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  1. Hi

    Please assist me with my understanding of FV adjustments.

    Why do we increase/reduce the Retained Earnings with movements in Liabilities.

    Say there was a Contingent Liability in subsidiary that is recognized at FV. When this is settled- the payment is reflected in the Consolidated Retained Earnings as an increase.

    I understand why depreciation for example would be taken there, not clear on why the Liability is or has this effect on Retained Earnings

  2. When do we adjust for NCI share of impairment losses when calculating the amount of NCI to be included in the consol SOFP of the group? I鈥檓 doing the practice questions and the workings vary. Sometimes impairment losses is adjusted and sometimes it isn鈥檛?

  3. Hi,

    You state that goodwill is at 2100. You are using the fair value method for NCI.
    Doesn’t this mean that goodwill attributable to AB group at reporting date is = to 75% of 2100? ie. 1575

    It would therefore mean that impairment is also split up 75 % – 25% therefore impairment for ab group = 75% of 420 = 315

    So goodwill recorder at 31st dec for the group SOFP = 1575 less 315
    = 1260

    No?

    Thank you

  4. Hello,

    I agree with Ewa’s comment above, the lecture example above doesn’t match the answers you provide at the end of the notes page 113.
    Would you please explain the differences?
    Also, I tried to do the full group accounts for these companies & couldn’t get the SFP to balance.

    Please can you help?

    Many thanks
    Sarah

    • Hi,

      The answer in the video is the correct answer, please ignore the answer in the back of the class notes for now. I will update it in due course.

      Without being able to see your answer I cannot explain why your group SFP does not balance, sorry.

      Thanks

      • Thank you for confirming!
        This is my group SFP;

        PPE – 18,000
        Goodwill – 1,680

        Current assets
        Inventory – 10,500
        Receivables – 8,000
        Bank – 5,000

        Total – 43,180

        Equity shares – 15,000
        Reserves – 17,435
        Non-controlling interest – 2,600
        Current liabilities – 7,000

        Total – 42,035

        I really appreciate your help.

        Thank you

        Sarah

      • Hello Sara,

        You have not adjusted the NCI-

        Fair value + 25% of post acquisition reserve – 25% of goodwill impairment

        # 2600+ 25% of 5000- 25% of 420

        # 2600+ 1250- 105=3745

        Therefore the value increases from 2600 to 3745= 1145

        Add 1145 to 42035= 43180. Both sides balances.
        Thanks.

    • Hi,

      If the fair value decreases then you will reduce the carrying value of the assets. This would only happen for a non-depreciable asset such as land, or possibly inventory.

      Thanks

  6. Re: Chapter 4 F2, Answer 1 鈥揊air value adjustments

    Hi,
    Sorry to bother you but I have just been through your calculations for example 1 Fair value adjustment and there are some differences in your calculations compare to the answer you provide at the end of the notes page 113.
    Would you please explain the differences?
    Thank you for your help
    Ewa

  7. Hi,

    To show control we put in 100% of the subsidiary’s assets and liabilities.

    PUP adjustments are made when there is unsold inventory at the reporting date, regardless of who sold it to whom. The key about who sells it is linked to where the adjustment to retained earnings is made.

    If P sells it we adjust their retained earnings.

    If S sells it we adjust their retained earnings.

    Thanks.

  8. Hi

    Not sure on the Ppe . You add in 100% of subsidiary 5k and not 75% of this value?

    Also not sure about pup , do we only adjust if parent sells to subsidiary?
    I have seen thru another lecture by another provider that if there is selling between sub and parent this should be eliminated, however I have seen thru another provider that we only adjust this if parent seeks to subsidiary but not if subsidiary sells to parent?

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