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For example, if there is an increase in porperty of 500 for the parent due to the acquisition, what will the possible adjustments be ?
And likewise if there is an increase in property of 500 for the subsidiary due to the acquisition, what will the adjustments be ?
I have no idea what you are talking about!
“For example, ” – this is an example of what?
For example for this transaction,
Premier’s group policy is to revalue all porperties to current value at each year end.On 30 september 2010, the value of Stanford’s property was unchanged from its value at acquisition,but the land element of premier’s property had increased in value by $500 000.
In this case the revaluation is on the parent’s property right ? So these are my adjustments.
+ 500 to PPE
+ 500 to other comprehensive income
+ 500 to revaluation surplusAm i correct ?
I wanted to ask if there would be a difference in adjustments if the revaluation was on the Subsidiary’s property instead. If yes,what would the difference be ?
“Am i correct ?”
Yes
“I wanted to ask if there would be a difference in adjustments if the revaluation was on the Subsidiary’s property instead. If yes,what would the difference be ?”
No and not applicable
Okay thanks. Then why in the answer key for qn for December 2010 on Premier, transaction (i) on revaluation.
In the consolidated SOFP, under PPE they didnt add 500 rev ? And they didnt add 500 to the revaluation surplus n also didnt add 500 to the OCI ?
Is it because it is stated “the land element of Premier’s property had increased in value by 500 as shown in the other comprehensive income” which means it has already been recorded therefore we dont have to make any further adjustments ?
For the same question premier, when calculating the group retained earnings , shouldn’t we include the increase in value of investment in Premier(gain in investment) by adding 300 to the group RE ?
But why in the answer key, its not included in the group RE ?
Likewise for the calculation of NCI(SOFP), the NCI% of revaluation wasn’t added . Why ?
“Is it because it is stated “the land element of Premier’s property had increased in value by 500 as shown in the other comprehensive income” which means it has already been recorded therefore we dont have to make any further adjustments ?”
Yes
“But why in the answer key, its not included in the group RE ?”
Because the question tells you that it’s in Other Equity Reserve “The other equity reserve relates to these investments” and here it is, in the printed solution!
“Available-for-sale investments (1,800 – 800 consideration + 300 gain)”
“Likewise for the calculation of NCI(SOFP), the NCI% of revaluation wasn’t added . Why ?”
This is another extract from the solution
This extract tells me that the nci is recognising their share of the revaluation depreciation adjustment
“Non-controlling interest ((1,300 see below – 400 URP + 50 reduced depreciation) x 20%)”
The property revaluation downwards at the date of acquisition is accounted for by the sentence that is note (v) to the question ….
…. “Premier’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose Sanford’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.”
OK?
Okay i get it. The NCI(SOFP) doesn’t include the NCI% of the revaluation because the revaluation was on the parent’s land and not the subsidiary’s land right ?
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