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One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.

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Non-controlling interests arise when:


A) The parent entity does not control a subsidiary in the group.
B) The parent entity raises capital through preference shares that have the characteristics of debt to fund the subsidiary.
C) The subsidiary has owners of equity who are not owners through their ownership interest in the controlling parent entity.
D) The subsidiary has invested in other entities in which it does not have a controlling interest.

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There is no adjustment for things such as management fees when determining non-controlling interest,because:


A) They are not a material item.
B) They do not involve non-controlling interest.
C) They are considered to be realised.
D) They relate only to the parent entity.

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Discuss the three elements considered when calculating non-controlling interests.

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The non-controlling interests are identi...

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AASB 101 Presentation of Financial Statements requires a separate line item on the face of the statement of financial position showing the non-controlling interest in equity.

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Only dividends payable to the parent entity are eliminated against dividends receivable in the accounts of the parent entity.

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After eliminating the dividend payable to the parent,the balance of the dividend payable to the non-controlling interest will be:


A) eliminated as well.
B) included within the consolidated financial statements.
C) recognised as an expense in the consolidated financial statements.
D) transferred into a non-controlling interest reserve account.

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Which of the following is not one of the stages used to determine non-controlling interest?


A) the non-controlling interest in the current period's profit or loss
B) the non-controlling interest in share capital at the date of acquisition of the subsidiary by the parent entity
C) the non-controlling interest in the goodwill at acquisition
D) the non-controlling interest in reserves at the date of acquisition of the subsidiary by the parent entity

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AASB 101 Presentation of Financial Statements requires an entity to disclose separately in the statement of comprehensive income,profit or loss for the period attributable to non-controlling interests and owners of the parent.

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Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?


A) The requirement to eliminate the effects of intragroup transactions does not hold when there are non-controlling interests.
B) The non-controlling interest's share in the dividends paid or proposed by the subsidiary is not eliminated on consolidation.
C) The non-controlling interest's share of the profits of the subsidiary is calculated after adjustments to eliminate income and expenses of the subsidiary that are realised from the economic entity's perspective.
D) Management fees paid in an intragroup transaction are considered realised when determining non-controlling interests in a subsidiary.

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Differentiate 'full goodwill method' from the 'partial goodwill method' in the presence of non-controlling interests in a subsidiary.Discuss the implications of permitting the use of either method in business combinations.

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The full goodwill method and the partial...

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Using full goodwill method,share of goodwill attributable to the non-controlling interests is recognised in the statement of financial position as part of non-controlling interest in equity.

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Buster Ltd owns 85 per cent of the issued capital of Rhymes Ltd.During the period ended 30 June 2016 the operating profit of Rhymes Ltd was $680 000.Buster Ltd bought goods for $540 000 from Rhymes.The goods cost Rhymes $400 000 and at the end of the period none of this inventory was still on hand.Rhymes paid Buster a management fee of $100 000 during the period.Goodwill on consolidation was impaired by $30 000.Rhymes paid a dividend of $40 000 at the end of the period. What is the non-controlling interest in the operating profit of Rhymes Ltd?


A) $87 000
B) $112 500
C) $102 000
D) $101 969

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Detail three situations where the presence of non-controlling interests means that elimination journal entries would not be the same as they would be if the subsidiary was 100 per cent owned.

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The non-controlling interests' proportio...

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Non-controlling interests are shown as equity,that is,as contributors of equity capital to the economic entity.

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Calculating the non-controlling interest (NCI) in the operating profit and opening retained earnings of a subsidiary is done by:


A) taking the operating profit and opening retained earnings figures of the subsidiary and multiplying them by the percentage ownership held by the NCI.
B) adjusting the operating profit and opening retained earnings of the subsidiary for any intragroup transactions and multiplying them by the percentage ownership held by the NCI.
C) adjusting the operating profit of the subsidiary for any unrealised profit or expense of the subsidiary as a result of any intragroup transactions and multiplying both this and the opening retained earnings by the percentage ownership held by the NCI.
D) adjusting the opening retained earnings and the operating profit for any unrealised profit or expense of the subsidiary as a result of intragroup transactions and multiplying this by the percentage ownership held by the NCI.

