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Hi Mike,
This just occurred to me. Can’t believe I’m asking this only now:
For example,
A parent company acquires a subsidiary at the beginning of the year where the subsidiary had a building which had a fair value of $10 million and a carrying amount of $8 million. The remaining useful life was 10 years. At the year end date the fair value of the building was $11 million.
The post acquisition revaluation gain would be $1 million (and not ‘$11 million’ – ’10 million less depreciation for the year’), is that correct?
Why not?
That $10 million will be the subject of 10% depreciation so, pre-revaluation, the carrying fair value will be $9 million
It’s now being revalued to $11 million so that’s $2 million going to a Revaluation Reserve
OK?
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