Corporate: Generally Accepted Accounting Principles and General Reserve

1598 Words Jul 18th, 2011 7 Pages
Corporate Accounting III
Assignment 2
Question 1: What is the difference between direct and indirect NCI?
Under AASB127, the group is required to prepare the consolidation statement when parent entity acquires shares in the subsidiary. There are two parties who own shares in the subsidiary if it’s not a wholly-owned subsidiary consolidation. One is the parent entity while the other is non-controlling interest. Non-controlling interest (NCI) is defined as “the portion of the profit or loss and net assets of a subsidiary attributable to equity interest that are not owned, directly or indirectly through subsidiaries, by the parent” (Leo, et, al. 2009, p. 895).
The NCI can be classified as either direct (DNCI) or indirect (INCI).
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To avoid double counting issue arising from continuing giving INCI a share of equity relating to the pre-acquisition assets of the subsidiary, the INCI is only given a share of the post-acquisition equity of the subsidiary. No double counting issue need to be considered again for post-acquisition equity since the investment shares in the subsidiary is recorded at cost, meaning any subsequent changes to the equity of its subsidiary after acquisition date will not be reflected in the shares in the parent. INCI is entitled to the post-acquisition equity once.
Word count: 215
Question 18.6
A. Samoa Ltd Singapore Ltd (75%)
1 Acquisition Analysais:
NFV of identifiable net assets of Singapore Ltd:
= $5,000 + $1,000 + $20,000
=$26,000
NFV acquired (75%): = $26,000*$26,000
Consideration transferred: =$18,750
Bargain Purchase =$750

1). Pre-acquisition elimination entry :(1/7/05)(75%)
Retained earning $3,750
General Reserve $750
Share capital $15,000
Excess $750
Investment in Singapore $18,750

(Retained earning: 75%*$5,000;General Reserve: 75% * $1,000; Share capital: 75% *20,000)

Pre-acquisition elimination entry…