Regarding the step acquisition of Caller indirectly because T acquires Park, why don't we recognize the gain on the equity investment in C on the date of consolidation. i.e. 1.Jun.2012, i.e. at that date the value of the investment of T in C was 280 and one year ago 1.Jun.2011 the original investment was 260 so this gain of $20 why don't we recognize it in W3: consolidated reserves/retained earnings because the rules states that for a step acquisition we have to revalue the investment at date control is got and then take any gains/losses to retained earnings so why isn't it done in the answer to this question?
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Trailer June 2013 Q1 (a) P2
https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p2/exampapers/int/P2INT_2013_jun_q.pdf.pdf
Above is the link to the question just in case you need to view it as I'm referring to note 1 and note 2 in the question. Thanks!
12y ago#2Here's an extract from the question:
"The fair value of the 14% holding of Trailer in Caller was $280 million at 31 May 2012 and $310 million at 31 May 2013" The original cost was $260m
Trailer has accounted for a $50m gain - another extract from the question: "Caller 310" from the Trailer statement of financial position
So Trailer has already, at the year end, recognised a $50m increase in the value of its 14% holding in Caller (Debit Investment $50m, Credit Retained Earnings $50m)
Now here's an extract from the answer (working 4 Retained Earnings):
"Reversal of gain on revaluation of investment (30)"
That therefore leaves just $20m recognised through Retained Earnings and I believe that that answers your question
:-)
This is simplicity in perfection. Thank you!
12y ago#4You're welcome :-)
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