in General IFRS Discussion by Level 1 Member (2.4k points)
The entity have decided to found new subsidiary, and contributed it's own building in new founded subsidiaries capital. The building was accounted at cost model in parents balance sheet. Can i measure initially the investment at cost (the cost when parent had purchased this building ) or it is obligatory to revalue this buildings in it's fair value.

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2 Answers

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by Level 5 Member (11.3k points)
as per my understanding, u means that the entity has invested in other company by giving building as purchase consideration.I would give answer on this assumption.

As per Provisions of IFRS,he purchase consideration for an acquisition (business combination) is the sum of:
  the fair values, at the acquisition date, of the assets transferred by the
acquirer, such as cash , Building etc

So the building shall be removed from balance sheet of parent company and building shall be shown in consolidated account at fair value
by Level 5 Member (29.1k points)
There is a one thing that is still not clear to me. Why should i use a fair value method when evaluating the potential liability when company's own shares are and will be shown at their nominal value which will eventually lead to result where estimates loss will be greater that the real result, and as i shown it before there will be a 0 zero effect on a PL in course of the three year period.
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by Level 5 Member (11.3k points)
I didnot understand why you mentioned Contingent liability when there is any relevance of this in given question.

I would try again to explain it again with example.

Suppose Parent company Purchase equity shares of Subsidiary company amounted rupees $100 and wants to exchange it with one of its building.Suppose the NBV of building in Parents accounts is $90.In order to remove it from accounts following entries would be passed.

Cr    Building $90

Cr gain on exchange of building $ 10

Dr Investment in associates $ 100

and in subsidiary company following entry would be passed.

Dr Building $100

Cr capital $v100

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