Hi sir, i was wondering if this is true:
1) Suppose the FV of NCA in the subsidiary is lower than its CV(impairment), then the depreciation charge over the remaining useful life will boost the group retaining earnings at p% in S. the entries born out of the adjustment will be:
DR SOPL, CR PPE and then; CR RE(p%) and CR NCI.
2) If the FV is greater than the CV, then:
DR PPE, CR GOODWILL and the extra depreciation; DR RE(P%), DR NCI.
I get this things confusing, pls help. thanks
Ask the Tutor ACCA FR
group sfp
5y ago#1Hi,
Sorry but I don't quite follow your points above. What part of the consolidation is it in relation to exactly? I don't quite see it being part of an exam question and you could be over thinking it all.
If you give me a bit more information then I can possibly help.
Thanks
BPP question 246.
Boat Co acquired 60% of Anchor Co on 1 January 20x4. At the date of acquisition, the carrying amount of Anchor co's net asset were the same as their fair values, with the exception of item of machinery which had carrying amount of 90,000, a FV of 160,000 and remaining useful life of 5years. NCI are valued at FV.
What is the journal entry required to reflect this FV adjustment in the consolidated SFP?
ANS; DR RE 25200 DR NCI 16800 DR PPE 28000 CR GOODWILL 70,000.
I'm well satisfied with the explanation of this answer at the back. my question was what will be the entries if the opposite happens. As in when FV is less than the carrying amount.
my thought: DR SOPL CR PPE with the difference and then the new depreciation charge on the difference taken to; CR RE(P%) CR NCI.
thanks.
5y ago#3Hi,
Yes, if the FV is less than the carrying amount then there will be a reduction in the value of the asset in the group accounts and a corresponding saving on the depreciation as the group charge is based on the lower value of the asset.
The lower charge will increase profit in the group accounts, where P gets its share of the saving and the NCI their share.
Thanks
Sign in to reply to this topic.