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Hi,
I’ve seen some answers written by you regarding the 06/2014 Q1, but I’m still confused about 2 points which i cannot understand:
1) why here disposing 8% equity interest in Nathan, we will use the 95 million carrying value of the investment in Nathan, not the carrying value of the net assets 120 million (plus adjustment)? in your previous answer, you said “The fair value hasn’t been reflected within the records. If it had been included the retained earnings would have correspondingly increased, but that’s not the case here.” but i’m still confused.2) The increased 5 million from Nathan’s 90 million (carrying value of investment) at 30 April 2013 to 95 million to 30 April 2014 is the 5 million goodwill increased in note 1, right? (actually should not be recognized because it’s internally generated goodwill). so the 10 million revaluation surplus in other comprehensive income should be reduced by 5 (10m – 5m (W2)).
1) when we dispose of an asset, do we record the disposal as at its fair value or as at its carrying value? When we sell a motor vehicle, the credit entry in the TNCA Account is the carrying value of the vehicle (or the cost where accumulated depreciation is recorded in a separate account)
2) I’m going to have to look at the question to answer this and I’m just about to go out for the day so I’m going to ask you to re-post your question so I don’t forget it
Thank you Mike~
1)
Like in 06/2014 Q1, it says:
“Marchant disposed of an 8% equity interest in Nathan on 30 April 2014 for a cash consideration of $18 million and had accounted for the gain or loss in other income. The carrying value of the net assets of Nathan at 30 April 2014 was $120 million before any adjustments on consolidation. Marchant accounts for investments in subsidiaries using IFRS 9 Financial Instruments and has made an election to show gains and losses in other comprehensive income. The carrying value of the investment in Nathan was $90 million at 30 April 2013 and $95 million at 30 April 2014 before the disposal of the equity interest.”the answer calculates the movement in equity like this:
($18 – (8%/60% of $95m)) = $5·3m (it does not use the 120 million carrying value of the net assets to calculate)However, in 06/2010 Q1 note 1, it also says:
“Ashanti disposed of a 10% equity interest to the non-controlling interests (NCI) of Bochem on 30 April 2010 for a cash consideration of $34 million. The carrying value of the net assets of Bochem at 30 April 2010 was $210 million before any adjustments on consolidation. Goodwill has been impairment tested annually and as at 30 April 2009 had reduced in value by 15% and at 30 April 2010 had lost a further 5% of its original value before the sale of the equity interest to the NCI. The goodwill impairment should be allocated between group and NCI on the basis of equity shareholding.”the answer calculates the movement in equity like this:
($34 – (Net assets per question at year end $210m + Fair value of PPE at acquisition $10m – depreciation of fair value adjustment $4m + goodwill (44 – 8·8)) x 10%) = 8.8
Here the answer does use the 210 million carrying value of the net assets to calculate, and does not tell us the the carrying value of the investment in BochemYou can refer to this link: https://opentuition.com/topic/marchant-062014-q1/, where trina also asked this question, but I cannot understand it.
Thank you so much ^_^
Hi Terry
Again, I’m not going to look at e question but these are my initial thoughts from your post and, again, if I haven’t answered you satisfactorily, then post again!
In Marchant it seems to me that we’re asked to calculate the gain in Marchant rather than the gain in the group. In Marchant’s own parent company records there is an account “Investment in Subsidiary” showing that investment at cost to Marchant and that’s what Marchant is disposing of.
In Ashanti we’re calculating the gain in the group so that’s why we’re looking at fair valued net assets at date of disposal and at the impaired value of the goodwill (in Marchant we weren’t concerned with looking at goodwill because goodwill in Nathan does not feature in the records of Marchant)
Is that better?
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