1. Advanced Financial Accounting
Lec-45
Main Ahmad Farhan

2. 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

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

4. 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.

5. 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

6. 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.

7. 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

8. 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

9. 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

10. 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

11. 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

12. Working
Holding %
Minority %

13. 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

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

15. Specific Scenario Intra group dividend Intra group trading
Unrealized profit