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When calculating the subs equity it is normally the pre acquisition profit that is adjusted and taken off the consideration but for this question alone (from the ones I have worked) it seems that have used the post acquisition figure (2000 x 9/12) What is the reason behind this?
Without looking at the question may I take a guess?
It’s a mid-year acquisition question, 3 months into the current year
And the answer has taken retained earnings as at the year end and deducted the 9 months’ worth of retained earnings since acquisition to arrive at the retained earnings figure as at the acquisition date
Is that correct?
And does that answer your question?
The alternative approach (and one that I always adopt) is to take the subsidiary retained earnings brought forward and then add on the retained earnings for the pre-acquisition period (in this case I’m guessing that it’s 3 months) but you should nevertheless arrive at the same figures
OK?
The alternative approach (and one that I always adopt) is to take the subsidiary retained earnings brought forward and then add on the retained earnings for the pre-acquisition period (in this case I’m guessing that it’s 3 months) but you should nevertheless arrive at the same figures
I also prefer this method but where I am getting stuck is the treatment of retained earnings.
In all the questions I have done thus far they simply give you the pre acquisition retained earnings (before the parent acquired the sub) and after the acquisition. In that case I just x/12 the months that do not relate and deduct the whole figure from the consideration
In the example I am talking about the pre acquisition retained earnings isn’t given. Now trying to find the figure to take off the consideration to get the goodwill is baffling me. All they have given is the post acquisition financial statements.
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