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When control is gained in steps, we revalue the consideration to fair value and the increase goes to P/L acc as a gain.
But in this qs the increase was 3m but the bpp kit has done something else and the inc is 2m to p/L as followsFV of consideration paid 5m
FV of 5% when no control waas achieved (3m)
Revaluation gain to Retained earnings =2mPls help
Is this not explained in the second part of paragraph (ii) of the question?
If you are still troubled after reading the question again, post again
No i did not get it
I think that the fair value now as compared to the date of acq shares should go to P/L.
Here why have they taken some other amount as an increase?I was also confused by this when I tackled the question. I had initially treated the gain/loss on disposal from the groups point of view: ie. FVNCI 5 less Cost 2 = Gain Disposal – completely wrong!
We should be taking the gain/loss from the disposal of the equity investment from the parents view, compare what the FVCI at of disposal less carrying value of the investment.
FVNCI – 5
Less Carrying Value (RE now 19 – RE at Doa 16) -3
The gain/loss on disposal 2I am still not totally happy with disposals so that will be revision for today:)
In the Statements of Financial Position given in the question, the investment in Zinc is shown as19. However, the cost of the two investments in Zinc, according to paragraph (ii) was only 18. The additional 1 is surely the increase in the value of the 5% holding in the period between acquisition of the 5% holding and the date of the deemed disposal.
I think that should do it for you
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