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

The maturity date of a note receivable, The maturity date of a note receiva...

The maturity date of a note receivable 1. Is the day of the credit sale 2. Is the day the note was signed 3. Is the day the note is due to be paid 4. Is the date of the first payme

Illustration of admissions and retirements, Illustration of Admissions and ...

Illustration of Admissions and Retirements Jim and Ken have been trading in partnership for several, sharing profits or losses equally after allowing for interest on their capi

Application for grant-court jurisdiction, Court jurisdiction A court ma...

Court jurisdiction A court may limit a grant of representation which it has jurisdiction to make, as follows: 1. Where the will has been lost or mislaid since the testator's

Calculate the gross profit margin and net profit margin, Assets            ...

Assets                                                       2011                                                                        2010 Non Current Assets

What amount of goodwill, Blue sky Company's 12-31-13 balance sheet reports ...

Blue sky Company's 12-31-13 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of the book value's are the same as the market values except for land, whi

Margin movement, A quick glance at the trend in the Operating and Net Profi...

A quick glance at the trend in the Operating and Net Profit Margin figure indicates an improvement in the margins over the 2 year period. As is evident from the graph above HAIL du

Dissolutions, DISSOLUTIONS A partnership may be dissolved due to variou...

DISSOLUTIONS A partnership may be dissolved due to various reasons which include: Poor trading that has led to losses A partner dying or leaving the firm The time

GAAP, Principles, concepts and CONVETIONS

Principles, concepts and CONVETIONS

Calculate mauves tax liability, Mauve Corporation began operations as a far...

Mauve Corporation began operations as a farm supplies business and used a fiscal year ending September 30. The company gradually went out of the farm supplies business and into the

Prepare the journal entries to record non-monetary exchange, Moore Corporat...

Moore Corporation follows a policy of a 10% depreciation charge per year on all machinery and a 5% depreciation charge per year on buildings (the corporation uses the nearest full

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