Reference no: EM132767226

Question - Modern Ltd has acquired all the shares of Country Ltd. The accountant for Modern Ltd understands that all the identifiable assets and liabilities of Country Ltd must be recognised in the consolidated financial statements at fair value. Although he understands the need to revalue items recorded by the subsidiary at carrying amounts different from fair value, he is unsure of a number of issues associated with accounting for these assets and liabilities.

Required -

i) Should the adjustments to fair value be made in the consolidation worksheet or in the accounts of Country Ltd? What would be the consequence of that?

ii) What equity accounts should be used when revaluing or recognising assets and liabilities?

iii) Do these equity accounts remain in existence indefinitely, since they do not seem to be related to the equity accounts recognised by Country Ltd itself?