revaluation TNCA

Hi Tarek

let me get a couple of points clear first. I assume that Hardy became a subsidiary on 1 January, 2007 and I assume that the remaining life of these fair-valued assets is 6 years FROM 1 January, 2007

The fair value adjustment is typically not reflected by the subsidiary following the take-over. The carrying value is normally NOT adjusted.

May I assume also that the parent / group year end is 31 December, 2007?

In working W2 Goodwill, increase the fair value of the subsidiary net assets at date of acquisition by 12,000 and thereby reduce the value of the goodwill. As you have said in your post, the TNCA will increase were we to prepare a Statement of Financial Position as at that date.

A year goes by, and now we are looking to prepare the consolidated statement of financial position.

In working W3 Consolidated Retained Earnings to be deducted from Hardy’s “today’s) retained earnings is an amount of 2,000 which represents the notional additional depreciation on the notional increase in the value of the TNCA (12,000) depreciated over its remaining estimated useful life (6 years)

On the consolidated statement of financial position there will be an increase of 12,000 – 2,000 = 10,000 increase in the value of the combined TNCA

Of course, the nci will suffer because the post acquisition profits of the subsidiary have just been reduced by a notional charge for depreciation – but they did enjoy an advantage when we increased the fair value of the subsidiary net assets as at date of acquisition

OK?

What does tnca stand for?