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Why is depreciation expense adjusted in subsequent years

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Reference no: EM132765187

Recently Brown Ltd have acquired all the shares of Pink Ltd. One of the assets in the statement of financial position of Pink Ltd was $42,000 goodwill, which had been recognised by Pink Ltd upon its acquisition of a business from Blue Ltd.

Having prepared the acquisition analysis as part of the process of preparing the consolidated financial statements for Brown Ltd, the directors have asked you to explain these following issues:

Problem 1: Where a fair increment involves a depreciable asset (increased by $50,000), why is depreciation expense adjusted in subsequent years? How is the depreciation rate/method determined when the depreciation rate/methods of Pink Ltd are different to those used by Brown Ltd?

Reference no: EM132765187

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