Fair value adjustment-group accounts, Financial Accounting

Assignment Help:

Fair value adjustment

IFRS 3 requires that goodwill on consolidation should be based on the fair values of the net assets of the subsidiary company on the date of acquisition.

This means that the subsidiary company should revalue its assets on the date of acquisition.But unfortunately no revaluation may have been done.  For the purpose of consolidation, it is important to determine what should have been the revaluation gain or loss if an asset is revalued. In most cases we revalue non current assets such as Property, plan nd equipment, intangible assets and long term investments. If there is a revaluation gain on any of the assets then the following entry will be made:

a) To record the revaluation gain

DR.  Group PPE/intangible assets/Longterm investments (with the full revaluation gain)
       CR.  Cost of control (with holding company share of revaluation gain)
       CR.   M.I (with M.I’s share of the revaluation gain)


For assets that are meant to be depreciated or amortized, (PPE and Intangibles), the total depreciation or amortization that should be charged to date should be estimated and provided for .

b) Compute the additional depreciation that should have been provided to date had the subsidiaries assets been revalued and record the amount as follows;

DR.   Group retained profits (with holding company share of additional depreciation)
DR.    M.I (with M.I’s share of additional depreciation)
         CR. Group PPE/Intangible assets (with the full additional depreciation)


Related Discussions:- Fair value adjustment-group accounts

Branch accounting, some lectures on branch accounting chapter of advance ac...

some lectures on branch accounting chapter of advance accounting or way how to do journal entries or way of branch accounting??i m totally unaware of this chapter and want to study

Annulment of order-adjudication of debtor, Annulment of order The order...

Annulment of order The order may be annulled if In the opinion of the court the debtor ought not to have been adjudicated bankrupt; All the debts have been paid in fu

Cash budget, Beginning balance 24,000 cash Sales 250,000 Gross profit 45% o...

Beginning balance 24,000 cash Sales 250,000 Gross profit 45% of sales Accounts receivable increase by 24,000 Accounts payable increased by 51,000 Inventory increased by 98,000 Sell

Prepare a report addressing adjust financial statements, You are the audito...

You are the auditor of a small private company called XYZ Limited. Last year, which was 20X9, the audit went smoothly and every balance on the financial statements was correct. Thi

Derivatives, On April 10, ABC inc. Enters in a swap contract for 10 years w...

On April 10, ABC inc. Enters in a swap contract for 10 years with a chartered bank to turn a fixed rate on liability of $150 million to floating rate. ABC wants to receive interest

Treasury security, The real risk-free rate is 3%. Inflation is usual to be ...

The real risk-free rate is 3%. Inflation is usual to be 3% this year, 4% next year, and then 5% afterthat. The maturity risk premium is estimated to be 0.0007 x (t - 1), where t =

Determine income statement , Mr. Wong currently running a small manufactur...

Mr. Wong currently running a small manufacturing business.  The Trial Balance of the business at 31 March 2011 is as follows:

International accounting, the role of international accounting toward promo...

the role of international accounting toward promotion of generally accepted accounting principle

Grants are not necessarily recognized as revenue, Grants are not necessaril...

Grants are not necessarily recognized as revenue when they are awarded. Columbus City was awarded a state reimbursement grant of $150,000 to assist its adult literacy program. The

Investment of accumulated income-trusts laws and accounts, Investment of ac...

Investment of accumulated income The income accumulations must be invested from time to time and the investments earmarked as being on Accumulations Account. The income aris

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd