Question 1

The NCI is entitled to a share of the consolidated equity of the group.

Accepted Answer

NCI stands for Non-controlling Interest, which means that the group has a portion of equity that is owned by external shareholders. Therefore, the NCI is entitled to a share of the consolidated equity of the group.

Question 2

Which of the following statements is incorrect?
A)The NCI is unaffected by the existence of any gain on bargain purchase.
B)The NCI share of equity at acquisition date is adjusted for its share of any gain on bargain purchase.
C)Any gain on bargain purchase is recognised in the pre-acquisition entry.
D)The pre-acquisition entry only adjusts for the parent's share of the pre-acquisition equity.

Accepted Answer

The NCI share of equity at the acquisition date is not adjusted for its share of any gain on bargain purchase. Instead, gains on bargain purchases are typically recognized in full by the parent company in the consolidated financial statements, not allocated between the parent and the non-controlling interest (NCI).

Question 3

Which of the following statements is correct?
A)The entry to reflect the NCI share of equity at acquisition date changes every year that consolidated financial statements are prepared.
B)The NCI is entitled to a share of consolidated equity.
C)To calculate the NCI share of equity,the subsidiary's equity at the end of the reporting period is divided into five parts.
D)The NCI is not entitled to a share of consolidated equity.

Accepted Answer

The NCI is entitled to a share of consolidated equity. The NCI's share of equity increases or decreases depending on the subsidiary's net income or loss, dividends declared, and other equity transactions. The NCI share of equity at acquisition date does not change every year. There is no specific formula dividing the subsidiary's equity into five parts to calculate the NCI share of equity. Therefore, options A, C, and D are incorrect.

Question 4

Where a subsidiary is partly owned by a parent and an NCI,any goodwill arising in the acquisition analysis is required to be allocated between that attributable to the parent and that attributable to the NCI.

Accepted Answer

The answer of Where a subsidiary is partly owned by...

Question 5

Beach Limited is a subsidiary of Golden Limited.When Golden acquired its 70% interest in Beach,the retained earnings of Beach Limited were $40 000.At the beginning of the current period,Beach Limited's retained earnings had increased to $100 000.Beach also earned profit of $20 000 during the current period.The NCI's share of the equity of Beach Limited at reporting date is:
A)$36 000.
B)$30 000.
C)$6000.
D)$84 000.

Accepted Answer

The NCI's share of the equity is calculated based on their percentage of ownership (30%) and includes their share of retained earnings at the beginning of the period, plus their share of the profit earned during the period. The retained earnings at the beginning of the period were $100,000, and the profit for the current period was $20,000, making a total of $120,000. The NCI's share is 30% of $120,000, which is $36,000.

Question 6

A non-controlling interest in the net assets of a subsidiary consists of the non-controlling interest's share at the date of the business combination:
A)less 100% of any post-acquisition dividends paid.
B)less the parent's share of any post-acquisition dividends paid or declared.
C)plus a share of the changes in the subsidiary's equity since the business combination.
D)less the non-controlling proportionate share of changes since the combination.

Accepted Answer

A non-controlling interest in the net assets of a subsidiary includes the non-controlling interest's share at the date of the business combination plus a share of the changes in the subsidiary's equity since the business combination. This reflects the non-controlling interest's entitlement to their share of the subsidiary's earnings and other equity changes post-acquisition.

Question 7

The NCI is a contributor of equity to the group.

Accepted Answer

NCI stands for Non-Controlling Interest, which means that a portion of the equity of a company or group is owned by others outside of the controlling ownership. Therefore, the NCI is considered a contributor of equity to the group.

Question 8

The NCI share of different categories of equity is required to be separately disclosed on the face of the consolidated statement of financial position.

Accepted Answer

The answer of The NCI share of different categories of...

Question 9

Non-controlling interests in the equity of a subsidiary at the date of acquisition are reflected in Step 1 of the NCI allocation process.

Accepted Answer

This is true according to the guidelines set by International Financial Reporting Standards (IFRS). Step 1 of the NCI allocation process involves determining the fair value of the subsidiary at the date of acquisition, which includes any non-controlling interests in the equity of the subsidiary. This value is used to calculate the initial book value of the subsidiary and the proportionate share of the non-controlling interests.

