If the fair value of a subsidiary's assets exceeds their book value when the subsidiary is acquired,the assets of the subsidiary are written up at the time consolidated financial statements are prepared.

Question

Quizplus · Accepted Answer

This is because according to the purchase accounting method, the excess of fair value over book value of a subsidiary's assets is recognized as goodwill on the consolidated balance sheet. The subsidiary's assets are written up to their fair value at the time of acquisition in order to reflect their true value on the balance sheet.

If the Fair Value of a Subsidiary's Assets Exceeds Their