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

Illustration of double entry-branches, Illustration of double entry The ba...

Illustration of double entry The balances on the current accounts of a head office and branch were Ksh 698,000, before the transactions listed below: Normal 0

Compute and list the budget - budgeting, When Lydia started her vending mac...

When Lydia started her vending machine business, she instituted flexible budgeting for the first few months of operations. Her first monthly budget numbers were these: Cost of g

How to prepare annual financial statements, "Government departments should ...

"Government departments should take audit report seriously by preparing annual financial statement on time".... Based on the above statement, suggest ways on how government depa

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

Show the calculations and journal entries, In the current year, Company A i...

In the current year, Company A is formed with $630,000 in capital from the sale of 21,000 shares of stock at $30 a share. Company A, which has no other operations, immediately acqu

Property in bankrupt''s reputed ownership, PROPERTY IN BANKRUPT'S REPUTED O...

PROPERTY IN BANKRUPT'S REPUTED OWNERSHIP The trustee may claim property owned by third parties which is in the bankrupt's possession at the commencement of the bankruptcy if:

Probability of success in application for debt finance, Q. Probability of S...

Q. Probability of Success in Application for Debt Finance? I have to advise you that there are signs of overtrading in our recent financial statements and our company is approa

Management and operational control, Management and operational control: Co...

Management and operational control: Cost of goods sold and gross margin analysis, profit as net income analysis, operating expense analysis, contribution analysis and analysis of

Adjudication order-adjudication of debtor, Adjudication order The court...

Adjudication order The court may adjudge the debtor bankrupt on the application of the O.R. or any creditor in the following cases: If the creditors so resolve at their first

Journal entry for company, 1. Think about the transactions listed below. a....

1. Think about the transactions listed below. a. A company obtains a $10,000 loan from a bank. b. A company purchases $15,000 of inventory from its suppliers. They paid $5,000 toda

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