GROUPS Flashcards
Deconsolidation
70%>40% 30%>60%
NAV: 118 89,6 35,4
Sale: -38,4 38,4
89,6*30%/70%
51,2 73,8
Dr investment 30
(Purch consid *30/70)
Dr profit on sale 16
(46-30)
Dr investment 52,5
Dr NCI. 35,4
Cr NAV (100%) 118
Cr Goodwill 7
Cr FV adj (52,5-51,2) 1,3
Cr Group profit 7,6
Shares sold 46k
FV remaining interest 52,5k
NAV 35000 21000 14000
-21000 -14000
Calculating group profit
NAV 21000
Proceeds 22000
= 1000
Changes in holding
(Disposal)
Sub——>Sub
Sub is selling
Calculating profit:
80/60 20/40
NAV 14500 11600 2900
Sale -2900 2900
(11,6*20/40)
🔺NAV (taken out of seller) 2900
🔺Proceeds 3000
(Purch consid *20/80)=1250
(CGT(392)/22,4)=1750
=Transaction between owners =100
NAV is less
Dr investment 1250
Dr profit on sale 1750
Cr NCI 2900
Cr RE 100
Dr RE 393
Cr Tax expense 392
Groups
Principles
- Goodwill only changed if there is impairment or loss of control
- Any payments to past shareholders will not form part of the purchase consideration
IF FV Goodwill:
DR Goodwill
CR FCTR (OCI)
Asset is part of consideration:
DR: Asset
CR: FCTR
DR: FCTR
CR: Deferred Tax
Subsidiary———> Associate
No GOODWILL
NAV 35000 210000 14000 Sale (8750) (14000) Investment 12250 FV adj 1400 FV remaining 13650 (Shares remain *share price)
Dr proceeds 9000 Dr investment 13650 Dr NCI 14000 Cr NAV 35000 Cr FV adj 1400 Cr profit 250
Subsidiary———> Associate
GOODWILL
NAV 35000 22800 14000 Sale (9500) (14000) Investment 13300 FV adj 350 FV remaining 13650 (Shares remain *share price)
🔺Dr investment 6250 (consid*25/60) 🔺Dr proceeds 2750 (Actual 9k-6250) Dr investment 13650 Dr NCI 14000 🔺Dr Loss (group) 500 Cr NAV 35000 🔺Cr FV adj. 350 🔺Cr Goodwill. 1800
Increase
Sub——> Sub
NCI is selling
NAV 62000 37200 24800
Buy 6200 -6200
(24,8*10/40)
Dr NCI 6200
Cr Investment 6200
If acquired at more than cost at R6600
Dr RE 400
Dr NCI 6200
Cr Investment 6600
Associate——-> Subsidiary
- There was no goodwill
- Do analysis as associate
- Find FV (at acquisition shares*FV price when became sub)
- Calculate goodwill as sub
-Consideration paid (had control)
-FV prev interest
(At acquisition shares* FV when held control)
=purchase consideration
+NCI
=Total investment
vs. NAV (Associate)
Dr Investment 125
Cr FV adj. 125
Investment at FV presented in OCI
IFRS 9
🔺Investment to sub in CURRENT year
- No analysis prior to acquisition as no influence
-After you acquired influence, calculate goodwill.
FV of existing shares = (shares at acquisition * share price at date you obtained control)
Dr Deferred Tax Cr OCI (M2M)
🔺Investment to Sub PRIOR YEAR
500 shares R700
2500 shares R7000 (1 April 17) price R3,10
Year end (31 Dec 17) price R4
500 (shares)*3,1= 1550
-700 = 850
Tax 28%80% =(190)
850-190= 660
2500 (shares) = 7000
Total =(7000+1550) 8550
Total shares 3000*4 = 12000
12000-8550 =3450
Tax28%80% = (773)
M2M = 2677
Dr share reval reserve 2677
Dr DT 773
Cr Investment 3450
Dr DT 190
Cr M2M 190
Client list form part of business combination
- IFRS 3.10, 3.13
- Although list was not recognized in its separate books it may be recognized as part of BC if it meets separability criteria
- IFRS 3 B33
- If list of customers contains confidential information the list cannot be sold to a third party suggest IA does not meet separability criteria
- Conclude list cannot be recognized as part of business combination
If something should be recognized on initial recognition of Accra in Fleximed’s consolidated financial statements
- IFRS 3.10
- Meet definition of Asset
- Therefore the contract can be recognised separately from goodwill as an intangible asset at acquisition
Consolidation notes:
- The acquirer shall measure the identifiable assets acquired and liabilities assumed at the acquisition date fair values
- The deferred tax calculation should be separated into two parts. The amount between the carrying amount at 1 August 2019 and the original costs should be recognised at 28% because it will be taxed as a recoupment. The difference between the fair value and the historical costs should be measured at CGT rate because it will be taxed as a capital gain.
associate ———->associate
NAV 50 400
Sale (balance) -37 800
Sale 50 400diff/old 12 600
fv adj (P/L+OCI) 1170
FV shares remain 13 770 (remaining sharespx*exch rate)
Separate Group Proceeds xxx xxx NAV (Investment*new/old) -14 700 -37 800 Profit/ Loss 26 550 3450
1. Invest in ass
RE
FCTR (P/L)%
2. Invest in ass
Share of profit
FCTR (OCI)%
Total FCTR % holding:
3. FCTR (OCI)
FCTR (P/L)
4. Profit on sale 26 550
Invest in shares 14 700
Profit on sale 3450
FV adj 1170
Invest in ass 50 400
Investment IFRS 9 13 770
Proportionate SUB ——————–> SUB
NAV (Ex GW)
Separate Group Proceeds 23 000 NAV% before decr 74 800 NAV(Invest*diff/old) -11 550 GW (FC GW* rate b4 ch) 8 500 Profit 11 450 =83 300
Portion sold 20/80 20 825
Proceeds 23 000
Profit 2175
1. GW (BoY) incl GW
FCTR
2. FCTR (Full BoY)
NCI
3. GW (CY) incl GW
FCTR
4. RE 2565
CGT 2565
11450*28%*80%*
5. FCTR 2565
NCI 2565
6. Profit on sale 11 450
Investment 11 550
NCI 20825
RE 2175
Total investment sold
Separate Group
Proceeds 140 0000 140 000
NAV (Invest*80/80) -46200 NAV%ye -109560
Profit 93 800 30 440
- Proceeds 140 000
NAV (100% YE) 135 900
NCI 100% YE 26 340
Profit 30 440
Total % holding
2. FCTR (OCI)
FCTR (P/L)
IFRS 3
- Consider if definition of business combination ito IFRS 3 met
- If not treat as normal asset acquisition
- There will not be any goodwill raised on the transaction
- If there is a capital appreciation IAS 40
