In June 2006 question 1 Hydan, why the calculation of consol retained earnings is not include the increase of fair value amount in plant?
But in other question like dec 2010 have include the decrease of fv of plant when calculate consol retained earnings?
What is the main cause?
I have neither question to hand but I shall repeat the basis for the calculation of the Consolidated Retained earnings. If you follow the basis, word for word ( no word is superfluous ) maybe that will help you to resolve the problem for yourself. A word of explanation first though. When dealing with fair value adjustments in the Consolidated Retained Earnings calculation, the top part of the working identifies the value of the Retained Earnings TODAY. From that adjusted amount is deducted the value of the Retained Earnings as at date of acquisition.
So, Consolidated Retained Earnings comprise:
H’s own, plus
H’s share of S post acq retained, less
Goodwill impaired since acquisition ( just our share )
Now, if that doesn’t help, you’ll have to post again and I’ll try to find the questions you refer to
so do you mean that fair value adjustment should include inside the calculation of consolidate retained earnings?
But why the june 2006 question 1 the examiner answer does not include the fair value adjustment figure in calculation of consolidate? please help me on this enquiry…thanks
Jessie, I don’t have the 2006 questions.
When making the fair value adjustments, in Working 2, Goddwill, we make the adjustment to the asset as at the date of acquisition.
In Working 3, Consolidated Retained earnings, the fair value adjustment is still required, but the amount to adjust is the value of the adjusted asset as at THE DATE OF CONSOLIDATION.
BPP and Kaplan both show in the Consolidated Retained Earnings calculation just the CHANGE SINCE ACQUISITION whereas I show in working 3 both the adjustment as at date of acquisition and the value at the consolidation date.
The effect is the same
Sir, it is the answer for working 3 after minus goodwill impairment is 18395 and the value before minus pre acquisiton is 7000?
Jessie, I still do not have the 2006 questions! I cannot answer your post – sorry
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