- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Example 1, at the date of acquisition, some of Danute’s inventory had a fair value of $12,000 in excess of its carrying value . All of this inventory had been sold before year end.
Questions 1… supposed the fair value of the inventory was below its carrying value , what will be the fv adj. when calculating the net asset of Danute at date of acquisition ?
Do we deduct the $12000,? and does this affect in any way the consolidation R.E ?Supposed the inventory were not all completely sold and according to note 3 where PURP arisen to $5.850 in Ausra , how do we treat this to ensure we are complying with best accounting practice .?
Thank you sir.
If fair value is lower the adjustment would be to deduct the value of $12,000 from the fair value of the subsidiary’s net assets at date of acquisition
Why? Because we’re trying to get to the fair value of the subsidiary’s net assets at the date of acquisition!
It’s not rocket science is it!
Does it affect the consolidated retained earnings figure at date of consolidation? Yes, of course it does. The figure that we have calculated for post acquisition profits would change.
Instead of a deduction of $12,000 as we have in the Danute calculation at the moment, the $12,000 (if it were a reduction in the fair value as at date of acquisition) would be seen to be increasing the post-acquisition profits instead of reducing them
OK?
Yes and also increase in good.
Sir. but I wonder why you did not do any comprehensive example in single entity FSs like you did in consolidated FSs, as in when there is leashold and contracts including associates. However , I hope we all make F7, I will be the first person to thank you so much !
- The topic ‘Fv adjustment’ is closed to new replies.