Which of the following statements is correct?Group of answer choicesAASB 3 Business Combinations requires that any revaluations of a subsidiary’s assets at acquisition date must be done in the consolidation worksheet.The revaluation of non-current assets in the subsidiary’s records means that the subsidiary has adopted the cost model of accounting for those assets.Revaluations of assets such as goodwill and inventory are not permitted in the accounting records of the subsidiary.Inventory can be revalued to an amount greater than its cost in the records of the subsidiary.
Question
Which of the following statements is correct?Group of answer choicesAASB 3 Business Combinations requires that any revaluations of a subsidiary’s assets at acquisition date must be done in the consolidation worksheet.The revaluation of non-current assets in the subsidiary’s records means that the subsidiary has adopted the cost model of accounting for those assets.Revaluations of assets such as goodwill and inventory are not permitted in the accounting records of the subsidiary.Inventory can be revalued to an amount greater than its cost in the records of the subsidiary.
Solution
The correct statement is:
AASB 3 Business Combinations requires that any revaluations of a subsidiary’s assets at acquisition date must be done in the consolidation worksheet.
Here are the steps to understand this:
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AASB 3 Business Combinations: This is an accounting standard that provides guidance on how to account for business combinations. It requires that the identifiable assets acquired and the liabilities assumed in a business combination must be measured at their fair values at the acquisition date.
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Revaluations of a Subsidiary’s Assets: According to AASB 3, any revaluations of a subsidiary’s assets at the acquisition date must be done in the consolidation worksheet, not in the subsidiary's individual financial statements. This is to ensure that the consolidated financial statements present a true and fair view of the financial position of the group as a single economic entity.
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Cost Model of Accounting: The revaluation of non-current assets in the subsidiary’s records does not mean that the subsidiary has adopted the cost model of accounting for those assets. The cost model is one method of accounting for non-current assets, but revaluations are typically associated with the revaluation model.
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Revaluations of Goodwill and Inventory: Revaluations of assets such as goodwill and inventory are generally not permitted in the accounting records of the subsidiary. Goodwill is measured at cost less accumulated impairment losses, and inventory is measured at the lower of cost and net realisable value.
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Inventory Revaluation: Inventory cannot be revalued to an amount greater than its cost in the records of the subsidiary. This would violate the principle of conservatism in accounting.
Therefore, the statement "AASB 3 Business Combinations requires that any revaluations of a subsidiary’s assets at acquisition date must be done in the consolidation worksheet" is correct.
Similar Questions
Revaluation of assets to fair value in a business combination will be accounted for:a) in the records of the subsidiary.b) on consolidation.c) either A or B.d) none of the above
Which of following statements is not correct in relation to the consolidation process?Group of answer choicesTo avoid double counting of the group's equity, the equity of the subsidiary at the acquisition date needs to be eliminated from the records of the subsidiary.Subsequent to the acquisition date, any intragroup transactions within the group needs to be adjusted and eliminated.The fair value adjustments of assets that were not previously recorded by the subsidiary are recognised in the business combination valuation entries.Consolidated financial statements should offset the carrying amount of the parent's investment in the subsidiary.
Which of the following statements is incorrect?Group of answer choicesA bargain purchase gain arises when the purchase consideration is greater than the FVINA acquired.When a subsidiary has existing goodwill in their books at the date of acquisition, the amount of FVINA will decrease in the acquisition analysis.The Investment in subsidiary account is always eliminated on consolidation and this account will always be equal to zero for the group.If a company acquires shares in a subsidiary cum div, consolidation adjusting entries are required to eliminate dividend payable and dividend receivable up until the dividend is paid by the subsidiary.
In accordance with IAS® 16 Property, Plant and Equipment, which of the following is true? A.If an entity decides to use the revaluation model, then all of its non-current assets must be revalued B.An entity must transfer excess depreciation from the revaluation surplus to retained earnings on an annual basis in respect of any property which it revalues C.If an entity decides to revalue property annually, then this property will not need to be depreciated D.There is no requirement for an entity to revalue property on an annual basis
Which of the following statements relating to an asset revaluation surplus ...Which of the following statements relating to an asset revaluation surplus account is correct?Question 2Answera.An entity is able to use this surplus for the payment of future dividends.b.An entity can transfer the surplus to current period profit or loss when the asset is disposed of.c.An entity is not able to use this surplus for the payment of future dividends.d.An entity is not able to transfer this surplus to any other reserve account.
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