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Hi Mike,
I wonder if you could help with this question:
A acquires 70% of B.
Value of NCI at acquisition £105,000
Fair Value of a building is £250,000 higher than carrying amount with 40 years life remaining
B’s Retained earnings increase £300,000 in 1 year.What amount should the NCI appear in CSoFP?
Thank you
$193,125 BUT ONLY IF the acquisition of B took place on day 1 of the accounting year and no dividend had been paid / proposed by B (you haven’t given me full information!)
Yes that’s the right answer, (no dividends and 1 full year)
The bit that is confusing me is, in Chapter 7 example 11, for w3 you have the full fair value increase included (less 2 years depreciation)
However in the question above, only the depreciation would be included in w3. Could you help clarify this for me please?
Thanks.
In working W3, in the top section, we have the retained earnings as at today
In the lower section we have retained earnings as at date of acquisition
In your question, as at today we would show “fair value adjustment $250,000, Depreciation on fair value adjustment $6,250” and in the bottom section we would show “fair value adjustment $250,000”
So, you see, the only difference is the depreciation.
In fact both Kaplan and BPP show just the change ie just the depreciation (sometimes) but I prefer to show both – as at now and as at date of acquisition
OK?
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