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Dear tutor
Hope you are well.
I do not understand why in the sampler answer it uses 8% of 95 (the carrying value of the invesment) to compare with the consideration, when calculating the gain/loss on disposal of holding in Nathan?
My concern is that why cant we use Nathan’s net assets (120) + FV adjustment (16 if we breakdown the NAV at acquisition) + goodwill after impairment(15-3=12) , then take 8% of this value to compare with the consideration?
Thanks.
Hi,
I’m well thanks. Hope your revision has been going well.
The key here is that we aren’t looking at the movement in equity in the group accounts where we adjust both retained earnings and NCI. We are looking at the profit/loss on disposal in the individual accounts so that it can be removed on consolidation.
To calculate this figure we look at comparing the proceeds to the carrying value of the investment, similar to like we do with the disposal of PPE.
Hope this helps.
Thanks
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