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Sir,I am little confused by ‘fair value’ when it’s shown in a question for many times and I don’t know how to deal with it, like this one below.
W required 80%of C on 1Jan2008. At the date of acquisition C had a building which had a fair value $22m and a carrying amount of $20m. The remaining useful life was 20yrs. At the year end date of 30 Jun 2008 the fair value of the building was $23m.
I do know that FV adjustment should be made- deduct depreciation (22-20)/20 from C’s profit.
but what about $23m? should I deduct (23-22)/19 ?
The increase from $20,900,000 ($22,000,000 less half a year depreciation of $1,100,000) to $23,000,000 ie an increase of $2,100,000 should be credited to revaluation reserve
Ok?
say the profit in post-acquisition is $1.6m, then the total comprehensive income should be $1.6m-($22m-$20m)/20yrs+$2.1m-$1.1m
am I right?and
your working:$20,900,000 ($22,000,000 less half a year depreciation of $1,100,000)
why the depreciation of $1,100,000 occurred?
Is it because we are going to sell the building at the end of this year? (remaining life of 19yrs is not considered.)No, and
For half a year the revalued asset was $22,000,000 and depreciation over 20 years for half a year is $1,100,000
And 19 years doesn’t come into this. At the end of the year there’s still 19.5 years of estimated useful life, not 19
><shouldn’t depreciation be half of $1100000?
(btw, did I calculate comprehensive income correctly?)
You’re correct – it should be half of $1,100,000! Thank heavens I wrote it down correctly in the workings – that would mean that I wouldn’t lose a mark in the exam from a stupid calculation error!
Without the question in front of me …… your comprehensive income calculation looks ok
The question actually is :W required 80%of C on 1Jan20X8. At the date of acquisition C had a building which had a fair value $22m and a carrying amount of $20m. The remaining useful life was 20yrs. At the year end date of 30 Jun 20X8 the fair value of the building was $23m..
C’s profit for the year to 30June 20X8 was $1.6m which accrued evenly throughout the year.
W measures non-controlling interest at fair value. At June 20X8 it estimated that goodwill in C was impaired by $500,000.workings in the answer page include $1m, which it says to be revaluation gain. This $1m must be ($2.1m-$1.1m) ,right?
It looks to me like the answer hasn’t depreciated the building for the half year ended 30 June 2008
In my head I have a revaluation gain at the end of June of $23,000,000 – $21,450,000 = $1,550,000
I don’t see where $2.1 – $1.1 comes in
Where’s the question from? I don’t recognise it as an ACCA question
Oh, I’ve been silly…..
$1.55m is revaluation surplus,
But the answer added $1m instead of $1.55m.
I assume that there is no depreciation charge according to the question and the answer…….
?
It did happen in BPP revision kit…
Probably the answer is more beautiful if $1m is used.
?
Hope the exam won’t make me crazy like that..
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