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Hello sir,
Sir I had a doubt regarding the apportionment of post acquisition profits of subsidiary (for eg. post acquisition sales, asset disposal). Shouldn’t we apportion them only to the post acquisition period if the acquisition has been mid year for calculating goodwill and NCI value at year end.
The answer to your question is “It depends”!
The exam question will give you a date that (for example) the asset disposal took place. If that date is in the period before acquisition, then it needs to be included in the pre-acquisition period and NOT time apportioned over the full year
If the activity took place in the post -acquisition period (as it does within the question Ausra and Danute in the free course notes) then the event should be adjusted / accounted for within the post acquisition period and NOT time apportioned over the full year
Is that clear?
Yes sir, But sir the questions in my BPP kit don’t seem to apply it or maybe I am misinterpreting it. Like for question 35 Prodigal, in the calculation of goodwill they haven’t added back the profit on post acquisition sales as that profit must not have been realised b4 acquisition.
Is that wrong or am I misinterpreting it?Yes, you’re misinterpreting what you need to do.
Those post acquisition intra-group sales were just sales. They were the post acquisition equivalent of some pre acquisition sales. If you want to add back those post acquisition sales, why do you not also want to add back the other post acquisition sales to the post acquisition period …. and, whilst you’re at it, you can add back all the pre acquisition sales to the pre acquisition results.
Sales by way of trade are simply sales by way of trade. The ones that you need to adjust for are those that do not accrue evenly through the year (sales DO accrue evenly, normally)
So the sale of a building or piece of PPE – that would be adjustable
OK?
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