Key concepts

Considerations Goodwill
transferred
A group Non-controlling interest
Net asset of Basic principles
subsidiary
Fair value Group’s retained
earnings

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 Considerations

Cash Issuing shares Incurring

liabilities…

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 A group: One enterprise (the parent) controls,
either directly or indirectly another enterprise
(the subsidiary). A group consists of a parent
and its subsidiaries

 Net asset: represents the net value of an entity

and is calculated as the total value of the entity’s
assets minus the total value of its liabilities
Net asset = Total assets- Total liabilities= Equity

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 Fair value:
The price that would be received to sell an asset
or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date
Fair value of net assets of subsidiary at the date of
acquisition: identifiable assets and liabilities of
subsidiary in acquisition are measured at
acquisition-date fair value
Fair value of net assets of subsidiary= Book value
of equity of subsidiary (net book value of
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subsidiary)+ Fair value adjustment on acquisition
 (2) Goodwill ( of NCI)= Fair value of NCI at the
date of acquisition- (% share of non-controlling
shareholders in subsidiary x Fair value of net
assets of subsidiary)

Total Goodwill (reported in the group’s

consolidated statement of financial position)=(1)+
(2) = Fair value of consideration paid+ Fair value
of NCI at acquisition date- 100% Fair value of net
assets of subsidiary
Goodwill is unchanged if there is no impairment on
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goodwill
 Non-controlling interest:
The holder of any shares not acquired by the
parent are collectively referred as a non-controlling
interest (part-owners of subsidiary)
All of the net assets of the subsidiary is included in
the group statement of financial position. Non-
controlling interest is shown as partly financing
those net assets
NCI post acquisition presented in group’s
statement= NIC at acquisitionday+ % share of
Non-controlling shareholders x retained earnings
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of subsidiary (from acquisition day to reported day)
 Group retained earnings= P’s retained earnings
+ P’s share in S’s post-acquisition retained
earnings

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 Basic principles

Adding together Cancellation of Consolidation as if

intragroup items you owned everything
then show the extent
to which you do not
own everything

Assets and liabilities are - Investment in subsidiary is The non-controlling

added together replaced by the % share of interest in the
parent of fair value of the assets subsidiary’s net asset is
and liabilities of subsidiary separately reported as a
- Eliminate in full intragroup assets part of equity
and liabilities, equity, income,
expenses and cash flows relating to
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group