Comments

  1. avatar says

    In the above question which is example 11, if we have to show the revaluation reserve separately it comes to a negative figure .

    Non Depriciable NCA 15000
    Depriciable NCA 18000
    Total 33000

    Less Fair Value Adjustments on Acquisition
    Inventory 20000
    Non Depriciable NCA 15000
    Depriciable NCA 30000
    Total 65000

    Gross Total (32000)
    Our Share 70%
    Revaluation Reserve (22400)

    How will we show this in the consolidated SOFP?

    PS: I’m going to follow the method you showed in the lecture as it is a lo easier to do and reduces my work but just wanted to know how it would be done.

    • Profile photo of MikeLittle says

      Hi

      I’m not sure what you are trying to achieve here! On acquisition, the fair value adjustments will be notionally entered into the subsidiary’s records – in the case you quote, the double entry will be Dr the depreciable and non-depreciable TNCA by their respective amounts and notionally credit the revaluation account.

      As time goes on and we depreciate the assets of the group for the purposes of consolidation, the double entry is Dr the Profit or Loss account and Cr (effectively) the depreciable TNCA

      At no stage in that second journal entry have I mentioned making an entry into the revaluation reserve!

      Ok?

  2. avatar says

    Sir, i cannot understand what is done in working 3- con. ret. earn. why do we have to add the non-depreciable non-current assets -15,000
    Depreciable non-current assets- 18000?
    i didn’t get the logic.

    • Profile photo of MikeLittle says

      Kaplan and BPP take a different approach to this mini-topic. They calculate the fair value of net assets at date of acquisition and at date of consolidation. The difference is post acquisition movement in subsidiary’s reserves.

      Personally, I don’t like that method!

      My way identifies the retained earnings “today” as amended by any fair value adjustments to the subsidiary’s figures and compare that total with the subsidiary’s fair valued retained earnings “then” also as amended for any fair value adjustments to the subsidiary’s figures.

      This second value, subsidiary’s retained earnings “then” is found in working W2 Goodwill

      The “then” figure is shown as adjusted for the fair values of the inventory (now sold), the non-depreciable non-current assets and the depreciable non-current assets

      If we are to be able to compare like with like to discover the post acquisition retained earnings, we need to adjust the retained earnings figure “today” by those same three adjustments

      Inventory – all sold, so no adjustment

      Non-depreciable non-current assets – presumably (in the absence of contrary information) still owned but, because it’s non-depreciable, they are shown at their original value of $15,000

      Depreciable non-current assets – again, in the absence of contrary information, we still own these assets. But what is their value “today”. It’s $30,000, 5 year life, two years since acquisition, therefore $18,000 notional book value

      Does that explain it for you?

  3. Profile photo of Swati says

    Dear Mike Sir,

    I want to know if ‘Complex Groups’ (A owns 60% in B and then B has a 60% share in another company C) are in DipIFR syllabus. I am preparing for DipIFR for December 2014.

    Many thanks!

    Regards,
    Swati

  4. avatar says

    Hello Mike,

    I know this is very basic but HOW did you get 18k of depreciation for the 2 years? On the answers at the back of the course notes, the total depreciation (30k) is multiplied by 60%. How did they arrive at that? I mean, 2 years comprise 40% of the 5 years through this calculation:

    (2/5) * 100 = 40%
    Which means the depreciation that occurred during the 2 years is 12,000.

    How did you arrive at 18,000?

    Sorry, I dont mean to waste anyone’s time by asking a silly question but I am really stuck at this!

    Thanks.

  5. avatar says

    Hi mr mike . i want ask about revaluation assets in consolidation F S

    On 1 January 20X7 Hardy owned some items of equipment with a book value of $45,000 that had a fairvalue of $57,000. These assets were originally purchased by Hardy on 1 January 20X5 and are being
    depreciated over 6 years.
    hardly is subsidery
    i know 12000 revaluation will put in GW calculation and TNCA in CoFS completly .
    but i dont know how can i deal with dep in CoRE and TNCA
    please help

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