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Right, I understand now what the question is asking. Thank you so much for clarifying!!
Thank you for your detailed response! I just checked in Kaplan, they have used the cost of capital, not adjusted it as ‘after tax cost of capital’, whereas there is a similar question that has used the after tax cost of capital. I don’t understand why the difference?
Aah okay! I’m sorry, I just saw this. Thank you so very much, this has cleared my doubts about excess depreciation, I was not understanding that point in almost every question I was doing but I understand the reason now 🙂
Hello! Thank you so much for answering! I missed that point completely, my bad! So, basically any revaluation of the net assets of subsidiary that takes place at the date of acquisition needs to be dealt with as a fair value adjustment in goodwill calculation, taking any excess depreciation charged to COS/Reserves. I also am a bit confused as to why we calculate excess depreciation, and not depreciation on the revalued amount? Is it because we have to cancel the previous depreciation charged on the asset prior to revaluation?