1. Profile photo of Samoar says

    Dear Mike

    Many thanks to you and Open Tuition for your support.

    I was trying to do example 11 of page 46 of the course notes using revaluation surplus. However, I just can’t seem to get to the bottom of it.

    Could you please show me how?

    I am not a great student, but would like to learn.


  2. avatar says

    Hi Mike, How did we arrive at $18,000 for the depreciable non-current Asset over 5 years. plus can u please explain a real life example of a non-depreciable current Asset and their features and accounting procedures, entries

  3. avatar says

    Dear Mike,
    You are so funny :)

    Here what I am after to:
    1/ Why we didn’t take 12000 in w3: DNCA ?

    2/ This doesn’t relate to this, but in notes i.e goodwill attributable to NCI on acq was $2000. So how we can deal with this? Will we just put it on NCI value in w2?

    Many Thanks

    • Profile photo of MikeLittle says


      1) I keep getting “Blocked plug in” on my computer so I can’t play the video

      Please let me know the chapter and question name

      2) “Will we just put it on NCI value in w2?” Yes. The nci for working W2 is their proportionate share of fair valued net assets at date of acquisition PLUS the $2,000


      • avatar says


        1/ I am talking about example11 i.e IFRS 13, ch # 7.

        Here I talked about w3 of DNCA. I asked why we will not take $12000 of $30000 by depreciating over 2 years.

        2/ This doesn’t relate to any example, but it is on page 40 above the example 6 of ch 7.

        I asked that “goodwill attributable to NCI on acq was $2000″. So how we can deal with this? Will we just put it on NCI value in w2?

        Many Thanks

      • Profile photo of MikeLittle says

        Because by the year end there has been two years’ worth of depreciation on the $30,000 (expected life of 5 years as at date of acquisition, two years have passed so only 60% of $30,000 still in the subsidiary as at consolidation date)


  4. Profile photo of allenmendonca 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


      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!


  5. Profile photo of anonymous 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?

  6. 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!


  7. 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!


  8. 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

  9. avatar says

    Dear Mr Mike

    1.Why would you not deduct the extra depreciation of 12 from the groups retained earnings especially if they have not been accounted for by the subsidiary.
    Would it not be prudent to account for the depreciation expense due to FV adjustment.
    2. If there is a FV adjustment in the subsidiary then should we not create a revaluation reserve when consolidating and decrease it by the excess depreciation.
    Hope for a reply!

    Much obliged

    • Profile photo of MikeLittle says

      IF I’m on the correct question, is the extra depreciation not 9 (36 / 4)

      The 9 IS accounted for by reducing the selling company’s retained earnings by the NET pup (if I’m on the correct question)

      I suppose it depends what the fair value adjustment relates to. Yes, I could see the argument that says it’s a revaluation. Frankly, I’m not so sure that it matters whether you include it within retained earnings or show it separately as a revaluation reserve

  10. avatar says

    apart from learning the drill of 4 workings
    there are also things to learn which are based on accounts knowledge
    but you did not cover all of them, and left to students effort.
    Am i right. and u want to practice us to do.?

    • Profile photo of MikeLittle says

      Yes, that’s it. You can find the figure for pre-acq, when preparing W3 Cons Ret Ears, by looking in W2 Goodwill. The FV of SNA @ DOA in W2 comprises S’s share capital, share premium and (basically) retained earnings as adjusted for fair value adjustments.

      The thing you must be careful about, though, is that you don’t pick up for the pre-acq figure the full fair value SNA. The figure you need for W3 is just the Retained Earnings figure as adjusted for the fair value changes

      Is that clear?

  11. avatar says

    Hi Mike,
    thanks for your time and efforts on this.
    Could you please explain why in the case of shares valued say at $1.50 just before acquisition, this valuation is not included in the W2 calculation of the FV of SNA at DOA( i.e the $1 shares will now be included as $1.50) rather you stick to the Balance sheet value, but then, you use the revalued NCA in that same calculation, why not stick to the book value also. However, this newer shares figure is included in calculating the NCI’s value @ DOA

    • Profile photo of MikeLittle says

      The market value of shares has NOTHING to do with the company – it’s dependent upon supply and demand in the market and on market sentiment. The market value information is there only for the purposes of valuing the nci on a full, fair value basis.

      The fair value of the subsidiary’s net assets is their book, carrying value as adjusted for any fair value re-assessments and the book value of net assets is the same as the company’s figure for shareholders’ equity

      And shareholders’ equity is share capital + reserves

  12. avatar says

    Is it okay only to listen to these lectures and not read the text book? I hardly have any time left. After listening to these lectures, am planning to practice the exam questions. please reply.

    • avatar says

      Be careful of this approach. I was in the same situation as you for Dec-12 session, I used only these lectures (but practised not enough) and I failed.
      However, for F5 it was ok. I passed using only opentuition resources.

    • Profile photo of merissa says

      Sue 30,000/5 =6000 annually. Bought at the start of 2008 so at end of 2008 is one year & at the end of 2009 is another. We’re consolidating at the end of 2009. The asset is depreciated for two years 30000-(30000/5*2)= 18000. Carrying Value at the end of 2009 is $18k

  13. avatar says

    Hi Mike,
    I have a question regarding the Exampole 11 in chapter 7. I am listining your lectures and also using BPP book and just see that they do FV adj in W3 a bit different. And as much as yours explanation seems to be logical to me, the way they show in BPP book is easier to remember and no make mistake, but I do not fully understant why this can be that way.
    Would you mind to have a look and explain it to me.
    W3) D R
    per question 360000 100000
    FV adj (32000) (*) see below
    pre acq (20000)
    post acq 48000

    DOA Movement YE
    INventory 20000 (20000) –
    NDNCA 15000 – 15000
    DNCA 30000 (12000) 18000
    Goodwill RE SOFP

    The question is why this negative 32000 can be put in RE like that? hope my question makes sense.

  14. avatar says

    An Excellent lectures which have quite good improvement compared to the previous version of these notes. Only question is – what about Associates? Why there are no examples on how to do the consolidation with associates? We know that in exam besides subsidiary we will have to include in the consolidation Associate as well :)

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