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Dear Sir,
Question 1 Pacemaker_June 2009
Please, explain , why depreciation and amortization of the revalued assets were not accounted in Net assets of subsidiary calculation, but were accounted in the calculation of Group RE?
Thank you!
Hi,
The depreciation and amortisation will both be adjusted for in the reporting date column of our net assets working, as well as being reflected on the face of the group SFP. The ACCA answer looks like they have not been adjusted for but they have. You can see it in the working done after the group retained earnings calculation, and then the same figures are adjusted for on the PPE and intangibles lines on the group SFP.
Thanks
Thank you for the reply.
So, the decpreciation and amortisation is adjusted at the reporting date only?
Not at the date of acquisition?But why the FV of assets is reported at the date of acquisition? (In the Goodwill calculation we take the net assets at acquisition date, right?)
So the net assets at the acquisition date are adjusted for the FV change, but not for the depreciation and amortisation?Yes, they will only be adjusted at the reporting date as no depreciation/amortisation can be charged on the acquisition date as we have only just gained control of the assets. When we acquire PPE normally we charge depreciation from when it is acquired but the charge at that acquisition date is zero as it has yet to be used, so similar to what we see with the group accounting.
Yes, the goodwill looks at the fair value of the net assets at the date of acquisition, so therefore there will be no adjustments for either depreciation or amortisation. Depreciation and amortisation are both post-acquisition expenses.
Thanks
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