- November 29, 2021 at 12:45 pm #642001
can you please tell me in this question how do we calculate the 3900 for RE at acquisition???
Thank you in advance!November 29, 2021 at 1:21 pm #642004
It appears that the question is not fully presented in Kaplan. The original question in Dec 2010 included SOPL for P and S, where the total comprehensive income for S for the year ended 30 Sep 2010 was $3,900,000.
Its a printing mistake. No need to worry too much about it. You will be given all relevant figures in real exam.November 29, 2021 at 1:52 pm #642007
and thank you for the quick response!
I am more afraid that i do not get the concept of how we calculate the RE at acquisition..
would you please assist me in getting the logic behind the steps?
My initial idea was that we calculate:
RE b/f + revaluation gains – dividends paid = RE c/f
however in this case i believe we have no dividends and simply replacing the revaluation gain and RE c/f does not bring me to the answer..
Thanks!November 29, 2021 at 4:37 pm #642022
The correct formula for calculation of RE (for FR exam) is:
RE at start of the year (b/f) + Profit for the year – dividends paid = RE at reporting date (c/f)
For consolidation questions, you can adjust it to make it appropriate as follows:
RE at acquisition + Post-acquisition profit – dividends paid = RE at reporting date
In this question, we could adjust the formula and find RE at acquisition.
For exam questions, there are two possible scenarios. Either you will be given ‘RE at acquisition’ date, or you will be given ‘RE at reporting date’ and you will have to go backwards making adjustments for any post-acquisition items to calculate RE at acquisition date, as is the case in this question.
A third possibility is mid-year acquisition, where you’ll be given RE at start of the year and you will have to add profit till the date of acquisition to arrive at RE at acquisition date. But such questions are rare and usually involve CSOPL only.
In regards to the formula you have written, ?revaluation gains are only transferred to RE when the asset (to which it relates) is sold. Until the asset is owned by the entity, revaluation gains cannot be transferred to RE. They will be maintained as a separate reserve under equity.
Good thing is, this is more of an SBR topic than FR and i have not seen any question involving these rules come up in FR exams.
I hope this helps.November 29, 2021 at 5:20 pm #642023
thank you for the detailed explanation – this was helpful, i will try to apply it next time.
I wish you lots of luck and success to your exams 🙂November 29, 2021 at 5:37 pm #642028
You are welcome.
And good luck for your exams.
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