In this workout, sour Braham group is planning to IP a subsidy. The IPO is for a non-controlling sake. Non controlling interest will be accounted for using percentage of net assets method. And we're asked to adjust the group balance sheet to account for the divestiture. We also assume the transaction is tax free. Now the most important thing I see here is that we're going to use the percentage of net assets method. So if we go down to the bottom, we see some information given to us. We're selling 30% of our subsidiary as part of the IPO, and the value of the stake sold is 70%. So if I was looking for the fair market value, that might be that 70. However, we're told that we're not using that methodology. Instead, we need to use the NCI percentage of net asset value. So we're selling 30%. I need to go and find my subsidiaries figures and here they are. We've got the subsidiaries balance sheet here. We've got total assets, liabilities, and equity. Well net assets as your assets minus liabilities, and that gives you the same figure as the equity 10 we're taking. Of that 110, we're taking 30%.

So we are valuing the NCI at 33. Those new shareholders have paid 70 to get this state, but we're only gonna account for 33 of it as NCI. Well, the remainder does go through. It goes through as a gain on sale. We're saying here that the NCI was valued at 33, someone's paid 70 for at. We've thus made a gain of the difference being the 37 in between. Now we've got some adjustment numbers. We can start to adjust our group figures. We've got a group balance sheet here, and it's important to realize that includes the subsidiary balance sheet here. So my group post IPO will be the group plus any adjustments. I don't need to add the subsidiary column in because the subsidiary column is already included in the group column.

I copy that down in line with all of the blue figures.

So in each case, I'm taking group plus adjustments. And for my subtotals, I'll copy them across because they sum vertically.

And we've got 600 of total assets, 600 of total liabilities and equity.

So what adjustments do we need to make? Well, we sold the stake for 70, so cash goes up of 70. It was 100 up to 170, but we now need to put the NCI in and our NCIs are 33. So at the moment, my balance sheet isn't balancing. My balance check is showing me 37 missing. That's the gain on sale. My gain on sale will go through to equity, which will go up by the 37, and that now gives me my balance. Balance sheet. Total assets 670. Total bilities is in equity 670.