if goodwill has been recognised in a transaction and given that both equity and acquisition method result in the same value for net income, would excess depreciation (fair value - book value) be charged in acquistion method as it is charged in equity method??
can someone kindly help out with this??
Yes, it is.
My pleasure.
This is a little confusing. In equity method, the excess over book value is depreciated and charged on the P/L till it reaches book value at purchase date (assuming no impairments). In acquisition method, the fair value of the asset is depreciated using the SL method till salvage value. You don’t do the same for equity method because it’s held at cost. I just wanted to make that clear in terms of BS and IS allocations. But both should net you the same bottom line.
depreciating the excess and depreciating the fair value basically lead to the same result and hence same net income…
Did I say something different?