STUDY NOTES

CFAP 1: ADVANCED ACCOUNTING AND FINANCIAL REPORTING

CHAPTER 11: BASIC CONSOLIDATION AND CHANGES IN GROUP STRUCTURES

Group statement of financial position as at the reporting date

$000
Goodwill (W3) X
Assets (P + S) X
Total assets X

Equity capital (Parent's only) X

Retained earnings (W5) X
Other components of equity (W5) X
Non-controlling interest (W4) X
Total equity X
Liabilities (P + S) X
Liabilities (P + S) X

You will need to do the following:

• Eliminate the carrying amount of the parent's investments in its subsidiaries (these will be replaced by
goodwill)
• Add together the assets and liabilities of the parent and its subsidiaries in full
• Include only the parent's balances within share capital and share premium
• Set up and complete standard workings 2 – 5 to calculate goodwill, the non-controlling interest and group
reserves.

(W2) Net assets of each subsidiary

This working sets out the fair value of the subsidiary's identifiable net assets at acquisition date and at the
reporting date.

At acquisition At reporting
date
$000 $000
Equity capital X X
Share premium X X
Other components of equity X X
Retained earnings X X
Goodwill in the accounts of the sub. (X) (X)
Fair value adjustments (FVA) X X
Post acq'n dep'n/amort. on FVA (X)
PURP if the sub is the seller __________ (X)
X X
(to W3) __________

Remember to update the face of the statement of financial position for adjustments made to the net assets at
the reporting date (such as fair value uplifts and provisions for unrealized profits (PURPS)).

The fair value of the subsidiary's net assets at the acquisition date are used in the calculation of goodwill.

The movement in the subsidiary's net assets since acquisition is used to calculate the non-controlling interest
and group reserves.

From the desk of Hassnain R. Badami, ACA

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