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Please can you assist me on the below:
1 June 20×1 – Robby acquired 5% of Zinc for $2m
1 December 201×2 – FV of investment is now $5m
I would have calculated a gain on the FV at acquisition of $3m but this is shown as $2m in the answer
Please can you help me understand this?
Thank you
Hi,
It is tricky but the key is that the original investment of $2 million is held at fair value through profit or loss in the parent’s accounts, so this value may have changed since 1 June 2009, which it has done so.
The invetment is held in Robby’s books at $19 million per the SFP which includes the $16 million paid on 1 December 2011, so the remainder must be in relation to the initial 5% acquired and gives us a value of $3 million. The fair value of this 5% has therefore now increased from $3 million to $5 million and hence the gain of $2 million.
Thanks
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