I am trying to get my head around allocable cost amount (ACA) allocation but am finding it too complicated to understand. Can I get an example of an ACA allocation to base my calculations on?
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Answer by Anton Joseph, Strathfield South 2136 NSW
- Understanding ACA allocation can be quite tricky. In our example company Z acquires all of company D’s shares, making company D a wholly owned subsidiary of company Z after the purchase.
- Company D’s assets at the time of consolidation are:
- $100 cash - a retained cost base asset; and
- 2 reset cost base assets:
- asset A - $300 (market value); and
- asset B - $200 (market value).
- Therefore the cost to company Z of purchasing membership interest in the subsidiary company D (the ACA) is $500.
- The costs for the assets brought into the group by company D are worked out as follows:
- the ACA is reduced by the retained cost base asset (cash) 500 - 100 = $400;
- this $400 is allocated to two reset cost base assets using their market values;
- the total market value of the two reset cost base assets is $500;
- so the ACA allocated to Asset A = 400 x 200 / 500 = $160; and
- the ACA allocated to Asset B = 400 x 300 / 500 = $ 240.