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Hi.
I have 3 questions.
1 ) .If fair adjustment for inventory has been done at the acquisition date and inventories have been sold before the reporting date , how do we treat it and what are the double entries for it and how do we adjust for the post acquisition profit. and if the fair value of inventory it does not change between acquisition and reporting how do we treat it ? is there any thing to be done to adjust post acquisition profit?.
2) .if at the acquisition date we have done fair value adjustment for PPE, what happens when that PPE is sold before the reporting date, what are the double entries to be posted.
3). How to treat change in fair value of contingent liability between acquisition and reporting dates ( is this change in fair value affects post acquisition profit?)
Thanks
Hi,
1) If the inventory has been sold by the reporting date then there is no adjustment to make, so nothing is shown in the reporting date column of the net assets working. The post acquisition movement is then the difference between the total of the at acquisition column and the at reporting date column. If there is no change in the fair value of inventory between the two dates then the adjustment at the acqusition date and the reporting date is the same.
2) If the PPE is sold then there is no adjustment to make at the reporting date, as if the PPE has gone there is now no associated fair value adjustment.
3) Again, we include the FV adjustment at the acquisition date, remembering to reduce the value of the net assets. If the FV is different at the reporting date then we include the new FV adjustment in the reporting date column and the movement takes care of itself when we look at the change in net assets between the two dates.
Thanks
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