Question

In a situation where the net assets acquired in the controlled entity are not recorded at...

In a situation where the net assets acquired in the controlled entity are not recorded at fair value, approaches that may be taken to account for this include:

Select one:

a. revalue the assets during the consolidation process each period.

b. adjust the depreciation on the assets to bring them to fair value in the consolidated accounts

c. revalue the assets in the parent entity's books

d. adjust the excess or goodwill so that the elimination entry balances.

Business   Accounting   
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Homework Answers

Answer #1

The answer is a.

a. Revaluate the assets during the consolidation process each period. Every time consolidation takes place, the subsidiary's balance sheet items are revalued to the current fair market values of the financial assets.

b. This cannot be done as only book value is evaluated through depreciation not the fair value of the asset.

c. Consolidation means just a combined report of both the companies but the items of the balance sheet and income statement remains different to both of them. So, including items of the subsidiary in the parent entity's books is not fair means.

d. This kind of goodwill comes into existence when the phenomenon happens between both the entities so this also doesn't play a fair means here.

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