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Dear Mike,
Can u please explain to me why when there is a fair value adjustment (downward) of an asset at the date of acquisition, it is not reflected in the consolidated profit and loss statement. for eg in the past exam papers, there is a question ( premier) ,for which the fair value of land was 1200 lower than its carrying amount. This lead to a reduction in depreciation amount of 50.
The cost of sale was reduced by 50.
However i dont understand why the 1200 was not included in the statement.Grateful if you could help me with that
Because that 1,200 adjustment is taken into account in working W2 goodwill. In addition, the 1,200 reduction is not reflected in the subsidiary’s own figures – there’s no credit against the assets. And if there’s no credit against the assets, then there can be no debit in the statement of profit or loss
Ok?
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