Advanced Financial Accounting Lec-45 Main Ahmad Farhan

Working-1 Holding % = No. of ordinary shares of S Co. acquired by P Co. Total No. of shares of ordinary shares in S Co. Minority % = 100% - Holding % X 100

Working-2 Cost of investment xxx Less Fair value of net assets of subsidiary Co. accrued by P Co. xxx xxx

Fair Value This is the value at which assets can be exchanged and liabilities can be settled between two knowledgeable willing in an arms length transactions.

Working-2 Cost of investment xxx Less Fair value of net assets of subsidiary Co. accrued by P Co. Net assets xxx +/- Fair value adjustment xxx xxx Fair value of net assets of subsidiary Co. x Holding % xxx Goodwill xxx

Working-3 Pre-acquisition Post-acquisition Ordinary share capital All --- Reserves On the date of acquisition After the date of acquisition Fair value of adjustment Total xxx Xxx Holding % of total Parent’s share Minority % of total Minority share Data will appear as a row wise.

Working-3 Cost of investment in S Co. xxx Less Dividend out of pre-acquisition profits xxx Less Parent’s Co. share in pre-acquisition equity of S Co. xxx Goodwill xxx Less Impairment loss xxx xxx

Working-4 All reserves of parent Co. xxx Add Parent’s share in post acquisition equity of S Co. xxx Less Parent’s share in depreciation effect on fair value adjustment xxx Less Impairment loss of goodwill xxx xxx

Working-5 All owner’s equity of S Co. xxx Add Fair value adjustment xxx Less Unrealized profit (In case of stop inter Co. trading) xxx Less Depreciation effect on fair value adjustment xxx Total xxx Total x Minority % = Minority interest

Working-5 MI share in pre-acquisition xxx MI share in post-acquisition xxx MI share in unrealized profit xxx Less MI share in Depreciation effect on fair value adjustment xxx xxx

Specific Scenario Intra group loans That will be cancelled. Intra group current accounts That will be cancelled and balance if any to shown in good or cash in transit. Intra group dividend That will be cancelled to the extent of holding % balance to be shown in the consolidated balance-sheet as payable to minority interest. Negative goodwill To be added in the group reserves. During the year acquisition of S Co. and calculation of pre-acquisition reserve Reserves as on opening date of the year in which the S Co. was acquired xxx Add Profit for the year in which S Co. was acquired x Pre-acquisition months 12 months xxx Pre-acquisition reserves xxx

Working Holding % Minority %

Working All opening balance of parent Co. xxx Add Post acquisition opening balance of retained profit of subsidiary Co. to the extent of holding % xxx Less Impairment of goodwill xxx xxx

Working Profit after tax of subsidiary Co. xxx Less Unrealized profit xxx Total amount xxx Minority % = Total amount x MI %

Specific Scenario Intra group dividend Intra group trading Unrealized profit