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Sir why is that depr of an asset as result of FV adj in the subsidiary is added to post acq figure on Consolidated RE ?
In the example of premier and Sanford
Sand FV of the property was $1.2 million less than the ca with remaining life of 8yr.
When I deducted the 1.2m from the FV of the SNA @ doa .
I depreciated using the remaining useful life of 8yr and becos it was mid yr I time apportioned it .So on Consolidated RE my post acq was 900 after I have deducted the pre acq RE of the SUB’s net asset but I did not know where to add the depr figure until I see from the solution , it was added to RE at the reporting date . Why pls?
Because Sandford hasn’t adjusted the asset for the fair value decrease and so is continuing to depreciate on the original carrying value
But, for consolidation purposes. the asset should be being depreciated on the reduced (fair) value
So, for consolidation purposes, Sandford has charged too mush depreciation and that’s why it’s now added back into Sandford’s post-acquisition retained earnings
OK?
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