Measuring the non-controlling interest

Learning objectives

• Calculate the non-controlling interest under each of the two methods from the data in a case.L1, L2, L3
• Distinguish the fair value method (full goodwill) from the proportionate share method (partial goodwill) and recall that the choice is made for each business combination.L1, L2, L3

Normative references

• IFRS 3 §19For each business combination, the acquirer measures at the acquisition date the components of non-controlling interest that are present ownership interests entitling their holders to a proportionate share of the net assets in the event of liquidation either at fair value or at the present ownership instruments' proportionate share in the recognised amounts of the acquiree's identifiable net assets; the choice is made combination by combination. All other components are measured at their acquisition-date fair values, unless another measurement basis is required by IFRSs. Restriction added by the Improvements to IFRSs of May 2010 (para. 64B). The method used for a case is never imposed by the Standard.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

5 questions

• The guidance on control does not clearly indicate the acquirer. Which factors are among the additional guidance to consider? More than one answer is possible.L2
• The choice between fair value and the proportionate share of identifiable net assets to measure the non-controlling interest is a single policy, applying to all of the entity's business combinations.L1
• On 1 April, Seine SA acquires 70% of Marne SA. Marne's identifiable net assets, measured under IFRS 3, are {identifiable_net_assets}. The other shareholders hold {minority_percent} of the capital. Case convention: Seine chooses, for this business combination, to measure the non-controlling interest at its proportionate share of identifiable net assets. Calculate the non-controlling interest at the acquisition date.L2
• Rhin SA carried out two business combinations in the year: Aube SA (listed, with a price available for the minority shareholders) and Braise SA (unlisted). Rhin's accounting manual requires the proportionate share “for all business combinations”. Write a short note concluding on this policy, distinguishing facts of the case, rule and professional judgement.L3
• Cristal SA acquired {parent_percent} of Sable SA and measured the non-controlling interest at its proportionate share of identifiable net assets; the goodwill recognised is {goodwill_recognised}. Sable is a cash-generating unit to which this goodwill is allocated. Case convention: the goodwill recognised belongs entirely to the {parent_percent} share. Calculate the carrying amount of goodwill grossed up to 100% before comparison with the recoverable amount.L3