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    • Avatar 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?

      • Avatar 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

      • Avatar 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. Avatar 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?

    • Avatar 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?

  2. avatar says

    Dear Sir, thank you very much for the lecture! It’s very helpful!

    One question, I am not quite sure why we have to add NCI in the CS of FP if the parents company do not own their part of the sub.

    Many thanks
    Connie

    • Avatar of MikeLittle says

      Hi

      It’s because they are partly responsible for financing the activities of the subsidiary. In addition, we add in the whole (100%) of the subsidiary’s assets and liabilities even though we don’t own 100%. We add the whole value because that’s what we control. The part that we don’t own (even though we do control 100%) is being financed by the nci. If we didn’t add in the nci, our Statement of Financial Position would not balance

  3. avatar says

    Using the Course notes provided, there seems to be a discrepancy on page 39. There’s an entirely different question (Remigjius and Ilona) there but it is not the one referred to by the professor… can some direction be given as to where I can find the question the lecturer refers to during his lecture.
    Many Thanks

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