Page 447 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Answers

Example 18.2 cont'd

Workings

(W1) Group structure

P = 80%, NCI = 20%, acquisition date = 1 January 20X7 (2 years)

S = Foreign subsidiary with functional currency of €

(W2) NCI share of profits

€
S's profit for the year 2,800
Impairment (fair value method) (800)
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2,000
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NCI share of profits × 20% 400

Translated at average rate (400 @ 2.5)
NCI share of profits $160

(W3) Annual foreign exchange difference from translating foreign
subsidiary.

$
Closing net assets at closing rate (23,200/2) 11,600
Less opening net assets at opening rate (23,200 – 2,800)/3 (6,800)
Less comprehensive income for the year at average rate (2,800/2.5) (1,120)
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Exchange difference on net assets 3,680
Annual Exchange difference on goodwill (W4) 787
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Total exchange difference for the year 4,467
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Workings continued overleaf

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