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Hi,
Can you please explain the followings for me?1) Ejoy entered into a joint venture with another company. Each party holds 5m ordinary shares of $1. Ejoy has contributed assets at their fair value of $20m (carrying value $14m). The gain on the disposal of the assets $6m to the joint venture has been included in Ejoy’s other income.
BPP has reversed $3m from the other income.
The joint venture’s financial statement is not in the question, and is not part of the consolidation.
My question is why the reversal?
2) Tbay is a discountinued operation held for sale on the date of the financial statement. The fair value of Tbay is $344m at 31 May x6. Later on the question states that the recoverable amount for another subsidiary was $630m and the value in use of Tbay was $334m.
The fair value of net asset at acquisition was $310 m and the post acq. profit was $19m.
When calculating the impairment of Tbay, BBP uses $344 as the base of recoverable amount. Then what is the value is use of Tbay for?
Thanks
1. Is it not because it is a 50:50 joint venture and they only need to show their share of the profit?
2. Is the value in use not $334m and therefore the recoverable amount is then the higher of the $334m and $344m, which gives $344m?
Thanks
Hi,
In the question the fair value was $344 and the cost to sell was $5.
When calculating fair value less cost to sell the answer showed (344-(5*100%/60%))=335.7.Bear in mind the proportionate method is used in the question and we had to gross up goodwill to get the carrying amount.
But, I don’t understand why we are grossing up the fair value less cost to sell.
Can you explain?
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