Tutorial 6 Q1- suggested answer

Top = Holding company

Down = Subsidiary company ( > 50% control)
Date of acquisition
Holding acquired

NCI
Pre-acquisition RE
Purchase consideration

Calculation of goodwill

Purchase consideration
NCI - full goodwill (120,000* RM 1.20)
NCI - partial goodwill (350,000 x 40%)

(-) Net identifiable assets

Share capital
Retained profit

Goodwill

Calculation of NCI

NCI at acquisition at 1/1/X6 - full GW

NCI at acquisition at 1/1/X6 - partial GW
Shares of post acquisition profit (1/1/X7 - 31/3/X7) [80,000+(40,000*3/12)-50,000]*40%]
NCI at 31/3/X7
Decrease in NCI at date of acquisition - full GW (160,000* 30% / 40%)
Decrease in NCI at date of acquisition - partial GW (156,000* 30% / 40%)
NCI after second acquisition at 1/4/X7
NCI shares of Down's profit at 1/4/X7 - 31/12/X7 (40,000 x 9/12 x 10%)
NCI at 31/12/X7

Fair value of consideration paid (350,000 -225,000)

Decrease in NCI in net asset & goodwill - full GW (160,000* 30% / 40%)
Decrease in NCI in net asset & goodwill - partial GW (156,000* 30% / 40%)
Adjustment to parent's equity
Calculation of Group Retained Profit

Top (80,000 +120,000)

Group shares of post - acquisition profits:
Down - 60% (30,000 + 40,000 x 3/12) x 60%
Down - 90% (40,000 x 9/12) x 90%
Adjustment to parent's equity
Group Retained Profit

Top Group
Consolidated Statement of Profit or Loss for the year ended 31 December 20X7

Revenue (310,000 + 160,000)

Cost of Sales (100,000 +80,000)

Expenses (40,000 +30,000)

Profit before tax
Taxation (50,000 +10,000)
Profit for the year

Profit attributable to:

Parent (160,000 - 7,000)
NCI (40,000 x 3/12 x 40%) + (40,000 x 9/12 x 10%)

Top Group
Consolidated Statement of Financial Statement as at 31 December 20X7

Non current asset (380,000 + 470,000)

Current asset (170,000 + 30,000)
Goodwill

Ordinary share capital

Group retained profit
NCI
Current liabilities (100,000 + 80,000)
 1st acquisition 2nd acquisition
1/1/X6 1/4/X7
180,000 / 300,000 90,000 / 300,000
= 60% = 90% (60% +30%)
40% 10%
RM 50,000 RM 90,000 (80,000 + 40,000 x 3/12)
RM 225,000 RM 125,000 ( 350,000 - 225,000)

Full goodwill Partial goodwill

RM RM RM RM
225,000 225,000
144,000
140,000
369,000 365,000

300,000 300,000
50,000 50,000
(350,000) (350,000)
19,000 15,000

Full goodwill Partial goodwill

RM RM
144,000
140,000
16,000 16,000
160,000 156,000
(120,000)
(117,000)
40,000 39,000
3,000 3,000
43,000 42,000

Full goodwill Partial goodwill

RM RM
(125,000) (125,000)
120,000
117,000
(5,000) (8,000)
 Full goodwill Partial goodwill
RM RM
200,000 200,000

24,000 24,000
27,000 27,000
(5,000) (8,000)
246,000 243,000

December 20X7

RM
470,000
(180,000)
290,000
(70,000)
220,000
(60,000)
160,000

153,000
7,000
160,000

ember 20X7
Full goodwill Partial goodwill
RM
850,000 850,000
200,000 200,000
19,000 15,000
1,069,000 1,065,000

600,000 600,000
246,000 243,000
43,000 42,000
180,000 180,000
1,069,000 1,065,000
ACR Tutorial 6 Q2 -suggested answer
Cadbury Group
Consolidated Statement of Profit Or Loss For The Year Ended 31 December X10

Revenue [8000 + 3000 + (4000 x 9/12) - 1000 (intragroup)]

Cost of Sales [4000 + 1000 + (2000 x 9/12) - 1000 (intragroup) + 40 (Unrealized profit)]
Gross Profit

Expenses [1200 + 800 + (1000 x 9/12)]

Gain on FV remeasurement - Jelly Bean
Share of Associate profits [700 x 3/12 x 40%]
Profit Before Taxation
Taxation [800 + 200 + (300 x 9/12)]
Profit after tax
Other comprehensive income
Deccrease in NCI
Profit after Other comprehensive income

Profit after tax attributable to:

Cadbury
Non-Controlling Interest
Sweets
1000 x 3/12 x 40%
1000 x 9/12 x 20%
Jelly Beans (700 x 9/12 x 20%)

