In this workout, we're looking at an IPO of secondary shares.

We're told that Nanotech sells a 20% stake in X Tech through an IPO.

So Nanotech is the sole shareholder of X Tech, but they're now going to sell some of their shares, 20% off to some new shareholders.

We're told to use the table below to construct the consolidated balance sheet for nanotech post the IPO and we're told the sale proceeds were a hundred million after tax.

So I've got the nanotech balance sheet here, and because it's a sole owner of X Tech, which is next door, that means that the nanotech balance sheet already includes the X Tech numbers.

We've just shown the X Tech numbers separately for some calculations coming up.

So i's come up with the nanotech post IPO balance sheets.

I'll take the nanotech original number.

In this case it's cash, and I'll add on the adjustments column, but I won't include X Tech because X Tech is already a part of the nanotech column.

Great. Now I'm going to copy that down to the cell below and the cell below and the cell below.

So wherever we've got these blue figures, I'm copying that same formula down, which shows me adding up nanotech and the adjustments.

But when I get down to the subtotal figure here, such as total assets, I'm going to sum upwards.

Great. I'm going to copy that first formula, take it down and do all of the blue numbers.

There we go. And then add up the subtotals.

Let's double check that it balances.

My total equity and liabilities is 2,900 and my total assets 2,900.

Now we need to put some figures in this adjustment column, but we need to do some sub calculations to help us do that.

So underneath here, we've got some room to work out the X Tech net assets.

Now that's gonna help us work out the net assets sold.

That becomes an NCI or non-controlling interest because nanotech sells off 20%, but they still own the original 80%.

That means they've now got to recognize that 20% is owned by someone else.

That is the non-controlling interest.

NCI has to be shown on nano tech's balance sheets.

We'll also have a gain on sale.

So how do we work out this NCI? Well, first of all, we need X Techs net assets and luckily net assets is just the same as their total equity, which was 330.

Now for the net assets sold, if I press equals, we take that 330 and we multiply it by the stake sold of 20%.

They've sold off 66, and that will become the NCI or non-controlling interest.

But hang on, we sold that 66 net assets.

We sold it for a hundred. So we've made a gain.

So my gain on sale is the 100 minus the 66.

These numbers now need to go into the adjustments column.

So let's scroll up and we need to make three adjustments.

The first one is the proceeds received by nanotech that will go into their cash.

So my first adjustment equals, and it's the 100 of sale proceeds received.

Next up, we've got the NCI and we've got a new line at the bottom here.

We'll be taking nanotech zero NCI at the moment, and we'll be adding on the adjustments.

The NCI is worth 66.

And lastly, we've got the gain on sale.

Now again, we need to think about who's made this gain on sale.

It's the selling shareholders.

And the selling shareholder in this case is nanotech.

So if I go up to equity, or in this case, additional paid in capital, we need to take their current figure and then add on an adjustment.

The gain on sale is 34. Fantastic.

And if we double check, our total equity and liabilities is 3000, and our total assets is 3000.

So a quick summary of what we've done.

First of all, the X Tech share count has not changed.

We have not created new shares and sold those shares.

We've just taken some shares that were already in existence owned by the shareholder nanotech, and we've just sold them onto a different shareholder.

This also means that X Techs net assets hasn't changed either.

There were no proceeds received by X Tech.

Instead, the shareholder nanotech, they received it.

That's why the proceeds went into the adjustment column and have affected the nanotech balance sheets.

And lastly, we had NCI being created.

That was the X Tech net assets or IV 330 multiplied by 20%.