect ownership interest, by Alpha Limited in Charlie Limited, is known as a/an:

Jacaranda Limited acquired a 75% ownership interest in Frangipani Limited on 30 June 20X5. On the same day, Frangipani Limited acquired a 60% ownership interest in Gardener Limited. The following inter-entity transactions have taken place between the entities in the group during the years ended 30 June 20X6 and 30 June 20X7: On 1 July 20X5 Gardener sold an item of plant to Jacaranda for a profit of $25 000. The remaining useful life of the plant at the date of transfer was 2 years. On 1 September 20X5, Gardener paid a dividend of $100 000 from profits earned prior to 30 June 20X5. Jacaranda lent $500 000 to Gardener on 1 January 20X6. Interest charged on the loan for the year ended 30 June 20X6 was $20 000 and for the year ended 30 June 20X7 was $40 000. On 31 May 20X6 Frangipani sold inventories to Gardener for $15 000. Profit earned on the sale was $1500. Gardener sold the inventories to external parties on 1 August 20X6. Details of profits earned by entities within the group for the years ended 30 June 20X6 and 30 June 20X7 are: 30 June 20X6 30 June 20X7 Jacaranda 100000 125000 Frangipani 45000 70000 Gardener 20000 35000 The tax rate is 30%. The effect of the dividend paid by Gardener to Frangipani on the NCI of Gardener for the year ended 30 June 20X6 is:

The direct NCI receives a proportionate share of both pre and post-acquisition equity of the subsidiary.

In a situation where a parent acquires shares in a subsidiary, and the subsidiary later acquires a controlling interest in another entity, the ownership structure is:

The accounting for intragroup transactions is not affected by the existence of multiple subsidiaries.