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Hi,
In the draft balance sheet for may 2012, the amount/CA of Hail is $55.
The information says:On 1 June 2010, Robby acquired 80% of the equity interests of Hail. The purchase consideration comprised
cash of $50 million. Robby has treated the investment in Hail at fair value through other comprehensive income
(OCI).Could you kindly tell me the ‘reason’ why it should be reversed from OCE??
Thank you.
Brother hail was acquired on 1 June 2010 for 50 million….So its 31 May 2012 so the fair value has increased to 55 million…we have to calculate goodwill so we have to take 50 million as the consideration..rather than 55 million…Only dividend is reversed from the OCE and added in Retained Earnings.
nope, I didn’t talk about dividend, that’s obvious it has to be reversed. I’m asking abou the reversal of $5m from OCE. I’ll wait for Mike’s anwer.
Alright Mike, I’m giving up on this question. There wouldn’t be Robby Hail Zinc anymore from me. God bless.
Hi, sorry for taking so long.
We will have been treating the investment in accordance with IFRS9 as at fair value through other comprehensive income whereas it should have been treated under IFRS3. So now we need to undo the incorrect entries and effectively start again!
OK?
Hi Mike,
I dig out this thread and trying to solve the problem myself when I study past paper Q 1 Robby – June 2012, time iv, Robby purchased PPE for $10 m on 1 June 2009.
One more confusing point on Robby,
in the answer sheet of OCE part, profit on revaluation of investment in Hail to be deducted $5m, why? In the question paper, item (i), I notice purchase of Hail is cash $50m, investment in Hail is $55m, Robby has treated invstm in H at FVTOCI, what does it mean? if this “gain”on fv change 55-50=5, should not be recognized in OCE, where should it be?
Thanks,
QinI notice to 31 May 2012, new deprn is $0.61, old deprn is $0.5, excess deprn 0.61-0.5=0.11 realized out of revaluation surplus $11-$9=$2 to R.E., then remaining $2-$0.11=$1.89 realized to OCI in IS, but total impairment loss is $2.59, so $2.59-$1.89=$0.7 charged to R.E. as a loss. But in PPE calculation, why total $2.59 deducted, what I am thinking is just $0.7 needed to be deducted, coz there is $2 revaluation surplus to release the excess dreprn ($0.11) and some part of impairment loss ($0.89)?
Can you give double entry to all of them.
Many thanks,
Qin
One more, third point – R in Z’s 5% FV increased from 2m to 5m, the 3m gain was not recognized in P&L, how to treat it?
Thanks,
QinThe 5m gain shouldn’t be recognised in the consolidation – it’s an investment by a parent in a subsidiary, not an investment in some quoted company unrelated to Robby
The asset is falling in value by 2.59. Such a fall is charged initially against any balance in Revaluation Reserve relating to that asset with any excess going to Statement of Income – retained earnings
Hi Mike,
1) you mean 5m gain just recognized in H-Robby’s own B/S? If yes, what’s the double entry? Also comparing this with Minny – Dec. 12, 3m gain on F.V.increase of Puttin is recognized in R.E. Puttin is H-Minny’s asso. In addition, in the answer sheet of Minny, the examiner says the gain 3m in OCE up to 1 June 2012 would not be transferred to P&L for the year but can be in R.E.. The question said Minny bought 16% more share of Puttin to have significant influence. Is it the reason 3m gain can be moved to Minny’s R.E.? If no significant influence or not buying 16% more, the 3m only has stay to OCE?
In PPE item(iv), Dr is OCE 1.89, What’s the Cr. for 1.89?
One more, third point – R in Z’s 5% FV increased from 2m in 1 June 2009 to 5m 1 Dec.2011, the 3m gain was not recognized in P&L, how to treat it? What’s the difference between this Z and Minny’s Puttin gain on FV increase
Thanks,
Qin
The printed solution identifies two separate gains – one of 1m and the other of 2m and then goes on to explain them
Hi Qin, I really do not think you are focused on the printed solution!
Check out the examiner’s answer again and, if there remains a doubt, post again
Hi Mike,
It takes time for me to understand your answer 🙂 I think I can understand your prior explanation now 🙂
Hope you can answer my following Qs:
From the question – Robby has treated the investment in Hail at fair value through OCI. Robby had treated the investment in Zinc at FVTPL in B/S to 31 May 2011. But there are different treatment to the FV adjustment on Hail and Zinc.
For Hail, 5 is not a realized gain, so we should remove it from OCI. Dr. OCI 5, but Cr. investment in Hail 5. This CR. 5 why not reflecting in Consol? Or Cr. 5 just shown in Robby’s individual account?
For Zinc, in answer sheet working 2, INCREASE IN F.V. TO 31 MAY 2011 FOR 1M, how it come, the Q just tells us Robby’s investment in Zinc on 31 May 2012 is 19m, 1m higher than total investment at 1 dec. 2011- 18m. I am confused in working 3 of Group R.E., increase in F.V. of equity interest- Zinc for 2m.
Thanks,
Qin
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