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Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2013.The fair value of the net assets of Nail Ltd at purchase was represented by:  Share capital $3760000 Retained earnings 1320000$5080000\begin{array} { | l | r | } \hline \text { Share capital } & \$ 3760000 \\\hline \text { Retained earnings } & 1320000 \\\hline & \$ 5080000 \\\hline\end{array} Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd.During the period ended 30 June 2015,Nail Ltd paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000.Nails' opening retained earnings at the beginning of the period were $1 460 000.At the end of the period Nail Ltd declared a dividend of $90 000.There were no other inter-company transactions.Goodwill was determined to have been impaired by $19 000 during the period.Companies in the group accrue dividends when they are declared by subsidiaries. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest?


A)
 Consolidation journal entries: Dr Share capital 2820000Dr Retained earnings 990000Cr Investment in Wills Ltd 3810000Dr Management fee revenue 540000Cr Management fee expense 540000Dr Dividend payable 90000Cr Dividend receivable 90000 Non-controlling interest:  Operating profit 245000 Opening retained earnings 365000 Share capital 940000‾ Total 1550000‾\begin{array}{l}{ \text { Consolidation journal entries: } }\\\begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 2820000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 990000 & \\\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 3810000 \\\hline\\\hline \mathrm { Dr } & \text { Management fee revenue } & 540000 & \\\hline \mathrm { Cr } & \text { Management fee expense } & &540000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Dividend payable } & 90000 & \\\hline \mathrm { Cr } & \text { Dividend receivable } & &90000 \\\hline & & & \\\hline\end{array}\\\text { Non-controlling interest: }\\\begin{array} { | l | r | r | } \hline \text { Operating profit } & 245000 & \\\hline \text { Opening retained earnings } & 365000 & \\\hline \text { Share capital } & \underline{940000} & \\\hline \text { Total } & \underline{1550000} & \\\hline\end{array}\end{array}
B)
 Consolidation journal entries: Dr Share capital 3760000Dr Retained earnings 1320000Cr Non-controlling interest 1080000Cr Investment in Wills Ltd 4000000Dr Impairment loss 19000Cr Accumulated impairment loss 19000Dr Management fee revenue 540000Cr Management fee expense 540000Dr Dividend payable 67500Cr Dividend receivable 67500{\text { Consolidation journal entries: }} \\\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & \text { Share capital } & 3760000 & \\\hline \mathrm{Dr} & \text { Retained earnings } & 1320000 & \\\hline \mathrm{Cr} & \text { Non-controlling interest } & & 1080000 \\\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Impairment loss } & 19000 & \\\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 19000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \\\hline \mathrm{Cr} & \text { Management fee expense } & & 540000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \\\hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \\\hline\\\hline\end{array}
 Non-controlling interest:  Operating profit 245000 Dividend 22500‾ Total 267500‾\begin{array}{l}\text { Non-controlling interest: }\\\begin{array}{|l|r|l|}\hline \text { Operating profit } & 245000 &\\\hline \text { Dividend } & \underline{22500} \\\hline \text { Total } & \underline{267500} \\\hline\end{array}\end{array}
C)
Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2013.The fair value of the net assets of Nail Ltd at purchase was represented by: \begin{array} { | l | r | } \hline \text { Share capital } & \$ 3760000 \\ \hline \text { Retained earnings } & 1320000 \\ \hline & \$ 5080000 \\ \hline \end{array} Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd.During the period ended 30 June 2015,Nail Ltd paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000.Nails' opening retained earnings at the beginning of the period were $1 460 000.At the end of the period Nail Ltd declared a dividend of $90 000.There were no other inter-company transactions.Goodwill was determined to have been impaired by $19 000 during the period.Companies in the group accrue dividends when they are declared by subsidiaries. