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Hello Mike, I suppose you’ll be answering my question. And thank god i passed my F7 last semester.
Well, back to my question,
P acquired S on 1 January 20×8 and it says any increase in the FV of NA over the carrying values at acquisition is attributable to a freehold property and HAS BEEN REALIZED BY 31 DECEMBER 20×8.
The Share capital of S are 200m and P acquired 90% of it for $400m and Retained earning at date of acquisition is $120m. The FV of NA at acquisition is $350m.
so the balancing figure of $30m should be FV adjustment right, but what does it mean it has been realized by 31 dec 20×8? any other things needed to be done? (no depreciation as it is a freehold prop) Im preparing conso P/L for 31 dec 20×8.
Thank you.
one more question. If a subsidiary sold an asset to parent, and there’s unrealised profit on the transfer, the excess depreciation should be deducted from parent or subsidiary retained profit?
Isn’t the point that included in this year’s profits is a gain on disposal of freehold land? Are you sure that the word used is “realised”?
Pups are deducted from the selling company. In the case of a TNCA transfer at a profit, the amount to be deducted is the net figure of profit recognised on transfer less depreciation on that profit element since the transfer
Ok?
in the suggested solution, there’s no fair value adjustment. balancing figure which is $30m is added to retained earning i.e. $120m + $30m = $150 (realized) . i don’t understand why the $30m is added to RE? what does the word realized means?
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