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Dear Sir,
I need some help for the two questions below:
1. On acquiring a subsidiary company, a negative goodwill may arise, usually referred to as ‘gain on a bargain purchase’. How is this line item treated in the consolidated statement of profit or loss and other comprehensive income? Is it classified as other income or as other comprehensive income?
2. I found this in BPP:
Non-controlling interests
S’s profit after tax (PAT) X
Less: *unrealised profit (X)
*profit on disposal of non-current assets (X)
additional depreciation following FV uplift (X)
Add: **additional depreciation following disposal of
non-current assets X
___
X
===
NCI% X
* Only applicable if sales of goods and non-current assets made by a subsidiary.
** Only applicable if sale of non-current assets made by subsidiary.I fail to think of an example where there is the term “additional depreciation following the disposal of non-current assets”. Can you please help me?
It would happen where one company sold an asset for an undervalue to another group company. So far as the group is concerned, that asset should be shown at its original cost less accumulated depreciation and impairments. By selling at an undervalue, not enough depreciation would be being charged by the buying company so an additional amount of depreciation needs to be charged
wrt to the first part of your question, I believe it should be shown as other comprehensive income and credited to retained earnings
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