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Sir here in solution I do not understand why they have added 9440 profit on disposal in operating expenses ? Can you please explain me
Hi,
This profit is what has arisen on disposal of the investment in the individual company accounts. As we are preparing the group accounts, based upon substance over legal form, then we need to remove this figure (legal form – disposal of the investment) and replace it with the group profit on disposal (substance – disposal of net assets and goodwill).
Thanks
Sir I have 1 confusion here. In the question the consolidated operating expenses are of 3300, right. And only subsidiary’s operating expenses are of 1673 (i.e 2510 x 8/12). So for preparing individual P&L of only parent company we need to deduct 1673 from 3300, correct?
This I have understood , but they have also added 9440 profit on disposal which was supposed to be shown in individual P&L of parent company, so they have done (3300 – 1673 + 9440) , but in question 1 line is mentioned that a gain on disposal of Swanson Co of $9·44m is currently included in operating expenses.in consolidated P&L, so it means that this 9440 is already adjusted in 3300 fig then now why we are adding back 9440?
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