Changes in the Composition of a Group (Introduction)

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  1. Profile photo of c0olmat3 says

    Ey Sir,
    In partial Acqusition(Ord.investment to Subsidary OR Associate to Subsidary) we calculate ‘Profit on deemed Disposal’ then add it to parent retained earnings.

    Do we do the same with Partial Acqusition of Ord.investment(10%) to Associate(25%). Do we need to calculate the gain on deemed disposal, or just have to make it(FV Deemed Disp) part of goodwill?

  2. avatar says

    Hello!!! Mr.Little

    May i know that….we made deemed disposal on date we controlled subsidary, so profit arisesd on disposal as fair value adjustment…will this fair value adjustment be part of opening retained earning???when calculating good will???as fair value adjustment is at acquisition date

    • Profile photo of MikeLittle says

      @syedwaqar, Yes, if you follow the logic through, the fair value of the deemed disposal proceeds is the opening line of the calculation of goodwill ( I presume that you are referring to the situation where we are acquiring a subsidiary which previously had been an associate ).

      But that opening line is the fair value of the investment – it’s not the fair value of the proportion of the associate’s assets so no adjustment will be made to the investee’s assets – unless they choose to make that adjustment ( which rarely happens in an exam question! )

      Is that ok?

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