B407F Week 4 (student)-1

B407F Week 4 (student)-1 - B407F Week 4-Consolidated...

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B407F Week 4 -Consolidated Financial Statements (II) Illustration 6 Fair value adjustments with depreciation At the date of acquisition, the fair value of Company B was equal to their carrying amounts with the exception of an item of plant, which had a fair value of $200 million in excess of its carrying amount. It had remaining life of 10 years at that date (straight-line depreciation is used). Depreciation on plant and equipment is classified as cost of sales in income statement. Company B has not adjusted the carrying amount of its plant as the result of the fair value exercise. Goodwill at acquisition: $m NCI Consolidation journal entries: Debit($m) Credit($m) Company B – Share Capital Retained profits All rights reserved by W.F.Hui. No further copying is permitted. 1
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Tangible non-current assets Goodwill Company A – Investment in Co. B NCI (W1-Elimination of investment in subsidiary) Dividend Income – Company A NCI Dividend declared and paid – Company B (W2 – Elimination of inter-company dividend) Depreciation expense (200/10) Accumulated depreciation (W3-Current depreciation on revalued non-current assets) Income Statement (300 – 20) = 280 x 25% NCI (W4-Current income to NCI) Consolidation worksheet: Co. A Co. B Debit working Credit
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