This question tested the core area of specifically gradually consolidation and acquisitions (control to control). The principle of calculation of goodwill at the date where control is gained was a key aspect of this question, in addition to the modification to parent's equity as the gaining of the additional 20% was a transaction between owners.
The most logical way to approach a statement of monetary position question of this sort was to increasing the balances on the face of the statement and then processes any modifications in the brackets. Time should have been devoted to considering the dates of control and the group structure preceding to and after the 20% additional purchase.
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Statement of financial position for the ZX Group as at 31 December 2012 ASSETS (all workings in $000)
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$000
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Non-current assets
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Property, plant and equipment (20,250 + 11,000)
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31,250
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Goodwill (W1)
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2,324
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33,574
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Current assets (16,000 + 5,000)
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21,000
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Total assets
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54,574
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EQUITY AND LIABILITIES
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Equity attributable to owners of the parent
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Share capital ($1.00 shares)
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5,000
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Retained earnings (W2)
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27,734
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32,734
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Non-controlling interest (W3)
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2,240
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Total equity
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34,974
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Total liabilities (14,800 + 4,800)
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19,600
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Total equity and liabilities
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54,574
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W1 Goodwill
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$000
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$000
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Consideration transferred
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8,750
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Non-controlling interest (40% x $10,280,000)
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4,112
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12,862
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Net assets at date of acquisition:
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Share capital
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1,000
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Retained earnings at acquisition date
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9,280
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(10,280)
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Goodwill at acquisition
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2,582
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Impairment 10% in 2011
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(258)
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Goodwill at 31 December 2012
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2,324
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W2 Consolidated retained earnings
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ZX Group
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CV
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$000
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$000
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As reported in SOFP
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28,200
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10,200
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Less pre-acquisition retained earnings
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(9,280)
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920
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Group share of CV ($920,000 x 60%)
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552
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Impairment of goodwill (as in W1 above)
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(258)
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Adjustment to parent's equity (W4)
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(760)
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Consolidated retained earnings
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27,734
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W3 Non-controlling interest
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$000
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Non-controlling interest at acquisition (W1)
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4,112
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Plus NCI share of post acquisition retained earnings (as in W2 above) (40% x $920,000)
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368
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NCI at date of transfer of additional 20% to ZX
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4,480
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50% transferred on 31 December 2012
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(2,240)
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NCI at 31 December 2012
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2,240
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W4 Adjustment to parent's equity
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$000
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Consideration transferred
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3,000
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Net assets transferred (W3)
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(2,240)
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Debit to group retained earnings
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760
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