Pro-forma journal entry

J1 Marks
Investment at fair value through OCI
Cost 800,000
Fair value at 1 July 2020 (100 000 x 13) 1,300,000
Fair value adjustment 500,000 1
Tax adjustment (28% x 80%) (112,000)
Net amount 388,000 1

Dr MTM (SCE) 388,000 1

Cr RE (SCE) 388,000

J2
Share capital (SCE) 11,000,000 1
Retained income (SCE) 780,000 1
Profit after tax (P/L) (500 000 x 6 / 12) 250,000
Goodwill (SFP) 1,090,000
Investment (SFP) [(100 000 + 600 000) x 13] 9,100,000 1
NCI (SFP/SCE) (300 000 x 13) 3,900,000 1
Dividend declared (SCE) (1 April 2020) 120,000

J3
NCI (P/L) (250 000 x 30%) 75,000
NCI (SCE) 75,000

J4
Dividend income (P/L) 91,000
NCI (SCE) 39,000
Dividend declared (SCE) 130,000
J1
Investment at fair value through P/L
No entry required
Analysis of equity 100% 70% 30%
At acquisition
Share capital 500,000
Retained income 400,000
900,000 630,000 270,000
Consideration transferred 1,000,000 800,000 200,000
Goodwill 100,000 170,000 (70,000) 655,000
350,000
Since acquisition (125,000)
Movement in retained income
(655 000 - 400 000) 255,000 178,500 76,500 880,000

Current year
PAT 350,000 245,000 105,000
Dividends (125,000) (87,500) (37,500)
1,380,000 344,000

Approach #2: Do not consolidate, only bring in your share of equity

J1: Bring in equity generated in prior years

Dr Investment (SFP) 178,500
Cr Retained income (SCE) 178,500

J2: Bring in your share of current year earnings

Dr NCI (P/L) 105,000
Dr Investment (SFP) 245,000
Cr Profit after tax (P/L) 350,000

J3: Eliminating the intragroup dividends

Dr Dividend income (P/L) 87,500
Cr Investment (SFP) 87,500

J4: Eliminate separate financials gain and recognise B98 gain

Dr Gain in separate financials (P/L) 287,143
Cr Investment (SFP) 46,857
Cr Gain on loss of control (B98) (P/L) 334,000

J5: Eliminate the double counting in fair value adjustment

Dr Fair value adjustment (P/L) 382,857
Cr Investment (SFP) 382,857

J6: Eliminate the associated deferred tax

Dr Deferred tax (SFP) 85,760
Cr Income tax (P/L) 85,760

Sold investment B98 gain

Cost of investment 800,000 Sold assets
Sold (342,857) Total NAV 1,380,000
Balance of investment 457,143 Goodwill
Fair value 840,000 1,380,000 414,000
Fair value adjustment 382,857 630,000
216,000
 Approach #1: Consolidate and deconsolidate
Appropriate when dealing with cash flows

J1
Opening balance Share capital (SCE) 500,000
PAT Retained income (SCE) 400,000
Dividend Goodwill (SFP) 100,000

Closing balance Investment (SFP) 800,000

NCI (SCE) 200,000

J2
Retained income (SCE) 76,500
NCI (SCE) 76,500

J3
NCI (P/L) 105,000
NCI (SCE) 105,000

J4
Dividend income (P/L) 87,500
NCI (SCE) 37,500
Dividend declared (SFP) 125,000

J5 (losing control)
Dr Accounts payable (SFP) 220,000
Cr Plant (SFP) 938,500
Cr Inventory (SFP) 120,000
Cr Cash (SFP) 541,500
Cr Goodwill (SFP) 100,000
Dr NCI (SCE) (30%) 344,000
Dr Investment (SFP) (retained) (40%) 840,000
Dr Gain in separate (P/L) 287,143
Dr Investment (SFP) (sold) (30%) 342,857
Cr Gain on loss of control (P/L) (balance) 334,000
2,034,000 2,034,000
598,857
J1 J2 J3 J4
200,000 76,500 105,000 (37,500)
Separate financial statements
Bank (SFP) 630,000
(30 / 70 x Investment (SFP) 342,857
Gain separate (P/L) 287,143
Analysis of equity 100% 70% 30%
At acquisition
Share capital 500,000
Retained income 400,000
900,000 630,000 270,000
Consideration transferred 1,100,000 800,000 300,000
Goodwill 200,000 170,000 30,000

