In the Situation in Which a Subsidiary Revalues Its Non-Current

question 67

Multiple Choice

In the situation in which a subsidiary revalues its non-current assets to fair value in its books as part of being acquired by a parent entity,the accounting treatment is:

• A) To treat the revaluation according to AASB 116 'Property, plant and equipment' in the books of the subsidiary entity.
• B) To create an asset revaluation reserve in the consolidated accounts and write it off against the parent entity's investment in the subsidiary.
• C) To adjust the investment recorded by the parent entity so that the entry balances in the elimination entry.
• D) Determined by AASB 127 'Consolidated and Separate Financial Statements', which is concerned with the treatment of the revaluation in the books of the controlled entity. It requires the adjustment to fair value to be written off to the income statement.
• E) None of the given answers.

---

Definitions:

Maintenance

The routine tasks and repairs conducted to keep equipment, buildings, or machinery in working order and prevent its deterioration.

Utilities

Services provided to the public or households such as water, electricity, natural gas, sewage treatment, and telecommunications, often subject to government regulations and possibly eligible for tax deductions in certain business contexts.

Rental Expenses

Costs incurred in the operation, maintenance, and improvement of a property rented out, which can often be deducted for tax purposes.

Deductible

The amount paid out of pocket by the policyholder before an insurance company pays a claim.