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F2: Advanced Financial Reporting

14.2 B, E

Splash is a 60% directly controlled subsidiary. Sauna is an indirectly controlled
sub-subsidiary with an effective shareholding of 60% × 70% = 42%. This gives
a NCI % for Sauna of 58%, not 30%.

The effective date of ownership of a sub-sub is the later of the date the parent
acquired the sub or the date the sub acquired the sub-sub. In this case Splash
(the sub) is consolidated from 1st June and Sauna is consolidated from
31st August. Option E shows this the opposite way round.

14.3 A

Buzz is a sub-sub within a mixed (D-shaped) group.

Buzz is consolidated using an effective shareholding consisting of both an
indirect and a direct shareholding. Buzz is consolidated using an effective
shareholding of:

Indirect shareholding (80% × 40%) 32%
Direct shareholding 20%
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52%

This gives a NCI% of 48% for the investment in Buzz.

An indirect holding adjustment (IHA) will be required based upon the cost of the
indirect holding in Buzz (the 40% shares acquired by Pug only). No IHA is
required for Doug’s direct holding in Buzz.

Goodwill is calculated as follows:
Pug Buzz
Cost of investment 5,000 Cost of investment 3,500
($2,500 + $1,000)
Indirect holding adjustment (500)
(20% × 2,500)
NCI at acquisition 700 NCI at acquisition 600
(20% × 3,500) (48% × 1,250)
S’s net assets at acquisition (3,500) S’s net assets at acquisition (1,250)
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Goodwill 2,200 Goodwill 2,350

500