Reference no: EM133064059
Question - Poplin Limited acquired a wholly owned subsidiary Sequins Limited on 1 July 2019. The consolidated financial statements for the year ended 30 June 2021 are being prepared.
At the acquisition date the following information was available concerning a trademark:
The trademark was measured at a fair value of $1.4 million.
In Sequins' general ledger the trademark was recognised at a carrying amount of $450,000 (with a cost of $600,000 and accumulated amortisation of $150,000).
Both Poplin and Sequins recognise intangible assets under the cost model in IAS 38 Intangible Assets. Accordingly, Sequins has not revalued the trademark to the $1.4 million fair value.
The trademark was considered to have a remaining useful life of nine years.
Ignore the impact of tax.
What is the correct amount of the amortisation adjustment to be recognised on consolidation against the opening retained earnings account for the year ended 30 June 2021?
A. An amortisation adjustment recognised on consolidation to decrease the opening retained earnings account by $105,556.
B. An amortisation adjustment recognised on consolidation to increase the opening retained earnings account by $105,556.
C. An amortisation adjustment recognised on consolidation to decrease the opening retained earnings account by $211,112.
D. An amortisation adjustment recognised on consolidation to increase the opening retained earnings account by $211,112.