05-04-2010, 03:32 PM
You will must take the effect of Revaluation of fixed assets in consolidated financial statements. In my opinion the effect of revaluation can be taken in subsidiary's own financial statement also.
The following material published in an article in "Student Accountant",official magzine of ACCA, deals very well with your question.
"The most common form of fair value adjustment is that made to the assets of the acquired subsidiary. The amount of the required adjustment is normally given in the question. The simplest of these adjustments would be to a non-depreciating, non-current asset (normally land). The amount of the adjustment should be added to the carrying amount of the asset (as it appears in the subsidiaryâs books), and the total included in the consolidated balance sheet (think of this as a debit entry). The amount of the adjustment should also be included in the calculation of goodwill (the equivalent of a credit entry, similar to creating a revaluation reserve). Note â sometimes in practice (but not in a Paper 2.5 examination question) a subsidiary will actually revalue its assets to fair values (in its entity financial statements) prior to consolidation, to assist the consolidation process. This is sometimes referred to as âpush downâ accounting, whereby the fair values determined by the parent are âpushed downâ into the subsidiaryâs books."
For more information see the link
http//www.accaglobal.com/pubs/students/publications/student_accountant/archive/scott0606.pdf
Regards,
Awais Aftab
The following material published in an article in "Student Accountant",official magzine of ACCA, deals very well with your question.
"The most common form of fair value adjustment is that made to the assets of the acquired subsidiary. The amount of the required adjustment is normally given in the question. The simplest of these adjustments would be to a non-depreciating, non-current asset (normally land). The amount of the adjustment should be added to the carrying amount of the asset (as it appears in the subsidiaryâs books), and the total included in the consolidated balance sheet (think of this as a debit entry). The amount of the adjustment should also be included in the calculation of goodwill (the equivalent of a credit entry, similar to creating a revaluation reserve). Note â sometimes in practice (but not in a Paper 2.5 examination question) a subsidiary will actually revalue its assets to fair values (in its entity financial statements) prior to consolidation, to assist the consolidation process. This is sometimes referred to as âpush downâ accounting, whereby the fair values determined by the parent are âpushed downâ into the subsidiaryâs books."
For more information see the link
http//www.accaglobal.com/pubs/students/publications/student_accountant/archive/scott0606.pdf
Regards,
Awais Aftab
