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opentution chapter 22 consolidated statement example 3
P acquired 100% of the share capital of S on 1 January 2005 for $60,000. On 1 January 2005, the
retained earnings of S were $15,000 and the fair value of the non-current assets was $9,000 more
than the carrying value.
At 31 December 2009 the companies’ Statements of Financial Position were as follows:why wasn’t the non current asset of $9000 not included in the retained earnings account? isn’t it profit?
Have you watched the free lectures on this chapter? I work through the example and explain (and there is no point at all in using the lecture notes without watching the lectures).
The 9,000 is certainly not a profit! It simply means that S was worth 9,000 more than the book value (and is part of the reason that P was prepared to pay 60,000 – the other reason of course being goodwill).
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