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  2. I don’t understand how you got the 80 for depreciation. The fair value was 2 years ago. That makes the useful life of the asset 12 years. 400 divided by 12 multiplied by 2 isn’t 80.

    • The depreciation expenses was determined at the point of DOA, since it is using the straight line method. Its excess by $400 with 10 years life, so there is an additional $40 depreciation charge per year in the consolidation. Multiply $40 by 2 because the acquisition is held 2 years ago, will then bring us to $80 adjustment to the RE.

    • The control of parent over subsidiary means 100% control of S’s assets and liabilities, so we must consolidate 100% of Finn’s assets and liabilities into the group accounts. Meanwhile, we record 30% NCI to indicate 70% ownership of Finn.

  5. Please Sir I don’t understand why the depreciation on the fair value adjustment is for two years since the company was acquired in 2014 and the reporting year is 2015. Should it not be one year? (i.e: 400/10 *2years)

  6. Hi sir,
    in example 2 i dont understand where the 400 from PPE comes from because the book value is 1250 and the FV is 1850 therefore the difference 600 not 400. please can you explain to me for better understanding?

  9. Hi Tutor,

    What is the double entry for the fair value adjustment of 400 on PPE. I see that the PPE is debited where does the credit get represented and how does that credit feed into the group balance sheet?

    Really would appreciate your response.

    Thanks you

  10. Dear Lecturer,

    First of all thank you very much for the great and updated lessons. I am struggling a bit with the following and maybe this is a stupid question :):

    The associate has declared (but not paid) a dividend of 20m USD. As the profit distribution is declared, I am wondering if we should recognise the amount as receivables as at YE 2015 in the accounts of the significant Investor? In the solution we are just deducting this amount from the equity attributable to significant Investor but not taking in to account the future benefit from the financial Investment, which will crystalize in cash on a short-term.

    Thank you very much for unwiring my issue 😀

    Kind regards

    Zoran

    • In the individual accounts of the associate the dividend would be declared in the usual fashion:
      DR RE
      CR Dividend payable

      In recording it in the group accounts, we do not record a receivable but instead:

      DR Share of profit of associate
      CR Investment in associate

      Hope this helps

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