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Hello ma’am, hope you are doing good.
I wanted to understand if the cost of investment recorded (as a NCA) in the individual SFP of the parent co changes after its initial recognition? due to factors such as goodwill impairment? changes in FV of net assets within the measurement period? or any other similar reasons?
I am well thank you.
I don’t see what relevance your question has to AAA but I can say that it is an underlying principle of IFRS that the carrying amount of ANY asset that is initially recognised at cost should be subsequently “written down” if its recoverable amount/net realisable value (however it is referred to) is lower. However, in the separate SoFP of a Parent, the cost of investment cannot be written down for goodwill impairment per se because goodwill is only recognised in consolidated SoFP.
no ma’am it has relevance to AAA as in June 2012 question CS group, the answer states that there is a RISK that cost of investment will be overstated, if goodwill has not be annually reviewed for impairment.
But now I am clear from your answer that downward valuation of goodwill will not impact the cost of investment.
And can you just confirm that any change regardless of the amount/event, will not impact cost of investment right?
Again you illustrate why it is important to give context to your questions so I don’t have to second guess what is your underlying query.
What we are saying here is that IF you don’t whether goodwill is impaired (because you don’t test it annually), there is a risk that it is – and if it is – there is a risk that the cost of the investment (in the separate financial is) could be (but is not necessarily) impaired. (You’ve studied for SBR so you know that goodwill (in consolidated FS) is the first thing that gets written off when a CGU is impaired.)
If, for example, a subsidiary was to lose something significant (profit/contracts/key management), the cost of the investment in the parent’s FS could indeed be impaired (and need to be written off).
my bad for not making the Refrence to the question straight away.
it was really the treatment in individual books that was concerning to me, as I knew the treatment in consolidated FSs. But ya now I think I perfectly understand your answer.
thank you as always for your kind help!
P.S.- is it possible for you to leave my queries unlocked, even when they are resolved. I mean sometimes all of a sudden some doubt relating to my previous query(which was resolved earlier) pops in my head, but simply because the doubt gets locked I can’t continue the thread. hence my request… hope you’ll understand!
A closed post is automatically marked “solved” which (apparently) is a good thing for google search engines and attracting students to OpenTuition’s website. Rather than continue on the same thread sometime later you can always copy and paste its url into a new thread – e.g. for this one is https://opentuition.com/topic/cost-of-investment-in-subsidiary-subsequent-measurement
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