Page 474 - SBR Integrated Workbook STUDENT S18-J19

Chapter 25

Example 11 – continued

$1.6 million of the expense ($2m × 80%) is attributable to the equity owners of
the parent company and the other $0.4 million is attributable to the non-
controlling interest (NCI).

Non-controlling interest

A level 3 input – an unobservable estimate – has been used to calculate the
fair value of the NCI at acquisition. The level 1 input – the quoted share price
– should have been used instead. This will increase the value of goodwill and
the NCI by $1 million:

Dr Goodwill $1m

Cr NCI $1m

Hudson

Holmes owns 40% of the ordinary shares of Hudson and can appoint
members of the board and so would appear to have significant influence. The
investment should have been accounted for as an associate in the
consolidated financial statements:

Dr Investment in associate $10m

Cr Financial assets $10m

Holmes should account for Hudson using the equity method. This means that
it should recognise its share of Hudson’s profit in the consolidated statement
of profit or loss. This amounts to $0.6 million ($3m × 6/12 × 40%). The
investment in the associate will be carried in the consolidated statement of
financial position at $10.6 million:

Dr Investment in associate $0.6m

Cr Share of profits of associate $0.6m

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