Since acquisition

Movement in retained income

(655 000 - 400 000) 255,000 178,500 76,500

Current year
PAT 350,000 245,000 105,000
Dividends (125,000) (87,500) (37,500)
1,380,000 444,000
 Disposal: 14%

Change in holding adjustment?

655,000 Opening balance

350,000 PAT
(125,000) Dividend

880,000 Closing balance

30%
14%
44%
Goodwill
Own NCI 30,000
Parent's share 34,000
(170 000 x 14/70) 64,000
isposal: 14%

hange in holding adjustment?

NCI before transaction

NAV (1 380 000 x 30%) 414,000
Goodwill 30,000
444,000

NCI after transaction

NAV (1 380 000 x 44%) 607,200
Goodwill 64,000
671,200

Movement 227,200
Consideration 294,000
Gain 66,800

Hold in (disposal recognised in separate financials)

Cost 800,000

Sold (14 / 70 x 800 000) 160,000

Proceeds 294,000
Gain in separate financials 134,000
Dr Gain in separate financials (P/L) 134,000
Dr Investment (SFP) 160,000
Cr NCI (SCE) 227,200
Cr Change in ownership reserve (SCE) 66,800
NAV 500000 NCI before transaction (30% x 500 000)
Goodwill Goodwill
NCI 30% 10,000
Parent 70% 35,000
45,000 NCI after transaction (20% x 500 000)
Transaction I Goodwill (10 000 x 20 / 30)
Parent purchases 10% from NCI for R54 000

Movement
NCI before transaction (30% x 500 000) 150,000 Paid
NCI after transaction (20% x 500 000) 100,000
Movement 50,000
Paid 54,000
Loss 4,000 Changes in ownership reserves (SCE)

NCI at proportionate share

Transaction II NCI before transaction (30% x 500 000)
Parent sold 10% to NCI for R55 000 NCI after transaction (20% x 500 000)
Movement
Consideration
Gain

NCI at fair value

NCI before transaction (30% x 500 000)
Goodwill

NCI after transaction (20% x 500 000)

Goodwill (10 000 + 35 000 x 10 / 70)

Movement
Consideration
Gain
150,000
10,000
160,000

100,000
6,667
106,667

53,333
54,000
667

150,000
100,000
50,000
55,000
5,000 Changes in ownership reserves

150,000
10,000
160,000

100,000
15,000
115,000

45,000
55,000
10,000
a) Cost of the investment 500,000 100,000
Profit after tax 1,000,000 200,000
Dividends (250,000) (50,000)
Other comprehensive income 120,000 24,000
Carrying amount of investment 274,000

b) Fair value of consideration (70%) 1,050,000

Fair value of previous holding (20%) 300,000
Non-controlling interest 150,000
1,500,000

Fair value of the net assets 1,370,000

(SC + PAT + OCI - Dividends)

Goodwill 130,000

c) Carrying of the investment 274,000

Fair value of the investment 300,000

Gain on remeasurement 26,000 Apply IFRS3.42

 J1
Dr Investment (SFP) 200,000
Cr Share of associate's profit (P/L) 200,000

J2
Dr Dividend income (P/L) 50,000
Cr Investment (SFP) 50,000

J3
Dr Investment (SFP) 24,000
Cr Share of associate's OCI (OCI) 24,000

J4
Dr Investment (SFP) 26,000
Cr Gain on remeasurement (P/L) 26,000

J5
Transfer or reclassify OCI
Not a reclassification adjustment in terms of IAS1
Apply IFRS3.42
Dr Revaluation reserve (SCE) 24,000
Cr Retained income (SCE) 24,000

