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GROUP ACCOUNTS: Minority Interest

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Advance Financial Accounting (FIN-611)
VU
LESSON # 38
GROUP ACCOUNTS
Rs.
EixamplssetsCase vi ] Minority Interest
F xed A e - [
1,450
Balance Sheet as on 31st December 2008
Goodwill
100
P
S
Current Assets
550
Rs.
Rs.
2,100
Fixed Assets
1,000
450
Investment in S.
550
Share Capital
1,200
Rer e v s
CusrernteAssets
350
150
600
1,900
600
1,800
Minority Interest
100
1,900
SharrenCLipibillities
Cur e t a ata
1,200
300
200
Reserves
600
200
2,100
Current Liabilities
100
100
1,900
600
The Parent Co. (P) acquired 80% shares of the Subsidiary Co. (S) on 31st December 2008
Prepare the Consolidated Balance Sheet as at 31/12/2008.
Required:
Eolutione - [ Csee iv]ii ] Minority Interest, Pre-acquisition Reserves, Goodwill
Sxampl - [ Caas v
Working
Balance Sheet as on 31st December 2008
P
S
Calculation of Goodwill
Rs.
Rs.
1Rs.0
Rs.
Fixed Assets
,00
450
Investment in S.
Investment
500
500
SharrenCApitets
Cur e t assal
300
400
150
Reserves
1,200
900
600
500
@
Share Capital
180%
,200
300
400
Reserves
600
200
Current Liabilities
100
100
Minority Interest
100
1,900
600
Simple calculation of Minority Interest is as under
The erar'entuito.o(fP)ubsidiiaey Compshares MI% e Subsidiary Co. (S) on 15t 0an20% 2008=when it's reserves were worth
OwnP s eq Cy  S acqu r r d 80% any @ of th
s0J x uary
=
100
Rs.120. Goodwill impaired with Rs. 33 during the year.
Alternatively we may split the Balance sheet of S Co. into the share of parent company and the share of minority interest.
R quired:
Net amount of the colPrenarf MIe Clonsohieatmountlanceinoreetinteatst1/12/2008.
ump oe th wil be t l d aed Ba of m Sh ity as re 3.
H%
MI%
Fioledion - etCase vii ]
S x ut Ass [ s
360
90
Current Assets
120
30
Workings
W-1
Determine the % of holding by dividing the number of equity shares acquired with the
Current Liabilities
(80)
(20)
H%
80%
total number of shares of the subsidiary company
%age representing the minority interest is very simple to calculate, just subtract H%
100
MI%
20%
from 100
Minority interest is the figure that represents the owners' equity of the minority share holders in the group. Therefore it is
shown separately but within the owners' equity class consolidated balance sheet.
W-2
Consolidated Balance Sheet
Analysis of Equity of S Co
As at 31 December 2008
201
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Advance Financial Accounting (FIN-611)
VU
Pre-
Post-
Fixed Assets
1,000
450
Acquisition
acquisition
Investment in S.
500
Dividend Receivable
40
Share Capital
300
Nil
Other Current Assets
360
Reserves
120
80
Current Assets
400
150
420
80
1,900
600
W-3
Calculation of goodwill
Rupees
Shate f investment
r oCapital
1,500
200
300
Cos
Pre ervessition equity of S Co.
Resacqui
600
200
420 x 80%
(336)
Dividend Payable
70
50
164
Other Current Liabilities
30
50
Impairment loss
(33)
Current Liabilities
100
100
Goodwill
131
1,900
600
W-4
The ParGnoup R(P) rves ired 80% shares of the Subsidiary Co. (S) on 1st January 2008 when its reserves were worth
e rt Co. eseacqu
Rs.120. Goodwill impaired during the year Rs. 33.
All reserves of P Co
600
Post acquisition reserves of S Co to the extent of H%
80 x 80%
64
Prepare the Consolidated Balance Sheet as at 31/12/2008.
Required:
Impairment loss
(33)
631
Solution - [ Case viii ]
W-5
W-1
Minority Interest
Determine the % of holding by dividing the number of equity shares acquired with the
O%ners' equity of Subsi%ary Compaota@ um% r of share= of the subsidia5y 0 ompany
Hw
80di
tny l n MI be
r0 c x 20%
=
s
100
%age representing the minority interest is very simple to calculate, just subtract H%
MI%
20%
from 100
Post-
acq
Detailed working
Total
Pre-acq
W-2
Ownernalequity foEquCy . f S Co
A s' ysis o f S it o o
500
420
80
Holding - 80%
(400)
(336)
(64)
Pre-
Post- 100
Minority Interest - 20%
84
16
Acquisition  acquisition
Share Capital
300
Nil
Reserves
120
80
420
80
W-3
Consolidated Balance Sheet
Calculation of goodwill
Rupees
As at 31 December 2008
Rs.
