Group Accounts - Complex groups

Question 1

What is effective interest used for in SOFP

Answer 1

Effective interest is used for deternining NCi and Reserves in equity section

Question 2

If company A owns 70% of B, and B owns 60% of C.

What is the effective of interest of A in C, and the NCi?

Answer 2

0.7x0.6 = 42% effective interest

—> 100-42=58% Non-controlling interest

Question 3

If company A owns 70% of B, and B owns 60% of C.

What kind of group structure is this?

Answer 3

Vertical group structure

Question 4

If Company D owns 70% of Company E, and Company E owns 40 percent of Company F.

But company D also owns 20% of company F.

What sort of group structure is this?

Answer 4

Mixed or D-shaped groups

Question 5

How is retained earnings affected in complex groups?

Answer 5

Use effective interest for group%

Pre-acqn reserves of SS are at date entity gains control of SS

Ensure any FV adjustment on consideration is included in reserves

Question 6

How is NCI affected in complex groups?

Answer 6

Need to remove Nci% x cost of investment in SS from NCI of S.

Refer to Q24