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Hello,
Grange increases it’s acqn % and it’s fairly straightforward. However my issue lies with the net assets of further acquiring the subsidiary. Initially the increase in land valuation is unaccounted for and must be included. But one and a half years later (whereby an increase in holding by the parent has occured), the revalued land is still a separate item in the net assets column. Why is this? Surely it would have been included in the figures at the reporting date (the figures as per question). If I am unclear with my description of if anyone requires further information regarding this question please ask and I will do my best to assist you.Thank you for taking the time to help me with this matter.
It is only rarely (certainly rarely in exam questions) that the fair value of assets on acquisition are actually adjusted in the figures of the subsidiary. So a fair value adjusted asset for consolidation 2 years ago is going to be fair valued again 2 years later when we increase our percentage holding.
Does that answer it?
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I think I understand what you are saying, so this is true even if no revaluations are made since the original revaluation date, well accoring to the scenario at hand. If the answer is yes, then I think I know what to look for in the exam and hopefully will be able to solve a question like this. If not, then I may need a more indepth explanation.
Regardless, thank you for the very speedy reply 😀 it is a reassuring feeling that I have someone who I can go to for help in difficult times. Thank you.That’s what we aim for on this site – just glad to know that we are appreciated 🙂
I think that I have only ever seen one example where the subsidiary amended their figures to reflect the fair values at date of acquisition.
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Hello Mike,
In this question (Grange Dec 2009) when Parent acquires additional holding of 20% in the Sub Park (ie Sub (60%) + (20%) = Sub 80%) shouldn’t we calculate a share of GW transfer together with share of Net assets transfer? NCI fair valued. Please help to understand this… is it so much confusing. BPP answer does not calculate share of GW on transfer between owners – is that right or wrong?Hmm, that surprises me. Unfortunately I don’t have access to a BPP revision kit. I’ll check in the Kaplan kit tomorrow
….sorry, so you’ll need to post again to remind me that I have your question outstanding
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P2_Dec 09_Grange_Question_Commentary_Answer
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Thank you Mike!
It appears more clear for me now. If I got that right – transfer between owners was based on the updated NCI valuation = NCI initial FV + NCI share post-acq.profits. That means goodwill is already embedded in the updated NCI valuation and by this included in the transfer between owners.
Thanks
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