[Dansa]

Hi Stephen thanks

apart from exam purposes – I encountered this at my job as something my manager assigned to me

would I have to take the Fixed asset register of each foreign entity and calculate as:

-B/f balance at closing rate of previous year
plus movement (additions less disposals) at average rate in the year

-then take the C/F balance at closing rate of this year

the balance if the FX effect of the fx register

Is this how it would be done?

[Dansa]

Great thanks Stephen

[Dansa]

Hi Stephen thanks

So once that entry is done, the elimination in consolidation would be

Credit investment
Debit NCI
Balance to reserve OCI

Is that it ?

[Dansa]

Thanks Stephen

So we have to the complete process of inter company elimination again for cashflow statements – right ?

[Dansa]

Hi Stephen thanks

Just researched online and it says that inter company transaction should be eliminated

So basically we have to do a separate consolidated statement for cashflow and do the eliminations based on cashflows ?

Thanks

[Dansa]

Perfect Stephen

Thanks so much

[Dansa]

Thanks Stephen

For the inter-company to cancel each other, the first translation to USD in the subsidiary as well as the translation in the parent to consolidate from USD back to GBP would have to be at transaction date fx rate, otherwise there would be a mismatch no? (Only referring to the payable and receivable)

[Dansa]

Thanks Stephen

[Dansa]

Hi Stephen thanks

-I have been researching it – wouldn’t credit salaries understate the salary costs in the p&l

-Couldn’t it be revenue ?

Thanks

[Dansa]

Hi Stephen thanks

So, let’s suppose we sell sub, we first calculate gain loses as

Credit net assets at fair value 30
Credit goodwill 10
Debit cash 50
Credit gain 10

If we revalued say from 20 to 30 when sub was bought at tax rate of 10% we have

DT liability for 1

-When we sell sub then have

Debit DT 1
Income tax expense 1 for the sale now
Credit tax liability for 2 which is the DT plus tax for the sale

Is that correct?

[Dansa]

Hi Stephen thanks

just for my knowledge (not referred to exams) but I would like to know the entries

First one would be
debit Goodwill
debit Net assets at book value
credit cash
credit NCI

second would be
debit net asset for fair value adj
credit goodwill (because when net asset increase goodwill reduces)

third would be
debit goodwill (because DT is a liability and reduces net assets hence goodwill increase)
credit D tax for the tax rate times fair value adj

are these correct? I might have another question later if you don’t mind

thanks
Daniel

[Dansa]

Also

If we have 10 (cost less fair value) goodwill then credit it by 30 and debit 9, would not it be negative or the first journal before anything is goodwill 40 debit, debit net assets 60, credit cash 100?

Then the others you suggested for fair value adj and DT?

[Dansa]

Hi Stephen

Sorry for late reply and thanks so much

I didn’t know that as i was taught to calc goodwill first and then do journals like

debit goodwill, credit NCI, credit cash (paid cash), debit net assets

So what are the correct journals? first fair value adj crediting goodwill, then the debit for DT?

Perhaps can you show me what journals would you make that involve debiting and crediting goodwill?

Thanks so much
Dan

[Dansa]

Great

Thanks

[Dansa]

Ah thanks so much that helps lots

Basically, we have deferred tax for the revaluation of assets and liabilities of a subsidiary to calcualte goodwill in business combinations but not for goodwill itself – right?

[Author]

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