Question 10

Happy Ltd holds a 60% interest in Valley Ltd.On 1 July 2018 Valley Ltd sold a depreciable non-current asset to Happy Ltd at a profit before tax of $10 000.The remaining useful life of the asset at the date of sale was 4 years and the tax rate is 30%.The impact of the above on the NCI share of profit for the year ended 30 June 2019 is:
A)debit $2800.
B)credit $2800.
C)debit $2100.
D)credit $2100.

Accepted Answer

The profit on sale of the asset needs to be eliminated in full from the group's perspective, including the non-controlling interest's (NCI) share of the profit. The profit before tax was $10,000, and the asset had a remaining useful life of 4 years, so the annual depreciation on the intra-group profit is $10,000 / 4 = $2,500. The tax effect at 30% is $2,500 * 30% = $750, reducing the annual impact to $2,500 - $750 = $1,750. The NCI's share is 40% (100% - 60% ownership by Happy Ltd), so the impact on the NCI share of profit is 40% of $1,750 = $700. However, since the question asks for the impact for the year ended 30 June 2019, which is one year after the sale, we need to consider the full year's impact, making the correct calculation for the NCI share $700. The options provided do not directly match this calculation, suggesting a possible misunderstanding in the calculation process. Given the options, the closest correct approach involves recognizing the need to adjust for the NCI's share of the profit elimination, but none of the provided options accurately reflects the correct calculation based on the information given. Therefore, a reevaluation of the calculation process is necessary, focusing on the profit elimination and its tax effect, and how it impacts the NCI's share of profit.

Question 11

Currimundi Ltd holds a 60% interest in Beach Ltd.Beach Ltd purchases inventory from Currimundi Ltd during the year for $30 000.The inventory originally cost $21 000.At the end of the year 80% of the inventory is still on hand.The tax rate is 30%.The NCI adjustment required in relation to this transaction includes a debit of which of the following?
A)Nil
B)$2016
C)$504
D)$5040

Accepted Answer

The NCI adjustment is required to eliminate the intercompany profit from the consolidated financial statements. The intercompany profit is the difference between the cost of the inventory to Currimundi Ltd and the price at which it was sold to Beach Ltd. In this case, the intercompany profit is $30,000 - $21,000 = $9,000. The NCI adjustment will include a debit to the NCI of 40% of the intercompany profit, which is $9,000 x 40% = $3,600. However, since 80% of the inventory is still on hand at the end of the year, only 20% of the intercompany profit has been realized. Therefore, the NCI adjustment will include a debit of 20% of $3,600, which is $720.

Question 12

Moffatt Ltd holds a 60% interest in Beach Ltd.Beach Ltd sells inventory to Moffatt Ltd during the year for $20 000.The inventory originally cost $14 000.At the end of the year 80% of the inventory is still on hand.The tax rate is 30%.The NCI adjustment required in relation to this transaction includes which of the following?
A)DR NCI $1344
B)DR NCI share of profit/(loss)$1344
C)DR NCI $1920
D)CR NCI $1344

Accepted Answer

The NCI adjustment required in relation to this transaction is the proportionate share of the profit from the sale of inventory to Moffatt Ltd. The profit on the sale is $6,000 ($20,000 - $14,000), and since Moffatt Ltd holds a 60% interest in Beach Ltd, the NCI would have a 40% interest in the profit, which is $2,400. However, since only 80% of the inventory is still on hand, the adjustment would be $2,400 x 80% = $1,920. To adjust the NCI balance, we would debit NCI for $1,920 x 70% (to account for tax of 30%) = $1,344. Therefore, the correct answer is A.

Question 13

Because it is necessary to distinguish between the parent's share and the NCI share of equity in the consolidated financial statements,extra columns are added in the consolidation worksheet to divide the group equity into the NCI share and the parent's share.

Accepted Answer

This statement is true. Extra columns are added in the consolidation worksheet to distinguish between the parent's share and the NCI share of equity in the consolidated financial statements. This is necessary because the NCI represents the portion of equity not owned by the parent company and therefore should be separated from the parent's share when presenting the consolidated financial statements.

