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Someone please explain me the logic behind adding the depreciation based on unrealised gain of asset in the retained earnings of selling entity ?
Because, as each year goes by, that proportion of the gain on transfer is realised
And whats the difference between contingent and deferred consideration and which one of them is examinable ?
If I make a profit of $50,000 on the transfer of an asset with a five year remaining useful life then, as each year goes by, one fifth of the profit has been realised because the asset has contributed to the subsidiary’s profits
In the same way that the passage of time uses up the asset by way of depreciation, that same time as it passes “uses up” the pup that I recognized on the transfer
Is that better?
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