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Fair value adjustment

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Fair value adjustment

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by P2-D2.
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  • Author
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  • August 9, 2020 at 9:11 am #579696
    Aaryatappy
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    if inventories exceeded their carrying amount by $300,000 and plant by $ 1,200,000, how do we show this in the net assets of subsidiaries working(W2) under the 3 columns(@reporting,@acquisition and post acquisiton)

    August 15, 2020 at 9:32 am #580636
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7172
    • ☆☆☆☆☆

    Hi,

    Assuming that the values you refer to are at the acquisition date then you increase the net assets by each of these amounts in the acquisition date column.

    If the values remain the same at the reporting date, which is unlikely, then you would put in the same figures in the reporting date column ad there would be no movement in the post acquisition column.

    What is more likely is that inventory will have been sold and there will be additional depreciation on the plant. We therefore would adjust the reporting date column for the amount on inventory that is left and any depreciation charged. The post acquisition movement will be the difference between the reporting date and acquisition date numbers.

    Thanks

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