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest? A) \begin{array}{l} { \text { Consolidation journal entries: } }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 2820000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 990000 & \\ \hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 3810000 \\ \hline\\ \hline \mathrm { Dr } & \text { Management fee revenue } & 540000 & \\ \hline \mathrm { Cr } & \text { Management fee expense } & &540000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend payable } & 90000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & &90000 \\ \hline & & & \\ \hline \end{array}\\ \text { Non-controlling interest: }\\ \begin{array} { | l | r | r | } \hline \text { Operating profit } & 245000 & \\ \hline \text { Opening retained earnings } & 365000 & \\ \hline \text { Share capital } & \underline{940000} & \\ \hline \text { Total } & \underline{1550000} & \\ \hline \end{array} \end{array} B) {\text { Consolidation journal entries: }} \\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 3760000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 1320000 & \\ \hline \mathrm{Cr} & \text { Non-controlling interest } & & 1080000 \\ \hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Impairment loss } & 19000 & \\ \hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 19000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \\ \hline \mathrm{Cr} & \text { Management fee expense } & & 540000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \\ \hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \\ \hline\\\hline \end{array} \begin{array}{l} \text { Non-controlling interest: }\\ \begin{array}{|l|r|l|} \hline \text { Operating profit } & 245000 &\\ \hline \text { Dividend } & \underline{22500} \\ \hline \text { Total } & \underline{267500} \\ \hline \end{array} \end{array} C) D)
D)
Finger Ltd purchased 75 per cent of the issued capital and in the process gained control over Nail Ltd on 1 July 2013.The fair value of the net assets of Nail Ltd at purchase was represented by: \begin{array} { | l | r | } \hline \text { Share capital } & \$ 3760000 \\ \hline \text { Retained earnings } & 1320000 \\ \hline & \$ 5080000 \\ \hline \end{array} Finger Ltd paid cash consideration of $4 000 000 for Nail Ltd.During the period ended 30 June 2015,Nail Ltd paid management fees of $540 000 to Finger Ltd and Nails had an operating profit of $980 000.Nails' opening retained earnings at the beginning of the period were $1 460 000.At the end of the period Nail Ltd declared a dividend of $90 000.There were no other inter-company transactions.Goodwill was determined to have been impaired by $19 000 during the period.Companies in the group accrue dividends when they are declared by subsidiaries. For the period ended 30 June 2015,what consolidation journal entries are required and what is the non-controlling interest? A) \begin{array}{l} { \text { Consolidation journal entries: } }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 2820000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 990000 & \\ \hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 3810000 \\ \hline\\ \hline \mathrm { Dr } & \text { Management fee revenue } & 540000 & \\ \hline \mathrm { Cr } & \text { Management fee expense } & &540000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend payable } & 90000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & &90000 \\ \hline & & & \\ \hline \end{array}\\ \text { Non-controlling interest: }\\ \begin{array} { | l | r | r | } \hline \text { Operating profit } & 245000 & \\ \hline \text { Opening retained earnings } & 365000 & \\ \hline \text { Share capital } & \underline{940000} & \\ \hline \text { Total } & \underline{1550000} & \\ \hline \end{array} \end{array} B) {\text { Consolidation journal entries: }} \\ \begin{array}{|c|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 3760000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 1320000 & \\ \hline \mathrm{Cr} & \text { Non-controlling interest } & & 1080000 \\ \hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 4000000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Impairment loss } & 19000 & \\ \hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 19000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Management fee revenue } & 540000 & \\ \hline \mathrm{Cr} & \text { Management fee expense } & & 540000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend payable } & 67500 & \\ \hline \mathrm{Cr} & \text { Dividend receivable } & & 67500 \\ \hline\\\hline \end{array} \begin{array}{l} \text { Non-controlling interest: }\\ \begin{array}{|l|r|l|} \hline \text { Operating profit } & 245000 &\\ \hline \text { Dividend } & \underline{22500} \\ \hline \text { Total } & \underline{267500} \\ \hline \end{array} \end{array} C) D)

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Describe the three steps involved in preparing consolidated financial statements.

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The three steps involved in preparing co...

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As prescribed in AASB 10,which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?


A) Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.
B) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests.
C) Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
D) All of the given statement are correct.

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Non-controlling interests are allocated on a 'line-by-line' basis throughout the statement of comprehensive income.

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