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Please tell me how to deal with following adjustment regarding a revaluation of an item of PPE in a Subsidiary
Suppose company A acquires 80% of company B in 1 jan 20×7 and on 1 jan 20×7 company B owned some items of equipment with book value of $45 million that had a fair value of $57 million these assets were originally purchased by company B on 1 jan 20×5 and are being depreciated over 6 years
So the remaining life is 4 years right so my question is when calculating the deprivation why it is 12×3/4 instead of just by 12/4 why it’s multiplied by 3???
Hi,
The 12 x 3/4 will give the carrying value of the PPE in the consolidated financial statements at the end of December X7. To calculate the depreciation through profit or loss each year then we would take 12 x 1/4.
What is the reporting date? If it is three years after the acquisition date then this would explain the depreciation of 12 x 3/4 as there would have been three years of depreciation cumulatively since acquistion.
Thanks
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