Mock 1 Q.1

Dear Billy

Regarding the Mock 1, I just come with the following doubts:

1. According to your model answer, the CJ2, the treatment for additional depreciation.
Why it is calculated as $3m (90m/30 years)?

Since you just provided with me the fair value adjustments for the Property was as follows:
Land = 75 + 55 (FV adj) = 130
Bldg. = 75 (CV) + 15 (FV adj) = 90 (given, FV of bldg element)

Should the additional depreciation be $0.5m (15/30) ?

An oversight.You are right.


2. Referring the CJ8, the unrealised profit on inventories of TAL.
Your workings provided the calculation of unrealised profit as 6 ($50m x 40% x 30%).
But the question states that the effective interest of TML over TAL is 70% (without control)
If so, why it is not calculated as $50m x 40% x 70%, which should be 14.

Should be 70%.


3. According to your lectures, when we are using the FV to account for NCI, the GW is Full Goodwill.
Then when we handling the impairment of GW, do we need to seperately account for
- the impairment on NCI's share of GW;
- the impairment on Parent's share of GW?

Say for example, in Mock 1, the GW is 105, P's share is 100 while NCI's share is only 5.
When we do the impairment on GW (in the Q, is states that there was a 20% impairment), the impairment of GW = 21.

Should we simple share the 21x25% to NCI or
5 x 20% to NCI?

If impairment of goodwill is recognised, NCI will be given a share of the loss (base on profit-sharing-ratio) if the full goodwill is recognised.



Would you please advise the relevant treatments.

Regards
Kelvin