Hi mike, if the fair value of Subsidiary`s inventory were greater than its book value @ acquisition, i know the difference is included in NA of S@DOA while calculating g/will.
what are the relevant accounting entries if the inventory is not sold during the year? and 2) if it is sold in the year? thanks in advance.
Ask the Tutor ACCA FR
FAIR VALUE ADJUSTMENT-INVENTORY
10y ago#1No accounting affect if it is sold before the year end - cost of sales will include the fair value adjustment of the inventory
If it's not sold by the year end, the inventory still held by the subsidiary that was under-valued as at the date of acquisition will be valued at its fair value at the year end
Most unlikely to happen both in the exam and in real life
understood.thanks for your quick response
10y ago#3You're welcome
please, if the fair value of Subsidiary`s inventory were greater than its book value @ acquisition,by say $100 must we add this amount in pre acq. while calculation ret, earning of subsidiary in w3 format.
thanks
10y ago#5Yes - it's a fair value adjustment
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