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Profit for the year was 3900 of the subsidiary’s SPL, while at year , SOFP RE was 4500.
The acquisition took place 1/6/2010.Year end to consolidate acct was 30/09/2010.
How to calculate the RE when calculating the FV net asset of the sub.
If, at the year end within which the acquisition took place, the subsidiary’s retained earnings were $4,500 and we are told that the profit for the year within which this acquisition took place was $3,900, that must mean that the subsidiary’s retained earnings at the start of this year were $600 … and that $600 is entirely pre-acquisition
But also pre-acquisition is some of the $3,900 profit relating to this current year of acquisition (the period from the end of last year up to the date of the acquisition)
The period from 1 October, 2009 up to the date of acquisition 1 June, 2010 is the relevant pre-acquisition period so a period of 8 months
And the profits achieved in the full year were $3,900
Therefore, of that $3,900, $2,600 (8/12 * $3,900) is per-acquisition
But we know already that there was $600 as at the start of this accounting period
So the full amount of retained earnings as at the date of acquisition of the subsidiary must have been $600 brought forward from last year + $2,600 for the first 8 months of the current year = an aggregate of $3,200
Is that OK?
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