On 1 January 2019, Alpha Ltd (Alpha) acquired a 90% interest in the ordinary shares of Beta Ltd (Beta) for R2 100 000. The acquisition of this interest met the definition of a business combination, as defined in terms of IFRS 3. On the acquisition date, the share capital and retained earnings of Beta amounted to R1 500 000 and R1 220 000, respectively. The carrying amounts of the assets and liabilities as recognized by Beta were fairly valued in terms of IFRS 3. On 1 January 2019, Beta had a contingent liability that related to a court case. It was a present obligation as of 1 January 2019 for which the probability criterion was not met in Beta’s individual financial statements. 

At acquisition, the fair value of the contingent liability was R500 000. The court case was resolved during the 2020 financial year and based on the ruling; Beta paid R550 000 to the claimant. Alpha measures non-controlling interests at its share of the net assets of the subsidiary. On 1 January 2021, the retained earnings of Beta amounted to R2 180 000, and Beta recorded a profit after tax of R777 000 for the year ended 31 December 2021. The profit was incurred evenly throughout the year. Beta paid a dividend of R150 000 on 30 June 2021. On 31 August 2021 Alpha sold 5% of the total ordinary shares of Beta at its fair value of R180 000. Alpha correctly accounted for the disposal of the interest in its separate financial statements. 

REQUIRED: 

Prepare the Pro-forma journal entry required to account for the change in ownership regarding the investment in Beta Ltd in the consolidated financial statements of the Alpha Ltd Group for the year ended 31 December 2021. 

• You must comply with International Financial Reporting Standards (IFRSs). Assume that all current IFRSs have always been in existence. 

• You are required to clearly indicate which component, part and/or item of the financial statement is affected by any journal entry. Journal narrations are not required. 

• Clearly show all calculations and work to the nearest Rand. Assume all items and amounts to be material, unless the contrary is clear from the information given.