Profit after Other comprehensive income attributable to:

Cadbury
Non-Controlling Interest
Sweets
1000 x 3/12 x 40%
1000 x 9/12 x 20%
Jelly Beans (700 x 9/12 x 20%)
ed 31 December X10
RM'000
13,000
(5,540)
7,460

(2,750)
180
70
4,960
(1,225)
3,735

(200)
3,535

3,380

100
150
105
3,735

3,180

100
150
105
3,535
ACR Tutorial 6 Q2 -suggested answer
Subsidiary to Subsidiary
1 January x8 31 December x9 1 April x10 31 Decemb
Cadbury

Bought 60% Goodwill Impaired Bought 20% Subsidiary fo

RM20,000 NCI @ 40%
Retained profit : RM150,000 Cost: 2.6m NCI @ 20%
COI : RM2500,000 FV of assets = RM12m
Sweets FVNA : RM 4 million

Goodwill would be calculated when The additional 20% of Sweets on 1 April

Cadbury obtained the control of Sweets, x10 is treated as transaction between group
which is at 1 January x8 shareholders, Cadbury and Non-controlling
Interest
Adjustment to equity should be calculated

Goodwill Calculation - Sweets Adjustment for decrease in NCI @ 1/4/x10

RM'000 RM'000
Consideration Transferred (60%) 2,500 Consideration Paid 2600
Non-controlling Interest 1,600 Decrease in NCI (2,400)
4,100 Adjustment to Equity 200 Overpaid
Less: Fair value of net assets at acquisition (4,000) (Recognized in OCI)
Goodwill @ 1 January x8 100
Impairment (20) Decrease in NCI = NCI at date of step acquisiti
Goodwill @ 1 January x10 80 = (12000*40%) * 20%/40%
= 2400

Associate to Subsidiary
1 January x5 1 April x10 31 December x10
Cadbury
Associate to Subsidiary
1 January x5 1 April x10 31 December x10
Cadbury

Bought 40% Bought 40% Subsidiary for 9 months

Associate for 3 months
Retained profit : RM150,000 Cost: 1m NCI @ 20% for 9 mths
COI : RM600,000 FV of previously investment
Jelly Beans (40%) = RM870,000

Associate Goodwill would be calculated when

Significant Influence Cadbury obtained the control of Jelly
Equity Method Beans, which is at 1 April x10
In substance, 40% has been disposed
and 80% has been purchased
On 1 April x10, the 40% should be
remeasured at fair value at the date of
control. Any gain or loss on
remeasurement will be reported to
group SCI

Goodwill Calculation - Jelly Beans Gain on remeasurement of the previously held investment

RM'000 RM'000 RM'000

Consideration Transferred 1,000 Fair value at date control obtained 870
FV of previously investment 870 Less: Carrying Amount of Associates
Non-controlling Interest 275 Cost of investment 600
2,145 40% x Post acquisiton profit 90
Less: Fair value of net assets at acquisition (690)
Share Capital 1,000 Gain on remeasurement - SOPL 180
Retained Earnings [200+(700/12*3)] 375
 (1,375)
Goodwill 770 Post acquisition untill 31/12/x9 50
Profit for 3 months until 31/3/x10 175
Total Post acquisition Profit 225

Intragroup Transaction
RM'000
Cost (100%) 800 Cadbury
Profit (25%) 200
Sales (125%) 1000

Sweets still has 20 percent of these goods.

Unrealized Profit (200*20%) 40 Sweets

31 December x10

bsidiary for 12 mths

I @ 40% for 3 mths
I @ 20% for 9 mths

paid

ep acquisition * %purchased/NCI % before step acquisition

20%/40%
Date of Consolidation: 31 December 2017

Note 1: Rakan's investment in Sahabat

Date of acquisition
1 January 2017 30% Associate
1 July 2017 30%
60% Subsidiary
Parent: 60%, NCI: 40%

Fair value adjustment of land

= RM300,000-RM200,000
= RM100,000

Note 2: Rakan's investment in Kawan

Date of acquisition
1 January 2017 60% Subsidiary
1 July 2017 20%
80% Subsidiary
Parent: 80%, NCI: 20% (40% - 20%)

Note 3: Intra-group sales

Goods sold by subsidiary (Kawan)
Intra-group transaction = RM480,000
Unrealised profit
= RM50,000 x 25%/125%
= RM10,000

Working 1: Group Retained Earnings/Profit

Rakan Sahabat
RM'000 RM'000
As per SOFP 22,638 24,075
Less: Pre-acquisition profit (18,075)