Question 14

Where a subsidiary is partly owned by a parent and an NCI,both the BCVR entries and the pre-acquisition entries are adjusted to reflect only the parent's share of the subsidiary's equity balances.

Accepted Answer

The BCVR (Book Value to Consideration Received) entries and the pre-acquisition entries reflect the total change in the subsidiary's equity balances, not just the parent's share. The Non-Controlling Interest (NCI) share is also considered in these adjustments to present a complete picture of the acquisition's impact on equity.

Question 15

Where a partly owned subsidiary has a dividend declared but not yet paid at balance date,the NCI share of equity is reduced by the NCI share of the dividend and the dividend payable to the NCI is eliminated.

Accepted Answer

The NCI share of equity is not reduced by the NCI share of the dividend until the dividend is actually paid. Instead, the dividend payable to the NCI is recognized as a liability in the consolidated financial statements until it is paid.

Question 16

The full effects of transactions between entities within a group are eliminated on consolidation,regardless of the existence of an NCI.

Accepted Answer

When consolidating financial statements, the full effects of transactions between entities within a group are eliminated, regardless of whether there is a non-controlling interest (NCI). This is because the purpose of consolidation is to present the financial information of the group as a single economic entity, rather than a collection of individual entities.

Question 17

Which of the following is not one of the 3 steps in calculating the NCI's share of the recorded equity of the subsidiary?
A)Determine NCI share of the changes in equity in the current period.
B)Determine the NCI share of equity of the subsidiary at acquisition date.
C)Determine the NCI share of the subsidiary's equity between the date of acquisition and the beginning of the current period.
D)Determine the NCI share of the subsidiary's equity prior to the date of acquisition.

Accepted Answer

The three steps in calculating the NCI's share of the recorded equity of the subsidiary are: 
1) Determine NCI share of the changes in equity in the current period. 
2) Determine the NCI share of equity of the subsidiary at acquisition date. 
3) Determine the NCI share of the subsidiary's equity between the date of acquisition and the beginning of the current period. Step D is not one of the three steps in calculating the NCI's share of the recorded equity of the subsidiary.

Question 18

The consolidated statement of comprehensive income must separately disclose the consolidated profit for the period attributable to equity holders of the parent and the NCI.

Accepted Answer

The IFRS requires the separate disclosure of consolidated profit for the period attributable to equity holders of the parent and the NCI in the consolidated statement of comprehensive income. This is in line with the principle of presenting a clear and transparent picture of the financial performance of the group.

Question 19

During the current year,a partly owned subsidiary has made a transfer from a general reserve to retained earnings.Which of the following lines would appear in the NCI consolidation entry relating to the current year transfer?
A)CR NCI
B)CR Retained earnings
C)DR General reserve
D)DR Transfer from general reserve

Accepted Answer

The transfer from a general reserve to retained earnings would result in a debit to the general reserve and a credit to retained earnings. As the question specifically asks for the NCI consolidation entry, we are looking for the impact on the Non-Controlling Interest (NCI) in the subsidiary. The NCI's share of the transfer would be recorded as a debit to "Transfer from general reserve" and a credit to "General reserve" (as the reserve is being decreased). Therefore, the correct answer is D, DR Transfer from general reserve.

Question 20

When preparing consolidated financial statements,any profit or loss that arises in relation to the intragroup transfer of services is regarded as:
A)immaterial and does not get adjusted on a consolidation worksheet.
B)immediately realised.
C)unrealised.
D)having no impact on the non-controlling interest,and so ignored for consolidation reporting.

Accepted Answer

The answer of When preparing consolidated financial statements,any profit or...

Quiz 21: Consolidation: Non-Controlling Interest

The NCI is entitled to a share of the consolidated equity of the group.

Which of the following statements is incorrect?

Which of the following statements is correct?

Where a subsidiary is partly owned by a parent and an NCI,any goodwill arising in the acquisition analysis is required to be allocated between that attributable to the parent and that attributable to the NCI.

A non-controlling interest in the net assets of a subsidiary consists of the non-controlling interest's share at the date of the business combination: