Inter Corporate Investments

CFA Level II
#1

Percentage of Elbe’s net income (in thousands) = 30% × €12,375 = €3,712.5

Minus amortization of the excess value of tangible assets at acquisition €105.0

Investment income = €3,607.5

Can somebody explain why we deduct the amortisation of excess value for the calculation of investment income? I was under the understanding that this is only done for calculating carrying value on the Balance Sheet or Goodwill.

Thanks

#2

It’s no different than depreciating any other tangible asset that you own. The subsidiary is depreciating only the value that they have on their books, but the value on your books is higher, so you have to supplement their depreciation expense with depreciation expense of your own.