Cost of investment
420 x 80%
500
Fixed Assets
1,450
Pre acquisition equity of S Co.
(336)
Goodwill
131
164
Current Assets
550
Impairment loss
(33)
2,131
Goodwill
131
W-4
Group Reserves
Share Capital
1,200
All reserves of P Co.
600
631
Post acquisition reserves of S Co to the extent of
Reserves
1,831
H%
80 x 80%
164
Minority Interest
00
1,931
Goodwill impaired
(33)
Current Liabilities
200
631
2,131
W-5
Minority Interest
Example - [ Case viii ] Minority Interest, Inter-Company Dividends
Owners' equity of Subsidiary Company @ MI%
=
500 x 20%
= 100
Balance Sheet as on 31st December 2008
P
S
Detailed working
Pos.t-
Rs
Rs.
Total
Pre-acq
Detailed working
202
img
Advance Financial Accounting (FIN-611)
VU
acq
40
Owners' equity of S Co.
500
420
80
10
Holding - 80%
(400)
(336)
(64)
50
Minority Interest - 20%
100
84
16
W-6
Cancellation effects of Intra group Dividend
P
S
Rs.
Rs.
Fixed Assets
1,000
450
Investment in S.
500
Dividend Receivable
40
Other Current Assets
360
Current Assets
400
150
1,900
600
Share Capital
1,200
300
Reserves
600
200
Dividend Payable
70
50
Other Current Liabilities
30
50
Current Liabilities
100
100
1,900
600
Consolidated Balance Sheet
As at 31 December 2008
Rs.
Rs.
Fixed Assets
1,450
Goodwill
131
Current Assets
510
2,091
Share Capital
1,200
Reserves
631
Minority Interest
100
Other current liabilities
80
Dividend payable by P
70
Dividends due to minority
10
80
Current Liabilities
160
2,091
203
Table of Contents:
  1. ACCOUNTING FOR INCOMPLETE RECORDS
  2. PRACTICING ACCOUNTING FOR INCOMPLETE RECORDS
  3. CONVERSION OF SINGLE ENTRY IN DOUBLE ENTRY ACCOUNTING SYSTEM
  4. SINGLE ENTRY CALCULATION OF MISSING INFORMATION
  5. SINGLE ENTRY CALCULATION OF MARKUP AND MARGIN
  6. ACCOUNTING SYSTEM IN NON-PROFIT ORGANIZATIONS
  7. NON-PROFIT ORGANIZATIONS
  8. PREPARATION OF FINANCIAL STATEMENTS OF NON-PROFIT ORGANIZATIONS FROM INCOMPLETE RECORDS
  9. DEPARTMENTAL ACCOUNTS 1
  10. DEPARTMENTAL ACCOUNTS 2
  11. BRANCH ACCOUNTING SYSTEMS
  12. BRANCH ACCOUNTING
  13. BRANCH ACCOUNTING - STOCK AND DEBTOR SYSTEM
  14. STOCK AND DEBTORS SYSTEM
  15. INDEPENDENT BRANCH
  16. BRANCH ACCOUNTING 1
  17. BRANCH ACCOUNTING 2
  18. ESSENTIALS OF PARTNERSHIP
  19. Partnership Accounts Changes in partnership firm
  20. COMPANY ACCOUNTS 1
  21. COMPANY ACCOUNTS 2
  22. Problems Solving
  23. COMPANY ACCOUNTS
  24. RETURNS ON FINANCIAL SOURCES
  25. IASB’S FRAMEWORK
  26. ELEMENTS OF FINANCIAL STATEMENTS
  27. EVENTS AFTER THE BALANCE SHEET DATE
  28. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS
  29. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 1
  30. ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS 2
  31. BORROWING COST
  32. EXCESS OF THE CARRYING AMOUNT OF THE QUALIFYING ASSET OVER RECOVERABLE AMOUNT
  33. EARNINGS PER SHARE
  34. Earnings per Share
  35. DILUTED EARNINGS PER SHARE
  36. GROUP ACCOUNTS
  37. Pre-acquisition Reserves
  38. GROUP ACCOUNTS: Minority Interest
  39. GROUP ACCOUNTS: Inter Company Trading (P to S)
  40. GROUP ACCOUNTS: Fair Value Adjustments
  41. GROUP ACCOUNTS: Pre-acquistion Profits, Dividends
  42. GROUP ACCOUNTS: Profit & Loss
  43. GROUP ACCOUNTS: Minority Interest, Inter Co.
  44. GROUP ACCOUNTS: Inter Co. Trading (when there is unrealized profit)
  45. Comprehensive Workings in Group Accounts Consolidated Balance Sheet