Page 19 - 35. FR APRIL 22 MTP QP ANSWERS

3. Calculation of Goodwill / Capital Reserve on the acquisition

S Ltd. SS Ltd.
Investment or consideration 340 (280 x 80%) 224
Add: NCI at Fair value
(400 x 20%) 80
(320 x 40%) - 128

420 352
Less: Identifiable net assets (Share Capital (400+125) (525) (320+115) (435)
+ Increase in the Reserves and Surplus till
acquisition date)

Capital Reserve 105 83
Total Capital Reserve (105 + 83) 188
4. Calculation of Non-controlling Interest
S Ltd. SS Ltd.

At Fair Value (See Note 3) 80 128
Add: Post Acquisition Reserves (See Note 1) (10 x 20%) 2 (10 x 40%) 4
Add: Post Acquisition Retained Earnings (15 x 20%) 3 (13 x 40%) 5.2
(See Note 1)
Less: NCI share of investment in SS Ltd. (280 x 20%) (56)* -

29 137.2
Total (29 + 137.2) 166.2
*Note: The Non-controlling interest in S Ltd. Will take its proportion in SS Ltd. So they have to
bear their proportion in the investment by S Ltd. (in SS Ltd.) also.
5. Calculation of Consolidated Other Equity

Reserves Retained Earnings
P Ltd. 180 160
Add: Share in S Ltd. (10 x 80%) 8 (15 x 80%) 12

Add: Share in SS Ltd. (10 x 60%) 6 (13 x 60%) 7.8
194 179.8

(b) The transaction price should include management’s estimate of the amount of consideration to which the
entity will be entitled for the work performed.

Probability-weighted Consideration
` 1,50,000 (fixed fee plus full performance bonus) x 60% ` 90,000

` 1,45,000 (fixed fee plus 90% of performance bonus) x 30% ` 43,500
` 1,40,000 (fixed fee plus 80% of performance bonus) x 10% ` 14,000

Total probability-weighted consideration ` 1,47,500
Based on the probability-weighted estimate, the total transaction price is ` 1,47,500. The contractor
have to update its estimate at each reporting date.

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