Week 11

Preparing group financial statements Accounting for the interests held in

the group by non controlling interests
Workshop questions: 29.5, 29.7, 29.8, 29.10

5 Assume that Company A acquires 70 per cent of Company B for a cash price of $10
million when the share capital and reserves of Company B are:
Share capital
$8 million
Retained earnings
$2 million
$10 million
(a) What amount will be shown in the consolidated statement of financial position for
goodwill pursuant to AASB 3 assuming that any non-controlling interest in the
acquirer is measured at fair value? LO29.3
(b) What amount will be shown in the consolidated statement of financial position for
goodwill pursuant to AASB 3, assuming that any non-controlling interest in the
acquirer is measured at the non-controlling interests proportionate share of the
acquirees identifiable net assets? LO29.3
(c) What are some of the implications of allowing the group to have two options in
accounting for goodwill on consolidation? LO29.3

7 Kelly Ltd acquired 70 per cent of the share capital of Slater Ltd on 1 July 2014 for a cost

of $300000. At the date of acquisition all assets were fairly valued, and the balance of
share capital and reserves was as follows:
$
Share capital
180000
Retained earnings
50000
Revaluation surplus
60000
290000
On 15 August 2014 Slater Ltd paid a $50000 dividend out of pre-acquisition earnings to
all shareholders that held shares at 10 July 2014. Non-controlling interest in the acquirer is
measured at fair value.
REQUIRED
Using the above information, prepare the consolidation adjustments and eliminations
required for the year ended 30 June 2015. LO29.2, 29.3

8 Layne Ltd acquired 90 per cent of the share capital of Beachly Ltd on 1 July 2014 for a

cost of $500000. As at the date of acquisition all assets of Beachly Ltd were fairly valued,
other than land that had a carrying amount $50000 less than its fair value. The recorded
balances of equity in Beachly Ltd as at 1 July 2014 were:
$
Share capital
350000
Retained earnings
100000
450000
Additional information
The management of Layne Ltd values any non-controlling interest at the proportionate
share of BeachleyLtds identifiable net assets.
Beachly Ltd had a profit after tax of $70000 for the year ended 30 June 2015.
During the financial year to 30 June 2015 Beachly Ltd sold inventory to Layne Ltd for
a price of $60000. The inventory cost Beachly Ltd $30000 to produce, and 25 per cent
of this inventory was still on hand with Layne Ltd as at 30 June 2015.
During the year Beachly Ltd paid $10000 in management fees to Layne Ltd.
On 1 July 2014 Beachly Ltd sold an item of plant to Layne Ltd for $40000 when it had
a carrying amount of $30000 (cost of $50000, accumulated depreciation of $20000). At
the date of sale it was expected that the plant had a remaining useful life of four years,
and no residual value.
The tax rate is 30 per cent.
REQUIRED
Prepare the consolidation adjustments for the year ended 30 June 2015 and, based on the
information provided above, calculate the non-controlling interests in the 2015
profits. LO29.2, 29.3

10 On 1 July 2013 Borris Ltd purchased 80 per cent of the shares of Natasha Ltd for $8

million. On 1 July 2013 the shareholders funds of Natasha Ltd were:

Share capital
$5 500000
Retained earnings
$3 500000
$9000000
Additional information
Management of Borris Ltd measures any non-controlling interest in Natasha Ltd at fair
value.
At acquisition date, all assets of Natasha Ltd were fairly stated, except land that had a
fair value $225000 in excess of its book value.
On 30 June 2015 the recoverable amount of goodwill of Borris Ltd was assessed to be
$500000. There had been no previous impairment losses recognised in relation to
goodwill.
During the financial year ending 30 June 2015 Natasha Ltd sold inventory to Borris Ltd
at a sales price of $290000. The inventory cost Natasha Ltd $200000 to produce. At 30
June 2015, half of this inventory had been sold by Borris Ltd.
On 1 July 2014 Natasha Ltd sold an item of plant to Borris Ltd for $250000 when it had
a carrying amount of $200000 (cost of $400000, accumulated depreciation of
$200000). The item of plant was expected to have a remaining useful life of five years
from the date of sale.
Natasha pays $30000 per year in management fees to Borris Ltd.
The income tax rate is 30 per cent.
Statement of comprehensive income of Borris Ltd and Natasha Ltd for the year ended
30 June 2015
Borris
Natasha
Ltd ($)
Ltd ($)
Sales
5200000
1550000
Cost of goods sold
3000000
500000
Gross profit
2200000
1050000
Other revenues
200000
150000
Other expenses
(400000)
(200000)
Profit before income tax expense
2000000
1000000
Income tax expense
(500000)
(350000)
Profit after income tax expense
1500000
650000
Statement of financial positions of Borris Ltd and Natasha Ltd as at 30 June 2015
Borris Ltd ($)
Natasha Ltd ($)
Current assets
Cash
250000
300000
Accounts receivable
650000
250000
Dividends receivable
40000

Inventory
2800000
1200000
Non-current assets
Land
4910000
3450000
Plant
7500000
5000000
Accumulated depreciation
(1500000)
(1000000)
Investment in Natasha Ltd
8000000

Deferred tax assets

250000
1100000
Total assets
22900000
10300000
Current liabilities
Accounts payable
250000
100000

Dividends payable
Non-current liabilities
Loans
Total liabilities
Shareholders equity
Share capital
Retained earnings
Total equity

50000

650000
900000

150000
300000

15000000
7000000
22000000
22900000

5500000
4500000
10000000
10300000

Borris Ltd
Statement of changes in equity for the year ended 30 June 2015
Share
Retained
capital ($)
earnings ($)
Balance at 1 July 2014
15000000
6000000
Total comprehensive income for
1500000
the year
Distributionsinterim
(500000)
Balance at 30 June 2015
15000000
7000000
Natasha Ltd
Statement of changes in equity for the year ended 30 June 2015
Share
Retained
capital ($)
earnings ($)
Balance at 1 July 2014
5500000
4000000
Total comprehensive income
650000
for the year
Distributionsinterim
(100000)
Distributionsfinal
(50000)
Balance at 30 June 2015
5500000
4500000

Total ($)
21000000
1500000
(500000)
22000000

Total ($)
9500000
650000
(100000)
(50000)
10000000

REQUIRED
(a) Prepare the consolidation worksheet journal entries for Borris Ltd and its controlled
entity as at 30 June 2015 and post them to a consolidation worksheet. LO29.2
(b) Calculate the non-controlling interest in profit and equity as at 30 June 2015. LO29.3
(c) Prepare the consolidated statement of financial position, consolidated statement of
comprehensive income, and consolidated statement of changes in equity for Borris
Ltd and its controlled entities clearly showing non-controlling interests. LO29.4