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Consider the following scenario:-
1. Parent company “A” received 95% share in company which is in similar industry as a government grant. Hence treated as subsidiary – “B”.
2. The total value of the company “B” $135 m was recognised as asset under the header “Investment in subsidiary” similarly as “Deferred Income” under liability.
3. The deferred income is amortized on quarterly basis by a fixed percentage over years and currently hold $ 26 m.
4. Meanwhile “A” purchased the balance holding of 5% of “B”. Now the total net worth of the subsidiary is updated.
5. Following market revaluation of the subsidiary’s assets, the fair value of the same is lower than book value.
Is it possible to do the below –
Book value of investment
Less: Deferred income
So that the value will now be similar to the market value with immaterial differences and we do not to have to amortize further.
Is this acceptable according to IFRS?
What is the rule?