Post-acquisition profit 6,000

Unrealised profit (note 3)
Impairment of goodwill (1,782.5)
Share of associate (Sahabat)'s profit (12mil x 30% x 6/12) 1,800
4,217.5
Share of subsidiary profit:
- Sahabat (60%) 2,531
- Kawan (60%) 4,200
- Kawan (80%) 5,592
Gain on remeasurement 6,300
Total GRE 43,060.5
Working 2: NCI
Sahabat
RM'000
NCI fair value at acquisition 15,600
Post-acquisition profit (6,000-1,782.5) x 40% 1,687
NCI at 31 Dec 2017 17,287

Kawan
RM'000
NCI fair value at acquisition 4,000
Post-acquisition profit (14mil x 40% x 6/12) 2,800
6,800 40%
Decrease in NCI (6,800*20%/40%) (3,400) 20%
3,400
Post-acquisition profit (7,000-10) x 20% 1,398
NCI at 31 Dec 2017 4,798
Kawan (6/12) Kawan (6/12)
RM'000 RM'000
19,898
(5,898)
14,000
7,000 7,000
(10)

7,000 6,990
i) Profit or Loss on remeasurement
RM'000 RM'000
Fair value of previously held shares (30% x 3mil shares x RM13) 11,700
Less : Cost of investment (note 1) 3,600
Post-acquisition profit (12mil x 6/12 x 30%) 1,800
(5,400)
Gain on remeasurement of investment in Sahabat 6,300

ii) Goodwill computation

Goodwill computation for Sahabat Berhad

Date of control: 1 July 2017
RM'000 RM'000
Consideration paid / Cost of investment in subsidiary 11,700
Fair value of previously held shares (30% x 3mil shares x RM13) 11,700
NCI at fair value (40% x 3mil shares x RM13) 15,600

Less: Net assets

Equity shares 3,000
Retained earnings at 1 Jan 2017 12,075
Current year profit before 1 July 2017 (12mil x 6/12) 6,000
Fair value adjustment of land (300,000-200,000) 100
(21,175)
Goodwill before impairment 17,825
Less: Impairment (10%) - note 4 (1,782.5)
Goodwill on consolidation 16,042.5

Goodwill computation for Kawan Berhad

Date of control: 1 January 2017
RM'000 RM'000
Consideration paid / Cost of investment in subsidiary 6,240
NCI at fair value (40% x 2mil shares x RM5) 4,000

Less: Net assets

Equity shares 2,000
Pre-acquisition retained earnings 5,898
(7,898)
Goodwill on consolidation 2,342

iii) Amount charge to equity attributable to acquisition of 20% interest in Kawan Berhad on 1 July 2017

Workings: RM'000
Consideration paid (note 2) (2,000)
Decrease in NCI (W2) 3,400
Amount charge to equity (OCE) 1,400

Journal Entries: RM'000 RM'000

Dr NCI 3,400
Cr OCE 1,400
Cr Cost of investment in subsidiary 2,000

iv) Consolidated Statement of Profit or Loss for the year ended 31 December 2017

Consol P/L
RM’000
Revenue (50,000+[24,000 x 6/12]+20,000-480 Interco) 81,520
Cost of sales (20,000+[6,000 x 6/12]+4,000-480 Interco + 10 URP) (26,530)
Gross profit 54,990
Operating expenses (4,000+[2,000 x 6/12]+1,000) (6,000)
Impairment of goodwill (W2) (1,782.5)
Finance costs (300)
Gain on remeasurement (i) 6,300
Share of associate (Sahabat)'s profit (W1) 1,800
Profit before taxation 55,007.5
Taxation (8,300+[4,000 x 6/12]+1,000) (11,300)
Profit for the year 43,707.5

Profit attributable to:

Owner of equity 37,822.5
NCI - Sahabat (6,000 - 1,782.5 Impairment) x 40% 1,687
NCI - Kawan (7,000 x 40%) 2,800
NCI - Kawan (7,000 - 10 URP) x 20% 1,398
5,885
43,707.5

v) Consolidated Statement of Financial Position as at 31 December 2017

CSOFP
Non-current assets RM'000
PPE (18,593+28,073+13,063+100 FVA) 59,829
Goodwill (ii) (16,042.5+2,343) 18,384.5

Current assets (1,568+9,025+8,883-10 URP) 19,466

Total assets 97,679.5

Equity and liabilities

Equity shares 8,000
Group Retained Profit (W1) 43,060.5
OCE (iii) 1,400
NCI (W2) (17,287+4,798) 22,085
74,545.5
Current liabilities (13,063+10,023+48) 23,134
Total equity & liabilities 97,679.5
erhad on 1 July 2017