ExpertMedium2 marksMultiple Choice
ACCA · Question 27 · Financial Reporting
Section B - Case 3: BioHealth Holdings
BioHealth Holdings acquired 75% of the equity share capital of MedTech Co on 1 January 20X8 for $8,500,000. At the acquisition date, the fair value of MedTech's net assets was $9,200,000. BioHealth values the non-controlling interest (NCI) at fair value, which was $2,600,000 at the acquisition date. For the year ended 31 December 20X8, MedTech reported a profit after tax of $1,200,000. No dividends were paid.
What is the carrying amount of the Non-Controlling Interest (NCI) in the consolidated statement of financial position as at 31 December 20X8?
Section B - Case 3: BioHealth Holdings
BioHealth Holdings acquired 75% of the equity share capital of MedTech Co on 1 January 20X8 for $8,500,000. At the acquisition date, the fair value of MedTech's net assets was $9,200,000. BioHealth values the non-controlling interest (NCI) at fair value, which was $2,600,000 at the acquisition date. For the year ended 31 December 20X8, MedTech reported a profit after tax of $1,200,000. No dividends were paid.
What is the carrying amount of the Non-Controlling Interest (NCI) in the consolidated statement of financial position as at 31 December 20X8?
Answer options:
A.
$2,600,000
B.
$2,900,000
C.
$3,500,000
D.
$2,300,000
How to approach this question
Take the NCI at acquisition and add the NCI's share (25%) of the subsidiary's post-acquisition profit.
Full Answer
B.$2,900,000✓ Correct
NCI at acquisition (fair value) = $2,600,000.
NCI share of MedTech's post-acquisition profit = 25% × $1,200,000 = $300,000.
Carrying amount of NCI at 31 Dec 20X8 = $2,600,000 + $300,000 = $2,900,000.
Common mistakes
Calculating NCI using the proportionate share of net assets method when the question states fair value method is used.
Practice the full ACCA FR — Financial Reporting Practice Exam 6
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