J6
Dr Share capital (SCE) 500,000 Sub/Associate Parent
Dr Retained income (SCE) 750,000 Opening - -
(1 000 000 - 250 000) OCI 120,000 -
Dr Revaluation reserve (SCE) 120,000 Closing 120,000 -
Dr Goodwill (SFP) 130,000
Cr Investment (SFP) 1,350,000 Equity Group
Cr NCI (SCE) 150,000 Opening -
OCI 24,000
Transfer (24,000)
-

Consolidat100%S + 100%P Starting

Opening 0
OCI 120,000
Transfer 0
120000
RE
-
-
24,000
24,000

PE6

(120,000)
Gain in separate financials J1
Cost of investment sold (20 / 30 x 250 000) 166,667
Proceeds 240,000
Gain in separate financials 73,333
J2
Loss in group financials
Cost of investment 250,000
Movement in retained earnings
(880 000 - 650 000) 230,000 69,000 J3
Profit for the year (420 000 x 1 / 12) 35,000 10,500
329,500
Excess
NAV at acquisition (250 000 + 650 000) 900,000 J4
x 30% 270,000
Paid 250,000 20,000
Carrying amount of the equity accounted 349,500

FV of investment retained (10%) 78,000

FV consideration received (20%) 240,000
318,000

Loss on disposal 31,500

Parent's separate financial statements

Cost of the investment 250,000
Cost of investment sold (166,667)
Balance in the separate financial statements 83,333 10%
Fair value 78,000
Fair value adjustment (loss) 5,333
Dr Investment (SFP) 99,500
Cr Retained income (SFP) (20 000 + 69 000) 89,000
Cr Share of associate's P/L (P/L) 10,500

Dr Gain in separate (P/L) 73,333

Dr Loss in group (P/L) 31,500
Cr Investment (SFP) 104,833

Dr Investment (SFP) 5,333

Cr Fair value adjustment (P/L) 5,333
Reversal of the loss recognised by parent

Dr Income tax (P/L) (5 333 x 80% x 28%) 1,195

Cr Deferred tax (SFP) 1,195

233,000 116,500

78,000
240,000
7,000 (38,500)

(31,500)

IFRS9
 100% 70% 30%
At acquisition
Share capital 500,000
Retained income 400,000
Total 900,000 630,000 270,000
NCI 340,000 340,000
Consideration 800,000 800,000
240,000 170,000 70,000

Since acquisition
PAT 120,000 84,000 36,000

Current year
PAT (Apportion profit to pre-transaction and post-transaction) 180,000 126,000 54,000
Dividends - 1 Feb 2020 (60,000) (42,000) (18,000)

Total, excluding goodwill 1,140,000 342,000

Total, including goodwill 412,000

New issue of shares 660,000

(600 000 x 1,10) 1,800,000

Dr Share capital (SCE) 660,000

Cr NCI (SCE) 45,500
Cr Change in holdings (SCE) 20,500
Cr Investment (SFP) (540 000 x 1,1) 594,000
660,000 660,000

Subsdiary issuing shares (separate financials)

Dr Bank 660,000
Cr Share capital (SCE) 660,000
 Shareholding Total Parent NCI
Pre-transaction 1,000,000 700,000 300,000
70.0% 30.0%

Share issue 600,000 540,000 60,000

Post-transaction 1,600,000 1,240,000 360,000

77.5% 22.5%
70,000
NCI before transaction
NAV attributable to NCI 342,000
Goodwill attributable 70,000
412,000

NCI after transaction

NAV attributable to NCI 405,000
(22,5% x 1 800 000)
Goodwill attributable 52,500
(70 000 x 22,5 / 30)
457,500

