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there is one question name PENKETH in kaplan kit , its a consolidation question . there was one adjustment which i am not able to understand why they have not added in net asset at acquisition date
(Sphere’s land, valued using the revaluation model, increased by $1 million since the
why we have not added it as fair value adjustment??
or is their a difference in the word fair value and revalue?
and also in consolidated comprehensive income why we not added like(1000*6/12) as company was acquired on 1 oct x3 and year end is march x4
in answer full1000 was added
It is a revaluation of an asset that has taken place in the post-acquisition period and not a fair value adjustment on the acquisition date. Due to this the subsidiary will have increased the value of the asset already in its own financial statements and we will therefore just add across the updated value when consolidating S’s results.
The challenge is then dealing with the revaluation gain in the equity section. This is treated in the same way as any other reserve, such as retained earnings, where we consolidate it by adding P’s share of any post acquisition movement to 100% of the parents reserve.
Also, we do not ever pro-rate the assets/liabilities on the group SFP for a mid-year acquisition. The SFP is a snap shot in time at the reporting date, it doesn’t matter when the subsidiary was acquired, and so we control those assets/liabilities in full at the reporting date and so add them across 100% at the reporting date.