Question

SBR 2020 SEP/DEC QN 1 A

The model answer for the SBR 2020 SEP/DEC exam for question 1A uses “10m” as no of shares of the associate that later turns into a subsidiary to calculate the FV of the original 40% interest and the FV of the NCI.

My question is that where did they get the “10m” no of shares figure. The no of shares of the associate-turn-subsidiary isn’t given and as far as I can tell, there isn’t a way of calculating it.

Any help will be highly appreciated.

Best

T

Answer 1

Hi,

The question says Sugar Co. paid the consideration to acquire an additional three million shares (30% shareholding).

If three million shares represents a 30% shareholding, there must be 10m shares
in issue (3m/0.3).