Consolidation

276 views 5 replies

SARITA DUDANI

STUDENT

8 Points Joined May 2013

A private company acquires a 45% share in a joint venture which is LLP as on Sep2009...Again as on April,2013 there is a reconstitution in the agreement and share of private co. comes to 40%. I have to consolidate joint venture LLP with d private company as on 31.3.2016 ...For this I shall be calculating cost of capital as on September.2009 taking 45% as share...Do I need to calculate cost of capital again as on April,2013 with 40% share ???If yes, what treatment should be done for d difference that arises on account of goodwill/capital reserve??? And if other process to be done, what should be done???

Replies (5)

Puja Prasad

Semi-Qualified CA & Student

336 Points Joined January 2016

You have to calculate goodwill/ capital teserve

Puja Prasad

Semi-Qualified CA & Student

336 Points Joined January 2016

You have to calculate goodwill/ capital reserve as on 31.03.2016 taking investment of 40%. Resulting Goodwill/ capital reserve shall be shown in balance sheet. Partial consolidation will be done accordingly.

Puja Prasad

Semi-Qualified CA & Student

336 Points Joined January 2016

please ignore 1st reply.

SARITA DUDANI

STUDENT

8 Points Joined May 2013

Hi puja,

Tnx for the reply..but I have a doubt again..pre acquisition profits will be considered till September.2009 wherein share is 45% and post profits after sep.2009...and again April 2013 agreement changes...so what will be the pre and post date in this case???

Dharmesh

Student

1025 Points Joined May 2016

Hi,

Good question... Well I'm not completely sure but based on the logic behind cost of control account i guess cost of control is not to be calculated again. Reasoning as follows , whenever an investment is made we make the cost of control account because we need to justify the cost paid towards the investment. Also when we sell the investment no justification is required and thus cost of control is not recalculated. In the given case there is no additional investment made..the holding changes on account of reconstitution..so there is no reason to justify anything i.e. cost of control need not be calculated..in a way its similar to selling of shares..