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Hi Sir,
I encountered this with Laurel Co Dec 2016. I just can not comprehend why does the 200 difference in fair value in inventory was added to COS but deducted in the post-acqn amount to get the NCI share in the profit? It was disclosed that inventory was sold before year-end.
If it was not sold what will happen? What are the accounting treatment?
Hi Tutor I can already confirm the scenario on this. Can you just confirm if I am on the right understanding?
If the inventories are all sold, the full amount of fair value increase will be reflected in the post-acquisition RE portion. If partially sold only the sold amount will be reflected under the RE (post-acquisition). The unsold portion will be added to the Inventory account. The fair value increase will be added to the Cost of Sales.
Please confirm. Thank you.
Hi,
Sorry, but the December 2016 exam paper is not on the ACCA website and the only question that I can find called Laurel is in the BPP revision kit. This question does not require you to prepare a group SPL, and I cannot see a figure for the adjustment of 200 that you mention above, sorry.
From what I can make out above, for the FV inventory adjustment you adjust the retained earnings at acquisition and then adjust accordingly the reporting date retained earnings. So therefore if the inventory has been sold then there is no FV adjustment to make, and if half has been sold then we only adjust for half of the FV adjustment as that is all that is left in the subsidiary’s accounts
Thanks
Hi Sir,
Thanks. Can I ask for more clarifications?
“So therefore if the inventory has been sold then there is no FV adjustment to make, and if half has been sold then we only adjust for half of the FV adjustment as that is all that is left in the subsidiary’s accounts” — this FV adjustment pertains to? Acquisition date and post-acquisition?
Hi,
Yes, this would be at the reporting date to reflect the inventory that is still held.
Thanks
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