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Wiley acquired 80% of Coyote on 1 January 20X8. At the date of acquisition Coyote had a building which had a fair value $22 million and a carrying amount of $20 million. The remaining useful life was 20 years. At the year end date of 30 June 20X8 the fair value of the building was $23 million. Coyote’s profit for the year to 30 June 20X8 was $1.6 million which accrued evenly throughout the year. Wiley measures non-controlling interest at fair value. At 30 June 20X8 it estimated that goodwill in Coyote was impaired by $500,000. What is the total comprehensive income attributable to the non-controlling interest at 30 June 20X8?
A $250,000 B $260,000 C $360,000 D $400,000The solution given by BPP is :-
A – 250,000Profit to 30 June 20X8 (1.6m × 6/12) 800,000 Additional depreciation on FVA ((2m/20) × 6/12) (50,000) Goodwill impairment (500,000) Other comprehensive income – revaluation gain 1,000,000 1,250,000 NCI share 20%
My concern is why they have not considered the Depreciation while calculating the revaluation of the asset as of 30/6/2008 . If consider the revaluation surplus would be 1.55 Million (23-(22-22/20*6/12) but in the solution it is calculated as 1 Million (23-22)
Kindly advise me if my understand is wrong.
“At the date of acquisition Coyote had a building which had a fair value $22 million and a carrying amount of $20 million.”
I believe it’s because the question specifically tells you that the carrying value as at the date of acquisition was $20 million – I’m assuming that that figure represents the value after depreciation for those 6 months from the previous year end up to date of acquisition
OK?
Hi, I’m studying F7 at the moment and came across this same issue. Having spoken to BPP, they have confirmed that the answer given in the book is incorrect.
However, I have got the depreciation as a different figure.
If the question means what it says “At the date of acquisition Coyote had a building which had a fair value $22 million” then the depreciation from the previous year end to date of acquisition is not an issue
But now we come to the issue of depreciation since acquisition to the year end post-acquisition
Here it should be 1/2 x $22 million / 20 $550,000 and a carrying value of $21,450,000
This compares with the fair value as at the post-acquisition year end of $23,000,000 and a post-acquisition gain of $1,550,000
Is that better?
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