Hi Mike,
in the exam June15, Q.9, the Retained Earning calculation deducts the full amount of URP in inventory instead of taking the 80% of it (corresponding to the participation %).
In a similar example in my BPP book (pag.136) instead it considers the URP multiplied by the % of participation.
Which one of the 2 approaches is correct?
Thanks
Luigina
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Treatment of URP in case of participation in Associate
10y ago#1There is more than one way to skin a cat (English idiom!)
You can take the FULL amount from the associate's retained earnings and then calculate the group's share of those reduced retained earnings or ...
... you can take the group's share of the associate's retained earnings and then deduct the group's share of the pup
Say pre-adjustment retained earnings were $100,000, the pup was $5,000 and the percentage holding was 30%
We can 1) 30% x (100,000 - 5,000) = 28,500 or ...
... 2) (30% x 100,000) - (30% x 5,000) = 28,500
Does it matter?
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