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Hi Mike,
I have got a question regarding to F7, Chapter 7, Example 11. the working you did on the lecture, Working 2 – Goodwill, you taken into account of the F.V of inventory, NDNCA & DNCA. then on working 3, you only taken into account of F.V of NDNCA & DNCA, but not inventory. I understand we assumed we still got NCA, but not inventory. however, on the FP, you added the NDNCA £15 & DNCA £18 on the balance sheet, why? I thought we already take care of the NDNCA & DNCA on working 2 & 3,but why do we need to add it back on the balance sheet on OA? confused, please help, and why do we ignored the inventory, not add it back on the balance sheet please?Thank you
Hi
In working three, the fair value of the assets at date of acquisition are deducted in arriving at post-acquisition retained. I sincerely hope that I haven’t added them into the closing Statement of Financial Position because it’s likely ( normal ) in questions that the inventory as at date of acquisition has all been sold by the year end.
Does that answer it? If not, post again
Hope that helps
Hi Mike,
Thank you for your reply, but I am still confused. on working 2 – Goodwill, you added the Fair value adjustment for Inventory, dep’n current asset, & non’dep’n current asset into the calculation to get the goodwill value. on working 3, you taken into account of the Fair value adjustment for NDNCA & DNCA to get the Conts retained earning figure for the parent company. I understand that we assumed inventory would be all sold at the end year, but why do we need to add the NDNCA £15 & DNCA £18 on the balance sheet? The OA should it not be just (350 + 300 = 650)? why do we need to add the 15 &18 onto the OA as well to get to 683 please? I thought we took care of the double entry on working 2 & 3??Thank you
What is the double entry you refer to in working 2 and 3?
I can see debit TNCA ( both depreciable and non-depreciable ) but …..
….. where’s the credit?
In my opinion, the fair value of the assets will be debited ( as above ) to the TNCA Account and the credit will be credited to a Cost of Control Account to be set off against the cost of acquisition to give the balance which represents Goodwill on Acquisition
Where has your credit gone?
Hi Mike,
I think I am being stupid here, keep looking at the same question and cannot get my head around it. Basically, I want to know why do we need to add the £15 & £18 back on Other asset on the statement of financial position please?Because that’s the fair value adjustment of the assets we bought – $15,000 non-depreciable and $30,000 depreciable, depreciated for 2 out of 5 remaining years = $18,000
The subsidiary, typically, has NOT recorded the fair values in its records but, for fairness of presentation, the parent should reflect the fair values under the control of the parent, and that includes these FV adjustments as at today’s Balance Sheet date
Better?
If not, as usual, post again!
Hi Mike
Im confused by the treatment of FV adjustments treatment in wk3. When you solved example 11, you added Fair Values adjustments net of depreciation to Retained earnings figure. but the way the similar question is solved in BPP manual (Q13 Hever) is different in that only movements in Fair values are considered in wk3. which one is the correct approach?
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