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Hi mike,
On acquisition, when the fair value of assets is greater than the book value, I don’t understand why a revaluation surplus isn’t created with the difference.
I get that the Ppe carrying amount is increased, and effectively goodwill is valued at a lower amount than it would have otherwise been without the fair value increase. But why not show a revaluation surplus instead?
Thanks mike
Because the adjustment is not actually written into the subsidiary’s records – this is simply an exercise to reflect fair values in the interests of fair representation and to calculate goodwill correctly
Ok?
Thanks Mike, but I don’t entirely get it. Why would it not be written in the subsidiary’s records?
Why does the subsidiary have to write in the revaluation? If it wants the carrying value to remain at historic cost less accumulated depreciation, then fine.
Actually, it leads to a more consistent approach in that the parent’s assets could themselves also be carried at historic cost less accumulated depreciation
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