Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Fair value adjustments on acquisition
- This topic has 5 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
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- April 18, 2015 at 3:15 pm #241719
Hi mike,
On acquisition, when the fair value of assets is greater than the book value, I don’t understand why a revaluation surplus isn’t created with the difference.
I get that the Ppe carrying amount is increased, and effectively goodwill is valued at a lower amount than it would have otherwise been without the fair value increase. But why not show a revaluation surplus instead?
Thanks mike
April 18, 2015 at 5:19 pm #241730Because the adjustment is not actually written into the subsidiary’s records – this is simply an exercise to reflect fair values in the interests of fair representation and to calculate goodwill correctly
Ok?
April 18, 2015 at 7:39 pm #241751Thanks Mike, but I don’t entirely get it. Why would it not be written in the subsidiary’s records?
April 18, 2015 at 8:03 pm #241755Why does the subsidiary have to write in the revaluation? If it wants the carrying value to remain at historic cost less accumulated depreciation, then fine.
Actually, it leads to a more consistent approach in that the parent’s assets could themselves also be carried at historic cost less accumulated depreciation
April 18, 2015 at 8:34 pm #241763Thank you mike
April 18, 2015 at 9:49 pm #241765You’re welcome
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