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Consolidation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Consolidation

Viewing 9 posts - 1 through 9 (of 9 total)
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  • February 11, 2017 at 5:13 pm #371987
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    Dear Sir,

    According to IFRS 3, the acquirer must identify acquiree identifiable assets and value it to fairvalue, which is then used for Goodwill. My question is that, will the subsidary also update its financial statements to reflect fair value of assets? Maybe building? even they have a policy of maintaing buiding at cost model?

    Regards.

    February 12, 2017 at 8:44 pm #372119
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Hi,

    No the subsidiary will leave their accounts unadjusted for any fair value adjustments as part of the acquisition. The fair value adjustments are made to reflect the substance within the group only.

    Thanks

    February 13, 2017 at 11:49 am #372220
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    So, at acquisition all the assets will be valued at fair value, and they will remain at fairvalue until sold in consolidated FS?

    Also, all the dealings and assets that come after acquisition are measured according to their relevant standards right? like inventory at lower of cost and NRV?

    Regards

    February 14, 2017 at 7:35 pm #372414
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Once the fair value exercise has been carried out for the consolidated accounts at acquisition the fair values can subsequently change at each reporting date, with any changes recognised through profit or loss.

    The assets acquired are treated as normal in the individual financial statements of the parent. Any additional fair value and changes are accounted for as above.

    Thanks

    February 15, 2017 at 9:19 am #372482
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    Thanks for clarification,

    But, what about assets acquired after acquisition date? Should they also be accounted at fair value in consolidation?

    Regards

    February 15, 2017 at 4:20 pm #372528
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Hi,

    If you buy them after the acquisition then the assumption would be that what you are paying is the fair value.

    Thanks

    February 15, 2017 at 7:02 pm #372584
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    Just one more clarification,

    If the subsidiary buys inventory after years it was acquired, in subsidiary accounts it will be lower of cost and NRV, but while consolidating we wont re value it right? we just add line to line items

    Regards

    February 16, 2017 at 2:30 pm #372724
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Correct. Everything in the individual accounts is treated as normal and in the group accounts there would be no adjustment as the transaction occurred post acquisition. Well done. Top work!

    Thanks

    February 16, 2017 at 8:07 pm #372789
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    Thanks a lot!

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