Provisional Fair Value of Identifiable…

Ssweetdream13y ago

Hi Tutor,

I would like to ask the question on BPP revision kit (December 2009) Grange question.

Note (ii)

provisional fair value of identifiable assets $202m including contingent liabilities $30m. then revised estimate contingent liabilities to $25m.

how to calculate the fair value of net assets acquired?

I refer to the answer, it use the provisional fair value.

Thanks in advance for answering my question. :)

MikeLittleTutor13y ago#1

Yes, because we cannot use the revised estimate. As at the date of acquisition our best estimate of the contingency was $30m and any later adjustment will NOT be used to amend the goodwill calculation

Ssweetdream13y ago#2

Thanks.

The revised estimate will include in post acquisition for Retained Earnings calculation, right?

I calculated the fair value net assets acquired (share capital+retained earnings+other components of equity) is different from provisional fair value? so, do I need to do any adjustment for that?

MikeLittleTutor13y ago#3

Hi, not sure I understand your question but I'll try to answer what I believe you're asking!

At date of acquisition, we have to use the best estimate which is given as 202 and uses the value of the contingency at 30.

At year end / consolidation date, the contingency has a revised fair value of 25. That's the amount to include when calculating the post acquisition profits of the subsidiary - the difference of 5 ( ie 30 - 25 ) will be used to INCREASE the subsidiary's retained earnings as at today ( it's a reduction of a fair valued liability )

Is that ok, or do you still have a query?

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