3. Fair Value Adjustments and Mid-Year Acquisitions Flashcards

1
Q

What is the difference between single company accounts and consolidated accounts in reference to fair value?

A

Most single company accounts use cost and ignore fair value, consolidated accounts MUST show subsidiaries assets and liabilities at fair value

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2
Q

What are the three columns used in the working for fair value adjustment?

A

At acquisition, change and at reporting date

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3
Q

From the working for fair value adjustment, where does the sum of the acquisition column go?

A

To subsidiaries net asset value in goodwill

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4
Q

From the working for fair value adjustment, where does the sum of the changes column go?

A

To subsidiaries retained earnings value in retained earnings

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5
Q

From the working for fair value adjustment, where does the sum of the at reporting date column go?

A

To consolidated non current assets

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6
Q

What 5 things can make up the cost of combination?

A
  1. Cash
  2. Deferred consideration (present value)
  3. Contingent consideration (fair value depending on probability of payment amounts)
  4. Share-for-share exchanges
  5. Quoted shares
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7
Q

What cannot be included in the cost of combination?

A

Direct costs e.g. legal fees - written off as an expense

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8
Q

What 2 things are excluded from a subsidiaries accounts but should be included in the consolidated accounts?

A

Intangible assets and contingent liabilities

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9
Q

How are revaluation reserves treated when consolidating accounts?

A
  1. Added to net assets for goodwill

2. The group is only entitled to its share of post acquisiton changes in reserves

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