B407F week 4 (student)-1

B407F week 4 (student)-1 - Consolidation (2) 1 Fair value...

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1 Consolidation (2)
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2 Fair value As we have to account for acquisition at the fair value of assets and liabilities acquired at the date of acquisition. The general idea is that the fair value is “amount at which an asset or liability could be exchanged in an arm’s length transaction” For adjustment of fair value, it can be done in two ways: Adjusted in the subsidiary account (seldom practice) Adjusted in the consolidated account Illustration 6
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3 Realized profits or losses Inter-company profits and losses are said to be realized from the group’s viewpoint when the goods and assets are ultimately sold to outside parties. No adjustments will be necessary for these realized inter-company profits and losses
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4 Unrealized Profit and losses If goods and assets remains with the buying company at the end of the accounting period, profit made by the selling company is said to be unrealized. If
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B407F week 4 (student)-1 - Consolidation (2) 1 Fair value...

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