GH owned 70% of the equity share capital of XY at 1 January 20X6.  GH acquired a further 20% of XY's equity share capital on 31 December 20X6 for…

According to IFRS 10, transactions that change a parent's ownership interest in a subsidiary, but do not result in a loss of control, are accounted for as equity transactions. The carrying amounts of the controlling and non-controlling interests (NCI) are adjusted to reflect the change.

Initially, GH owned 70%, so the NCI was 30%. The carrying amount of this 30% NCI was $600,000. GH acquired a further 20% stake from the NCI. The amount debited to NCI is the proportionate share of its carrying amount that has been acquired. This is calculated as: (Interest acquired / NCI interest before acquisition) × NCI carrying amount = (20% / 30%) × $600,000 = $400,000.

B. $120,000: This incorrectly calculates 20% of the NCI's carrying amount ($600,000 × 20%), rather than the correct proportion of the NCI's holding that was acquired (20/30).

C. $200,000: This amount does not correspond to any correct calculation method under IFRS 10 for adjusting the NCI's carrying amount in this type of transaction.

D. $430,000: This is the cash consideration paid for the additional shares. The difference between the consideration paid ($430,000) and the NCI adjustment ($400,000) is recorded directly in equity.

1. International Financial Reporting Standard (IFRS) 10

Consolidated Financial Statements.

Paragraph 23: "Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (ie transactions with owners in their capacity as owners)."

Paragraph B96: "In such circumstances the carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received shall be recognised directly in equity and attributed to the owners of the parent."

2. PwC

"A global guide to accounting for business combinations and noncontrolling interests" (2021).

Section 4.3.1

Page 4-10: This guide explains that when a parent acquires additional interest in a subsidiary without a change in control

the carrying amount of the NCI is reduced by a proportionate amount. The example provided demonstrates the calculation as (percentage acquired / NCI percentage before acquisition) multiplied by the NCI carrying amount.

3. Deloitte

"iGAAP 2021: A guide to IFRS reporting."

Volume A

Chapter B10

Section 4.2.2: This section details the accounting for increases in ownership interest without a change in control

stating

"The carrying amount of the non-controlling interests is adjusted to reflect the change in the non-controlling interests’ proportionate share of the subsidiary’s net assets." This supports adjusting the NCI by its proportionate carrying value.