Question 1

Section B - Case 1

Scenario: GlobalTech PLC acquired 80% of CloudServe Ltd on 1 July 20X5. Year-end is 31 December 20X5. GlobalTech paid $5m cash and issued 1m shares (market value $2 each). CloudServe's net assets at acquisition were $6m. Fair value of NCI at acquisition was $1.5m. Post-acquisition, CloudServe sold goods to GlobalTech for $1m at a 25% mark-up on cost. Half of these goods remain in inventory at year-end. CloudServe's profit for the full year was $800k (accruing evenly).

Following the previous question, what is the impact of the $100,000 goodwill impairment on the carrying value of the NCI at year-end (in $)?

Accepted Answer

Calculate the NCI share of the impairment: 20% of $100,000 = $20,000. This amount reduces the NCI carrying value.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Assuming NCI takes no share of the impairment.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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