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can you please explain the journal entries in this question about the factoring?
and about the treatment of the fair value adjustment of Zinc?
for the factoring if the seller bears the risk and reward, then receivable is not derecognized right???
And we have to create a loan to the amount we receive from the factoring and debit the cash with same amount.
So what do we do to the difference between the receivable and the loan amount, in this case to the 0.4???
as per the equity interest, why is there an adjustment to RE stating :
Increase in fair value of equity interest (5·00 – 2·00 – 1·00) = 2·00
shouldn’t the increase in fair value be calculated,in this case using the FV at the further acquisition(55%) date the $5 and the consideration of $2 at acquisition date of the 5% holding.
so what is that adjustment of 1 in the calculation???
sir , i also have same problem for factor rec. 4 – 3.60 = loss of .40
but why its added in REFactoring trade receivables 0·40
Hi,
Any difference between what we receive and what is derecognised as a receivable is taken through profit or loss, think of it as an irrecoverable debt expense. This is why when they’ve corrected the error and reinstated the receivable at $4 million they are also removing the expense of $0.4 million from profit or loss.
The answer for the goodwill is far too complicated in the model answer. The easiest thing to do is to look at what we’ve paid, $16 million, and add the fair value of the previously held holding, $5 million, and this give you $21 million.
Don’t stress about the finer details as you won’t have the time to do this in the real exam.
Thanks
I understood the factoring part.
i understood the goodwill part but what i want to now is in the RE they have recognised
‘Increase in fair value of equity interest – Zinc 2·00’
shouldnt this be 3.00?
ie the fair value of the equity interest 5.00
(-) consideration paid (2.00)
=increase in fair value of equity interest 3.00
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