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I have been watching the revision lectures and I’m confused about the treatment of fair value differing from carrying value and how it is incorporated into retained earnings.
Dec 2011 Q1 point (ii), we are told Saracen’s plant has a fair value of $4 million above its carrying amount. This is not included in the retained earnings calculation.
June 2009 Q1 point (v), we are told Syclop owned a property carried at $62 million. The fair value of the property is $82 million. This $20 million difference is included in the retained earnings calculation.
Am I missing something?
“we are told Saracen’s plant has a fair value of $4 million above its carrying amount. This is not included in the retained earnings calculation.”
This sounds like it could be a mis-interpretation on your part. If you are completely happy about the detail of your post, write again and I’ll check the lectures for myself (I hate listening to myself!)
But from what you have written, I can think of only one reason why the Saracen fair value adjustment has not been included within the consolidated retained earnings. It is possible (but most unusual for me) to include in working W3, Consolidated Retained Earnings only the post-acquisition movement of the fair valued asset.
So, in the recording for Saracen, have I possibly included only the depreciation of the $4m within the top half of woring W3?
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