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Dear Tutor,
I would like to receive your explanation on the treatment of investment in subsidiary in separate statement of parent as of following case:
+ As IAS 27, investment in subsidiary in separate statement could be valued at either cost model or F.Instrument (FVTOCI or FVTPL). If the value of this investment changes, what is the effect to consolidation process?
+ For example: the investment, which is value at lower of carrying value and the fair value net cost to sell, now decreases in value due to recession in stock market and becomes smaller than carrying value. As IAS 27, we must write down the value of investment on separate statement, does it mean that the goodwill in consolidated statement should also be written down?
+ Further, if the fair value of investment falls so much, exceeding the goodwill, so what is the adjustment in consolidated statement?Tks you so much!
Binh, there’s no way that I’m answering this in an F7 forum, and there’s no way that you should be worrying / pondering about this.
I would hesitate to answer it in a P2 forum, so don’t ask it there either!
Sorry sir, but is there any problem with my question? Is it out of syllabus or something like that? I am studying F7 and this question arises during the time I revise consolidation chapters.
Hi Binh
IAS 27 IS in your syllabus but you are looking way way way too deep into a theoretical problem that, to the best of my knowledge and belief, has never been asked at P2, let alone at F7.
There’s enough other matters to learn without delving into the fringes of the syllabus – matters that have a better than even chance of appearing in the exam in less than 2 months’ time
OK, thank you sir, it is just my curiosity.
I will try to manage my revise time better and cover all matters in syllabus.Hi – don’t worry about it – it’s a very good question and certainly one that I have never come across before. But the chance of your examiner asking “What would be the treatment of the investment in the separate accounts of the investor where the investor treats it not under the cost model and there’s an impairment in the value of the invested company?” is such a remote possibility that it really isn’t worth spending any more time on
🙂
Hi tutor,
I saw an question in F3 BPP Revision kit 26.1 as follow :
On 1 Jan 20X0 Alpha purchased 90,000 ordinary $1 shares in Beta Co for $270,000. At that date Beta Co’s retained earnings amounted to $90,000 and the fair values of Beta Co’s assets at acquisition were equal to their book values.
3 years later on 31 Dec 20X2, the SOFP of the 2 companies were :
Alpha Co ($) Beta Co ($)
Sundry net assets 230,000 260,000
Shares in Beta 180,000 –
410,000 260,000
Share capital
Ordinary shares of $1 each 200,000 100,000
Retained earnings 210,000 160,000
410,000 260,000My question is : Why will the investment in Beta drop from $270,000 on 1 Jan 20X0 to $180,000 on 31 Dec 20X0?
Will this affect goodwill calculation?
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