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    • Profile photo of MikeLittle says

      Why would you do that? If a question says that these have a fair value of $XXXXX, and $XXXXX is different than the carrying value of those matters, then you would make a fair value adjustment.

      But otherwise, no

      • avatar says

        Isn’t Fair Value of Subsidiary at the date of acquisition = Net Assets of Subsidiary at the Date of acquisition?

        Net Assets = Share Capital + Reserves – Fictitious Assets to the extent not written off?

      • Profile photo of MikeLittle says

        No, where have you got that from.

        It really depends on what exactly you mean by “fictitious assets”

        If you’re talking about unrecognised intangible assets like an internally generated brand name or a customer list, these are part of the subsidiary’s net assets at date of acquisition. But they do not appear in the subsidiary’s accounting records – they are unrecognised. Nevertheless, they DO form part of the subsidiary’s fair valued net assets at date of acquisition and therefore need to be brought is as fair value adjustments in working W2, Goodwill

      • avatar says

        Fictitious assets in the sense Preliminary expenses not written off, Advertisement suspense account, discount on issue on shares to the extent not written off etc

      • Profile photo of MikeLittle says

        Yes, you mentioned preliminary expenses and advertising suspense account in your first post.

        I have never heard of any company that has not written off its preliminary expenses!

        The advertising suspense that you mention I presume is an advertising campaign the benefit of which will not be felt until next year so a proportion of it has been treated as a prepayment (or not so treated, but could justifiably have been treated)

        Now you also bring in discount on issue of shares! Well, let’s get rid of that one straight away! Such a discount is ILLEGAL! Not only is it not a fictitious asset – it’s not an asset at all and, if it has happened, then you should be warning the directors that their personal wealth is about to be reduced when the case is brought to court. In addition, they could well find themselves out of a job and on the list of Banned Directors under CDDA

        I’ve dealt with Preliminary expenses – never heard of it happening

        A prepayment for advertising seems like a reasonable case of a fair value adjustment – though the (new) subsidiary’s (former) auditors need to be questioned closely about why this was not treated as a prepayment in last year’s financial statements (if applicable)

  1. Profile photo of maat9 says

    your lecture is great…..but my question is why the impairment of good will charged to NCI in first example.of the lecture…… and plz tell me when we charged the impairment of good will charged to NCI?

    • Profile photo of MikeLittle says

      Where the nci is valued on a proportionate basis, they have no goodwill and therefore any impairment is all ours.

      Of the nci is valued on a full fair value basis, they have some goodwill, so any impairment is allocated between the parent and the nci in the proportion of their different shareholdings.

      Does that answer it?

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