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X 

NCI at reporting date 

  

X 

 

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CHAPTER 24  

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  THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

 

429 

 

The existence of a NCI also has an impact on the calculation of group retained earnings as some of the 

retained earnings are owned by the NCI, as we have seen in the calculation above. Group retained 

earnings should only reflect the group's share of the post-acquisition retained earnings of the subsidiary. 

The proforma for group retained earnings working is amended as follows.  

Retained earnings 

 

 P Co 

 S Co 

 

 $ 

 $ 

Per question 

 X 

X  

Pre-acquisition retained earnings 

 

 

(X) 

 

 

 Y 

Group share of post-acquisition retained earnings: 

S Co (Y × %) 

 

 X 

     

Group retained earnings 

 X 

 

3.1 Goodwill and NCIs 

In the calculations of goodwill we have looked at so far, the parent company has acquired 100% of the 

shares in the subsidiary.  

Where there is a NCI, the consolidated accounts show 100% of goodwill even though the group does 

not 'own' all of it. This is consistent with the treatment of other assets and the concept of control. 

Because this is the case, we need to include the fair value of the NCI in our goodwill calculation. 

The proforma for goodwill will now look as follows. 

Goodwill 

 $ 

 $ 

Fair value of consideration transferred 

 

 X 

Plus fair value of NCI at acquisition 

 

 X 

Less net acquisition-date fair value of identifiable assets acquired and 

liabilities assumed: 

 

 

 

Ordinary share capital 

 X 

 

 

Share premium 

 X 

 

 

Retained earnings at acquisition 

 X 

 

 

Fair value adjustments at acquisition 

 X 

 

 

 

 (X) 

Goodwill  

  

  X 

3.1.1 Example 

P Co acquires 90% of S Co for $10,000,000. At this date the fair value of S Co's net assets are 

$8,000,000 and the fair value of the NCI is $1,000,000. Calculate goodwill. 

Goodwill 

 

$'000 

Fair value of consideration transferred 

 

10,000 

Fair value of NCI at acquisition 

 

   

 

  1,000 

 

 

11,000 

Less net acquisition-date fair value of identifiable assets acquired and liabilities  

   assumed 

  

 (8,000) 

Total goodwill 

  3,000 

 EXAM FOCUS POINT 

In the exam there are a couple of ways that you could be given the fair value of the NCI at  

acquisition. 

(a) 

The question could simply provide you with the figure.  

(b) 

You could be told the subsidiary's share price just before the acquisition. You would then need 

to multiply the share price by the number of shares held by the NCI.

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