Question
In: Accounting
AG acquired 80 percent of the shares of its subsidiary LM on January 1, Year 5.On...
- AG acquired 80 percent of the shares of its subsidiary LM on January 1, Year 5.On this date the fair value of the land of LM was greater than its carrying value. Which of the combinations of LM’s net book value (NBV) and fair value increments (FVI) would be included in its consolidated assets values for land on December 31, year 6?
- 80 percent of NBV and 90 Percent of FVI.
- 100 percent of NBV and 90 Percent of FVI.
- 100 percent of NBV and 100 Percent of FVI
- 80 percent of NBV and 80 Percent of FV
Solutions
Expert Solution
Given case AG acquired 80% of the shareholding of its subsidiary LM on January 1, year 5.
On the date the fair value of the land of LM is greater than its carrying value.
In that case the AG is required to make consolidated financial statements, preparation of consolidated financial statements the AG company has to record all the assets and liabilities of the LM company to the proportionate to the shares held with the AG company.
Which is as follows :-
AG company holding as 80% and non controlling interest as 20%
As per above provided information the AG company has to consolidate all the value of assets and liabilities of 80% of the LM company in its consolidated financial statements.
As per above given procedure, the value of land to be consolidated as 80% of net book value and 80% of fair value increments.
as per international financial reporting standards every company has to evaluate its assets and liabilities based on the fair value of the respective assets and liabilities. But not given case LM didn't revised the value of land. In this case the parent company takes 80% of the net book value of the land and 80% of the fair value increments for preparation of consolidated financial statements.
the right of AG company in LLM company is limited to 80%, so the value of land to be consolidated and also the fair value increments to be taken to the parent company is limited to 80% only.
The answer is option d.
These are all the information required to solve the above given question.
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Thank you.
ekkarill92 answered 2 years agoRelated Solutions
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