Currently, the investment in a subsidiary, either domestic or foreign, must be tested for impairment every tax period. Note;FRS quoted references are superseded, I have a question relating to the valuation of an investment in a subsidiary, Explore our AccountingWEB Live Shows and Episodes, View our 2020 Accounting Excellence Firm Awards Finalists, MyWorkpapers Lite for growing accountancy firms. The agreement simply states that the acquisition was for the shares. Irrespective of who is using the customer list, who owns it? Impairment: Investment in subsidiaries A goodwill impairment on consolidation indicates a decrease in value since acquisition. Surely in the absence of some agreement one could just as easily say the sub retains the goodwill inherent in the list and is licensing the parent to use said list for no consideration, meantime. ‘investment in a subsidiary’ are not in IFRS 9’s scope. Other IFRIC members disagreed. Section 35 – Transition to FRS 102 – Ability to show the deemed cost equal to the revalued value such that these assets are not considered to be revalued assets and instead that is deemed to be the cost of the asset. Recoverable amount is £2.5m so a further impairment loss of £210,000 is needed. What were the net assets of the subsidiary on the acquisition date? Therefore, I don't see how the market value of £400k can be justified. It is the notionally adjusted goodwill figure which is then aggregated with the other net assets of the CGU. Specialised activities (Section 35) PwC – UK GAAP (FRS 102) illustrative financial statements for 2018 year ends 1001 FRS 102, paragraph 27.26 requires Topco to notionally adjust the goodwill to take into account the NCI. Examples of source references used are: 4.14 Paragraph 4.14 of FRS 102 No mention of transfer of business etc. The finance director has calculated recoverable amount of Subco’s net assets to be £950,000. So has the holding company suffered a loss by acquiring £400,000 of goodwill without paying for it? the higher of fair value less costs of disposal and value in use). The Ratchford Group is a clothing retailer. FRS 102 states that “Investments in unlisted Company shares, whose market value can be reliably determined, are remeasured to market value at each balance sheet date. Subsequent to this, the subsidiary company prepared accounts to 30 April 2016, which showed all assets/liabilities had been stripped out, leaving solely the £100 issued share capital. However, the standard board is considering changing the requirement before 2015. Impairment of assets (Section 27). My understanding is that the original value of the investment prior to impairment or revaluation is simply the price the purchaser was prepared to pay to the vendor to get his hands on the customer list. FRS 102 does clarify that where an entity’s share of losses in an associate exceed their investment, the deficit does not need to be recognised on the consolidated balance sheet unless there is a constructive obligation to meet the liabilities. The TaxCalc Survival Guide to Self Assessment, Payroll and Covid: Growth and profit opportunities, Formulas to avoid sluggish payroll during COVID-19. However, FRS 102, paras 27.29 to 27.31 restrict the amount of the impairment loss that can be reversed. The investment is an investment in an equity The objective of FRS … Hyperinflation (Section 31). This states that an entity cannot reduce the carrying amount of any asset in a CGU below the highest of: FRS 102, para 27.23 then says that any excess amount of the impairment loss which cannot be allocated to an asset because of the above restriction must be allocated to the other assets of the unit pro rata on the basis of the carrying amount of those other assets. 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