[daphney]

i had a similar problem before. what you are missing is that in example 3, we were asked to use the proportionate share of net assets method not the fair value. i think it is also worth noting that when using the proportionate share method, our net assets are determined by adding the share capital and retained earnings of the subsidiary at reporting date and NOT by adding assets and liabilities and then netting them off. i suspect it would be double counting if we were to add S’s share of retained earnings again because in example 3 we said [20%*(250 000{share capita}+900000{Retained earnings}]), so in essence we have included the subsidiary’s share of post acquisition retained earnings. i hope i’m not misleading you. Chris please confirm

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