Movement in NCI 45,500

Paid (60 000 x 1,10) 66,000
EQUITY Gain 20,500
Shareholding analysis Total Parent NCI
Pre-transaction 1,000,000 550,000 450,000
55% 45%

Rights (1 000 000 x 2 / 4) 500,000 275,000 225,000

NCI sold rights 225,000 (225,000)

Post-transaction 1,500,000 1,050,000 450,000

70% 30%

NAV 100% 55% 45%

At acquisition
Share capital 4,000,000
Retained income 400,000
4,400,000 2,420,000 1,980,000
Paid 4,540,000 2,500,000 2,040,000
140,000 80,000 60,000

Since acquisition
Movement / PAT 1,225,000 673,750 551,250
Total excluding goodwill 5,625,000 2,531,250

Rights issue (500 000 x 4,90) 2,450,000

8,075,000

Dr Change in degree of ownership (SCE) 208,750

Dr Share capital (SCE) 2,450,000
Dr NCI (SCE) 128,750
Cr Investment (SFP) 2,787,500
Parent (500 000 x 55%)
NCI (500 000 x 45%)

Parent's separate financials

Dr Investment in rights (SFP) 337,500
Cr Bank (SFP) 337,500
(225 000 x 1,50)

Dr Investment (SFP) 2,787,500

Cr Bank (SFP) (500 000 x 4,90) 2,450,000
Cr Investment in rights (SFP) 337,500

Subsidiary's separate financials

Dr Bank (SFP) 2,450,000
Cr Share capital (SCE) 2,450,000

NCI before transaction

NAV attributable to NCI 2,531,250
Goodwill attributable to NCI 60,000
2,591,250

NCI after transaction

NAV attributable to NCI 2,422,500
(8 075 000 x 30%)
Goodwill attributable to NCI 40,000
(60 000 x 30 / 45)
2,462,500

Movement in NCI 128,750

Consideration paid when selling their rights 337,500
Loss 208,750
Shareholding analysis Total Parent NCI
Pre-transaction 1,000,000 600,000 400,000
60% 40%

Share buyback (300,000) (215,000) (85,000)

700,000 385,000 315,000
55% 45%

NAV 100% 60% 40%

At acquisition
Share capital 4,500,000
Retained income 400,000
4,900,000 2,940,000 1,960,000
Paid / NCI 5,780,000 3,480,000 2,300,000
Goodwill 880,000 540,000 340,000

Since acquisition
Movement (2 640 000 x 7 / 12) 1,540,000 924,000 616,000
6,440,000 2,576,000

Share buyback (300 000 x 7,20) (2,160,000)

4,280,000

Dr NCI (SCE) 605,000

Dr Change in holding (SCE) 7,000
Dr Gain in separate financials (P/L) 301,000
Dr Investment (SFP) 1,247,000
Cr Share capital (SCE) 1,350,000
Cr Retained income (SCE) 810,000

2,160,000 2,160,000
Gain in separate financial statements

Cost of investment 3,480,000

Cost of investment sold 1,247,000
(3 480 000 x 215 / 600)
Proceeds (215 000 x 7,20) 1,548,000
Gain in separate financials 301,000

Gain in group financials

NCI before transaction

NAV attributable to NCI (1 960 000 + 616 000) 2,576,000 (6 440 000 x 40%)
Goodwill attributable to NCI 340,000
2,916,000

NCI after transaction

NAV attributable to NCI 1,926,000
(4 280 000 x 45%)
Goodwill attributable to NCI 385,000
(340 000 + 540 000 x 5 / 60) 2,311,000

Movement in NCI 605,000

Consideration paid to NCI (85 000 x 7,20) 612,000
Loss 7,000

Subsidiary's separate financials

Dr Share capital (SCE) (4 500 000 - 3 150 000) 1,350,000
Cr Retained income (SCE) 810,000
Cr Bank (SFP) 2,160,000