1 Groups and consolidation: an overview

Plus fair value of NCI at acquisition 
 
 X 
Less net acquisition-date fair value of identifiable assets acquired and 
liabilities assumed: 
Ordinary share capital 
X 
Share premium 
X 
Retained earnings at acquisition 
X 
Fair value adjustments at acquisition 
X 
(X) 
Goodwill
X 
3.1.1 Example 
P Co acquires 90% of S Co for $10,000,000. At this date the fair value of S Co's net assets are 
$8,000,000 and the fair value of the NCI is $1,000,000. Calculate goodwill. 
Goodwill 
$'000 
Fair value of consideration transferred 
10,000 
Fair value of NCI at acquisition 
1,000 
11,000 
Less net acquisition-date fair value of identifiable assets acquired and liabilities
assumed 
(8,000) 
Total goodwill 
3,000 
 EXAM FOCUS POINT 
In the exam there are a couple of ways that you could be given the fair value of the NCI at
acquisition. 
(a) 
The question could simply provide you with the figure.
(b) 
You could be told the subsidiary's share price just before the acquisition. You would then need 
to multiply the share price by the number of shares held by the NCI.
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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
430
 
3.1.2 Goodwill attributable to NCI 
Total goodwill is recognised in the statement of financial position, as the group controls 100% of it. 
However, we can calculate goodwill attributable to the NCI as follows. 
$'000 
Fair value of NCI 
1,000 
NCI in net assets at acquisition (10% 

8,000) 
(800) 
Goodwill
200 
3.2 Example: NCIs 
P Co purchased 75% of the share capital of S Co on 1 January 20X1 for $60,000 when the retained 
earnings of S Co were $5,000. The fair value of the NCI in S Co at that date was $15,000. The 
statements of financial position of P Co and S Co as at 31 December 20X1 are given below.
P CO
STATEMENT OF FINANCIAL POSITION 
Assets
$
$
Non-current assets 
Tangible assets 
50,000 
30,000 $1 ordinary shares in S Co at cost 
60,000 
110,000 
Current assets 
45,000 
Total assets
155,000 
Equity and liabilities
Equity
80,000 $1 ordinary shares 
80,000 
Retained earnings 
55,000 
135,000 
Current liabilities 
20,000 
Total equity and liabilities
155,000 
S CO
STATEMENT OF FINANCIAL POSITION 
$
Assets
Tangible non-current assets 
35,000 
Current assets 
40,000 
Total assets
 
 
75,000 
Equity and liabilities 
Equity
40,000 $1 ordinary shares 
40,000 
Retained earnings 
15,000 
55,000 
Current liabilities 
20,000 
Total equity and liabilities
 
 
75,000 
Required
Prepare the consolidated statement of financial position at 31 December 20X1. 
Solution 
All of S Co's net assets are consolidated despite the fact that the company is only 75% owned. NCI is 
included in the statement of financial position at its fair value plus its share of post-acquisition retained 
earnings.
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CHAPTER 24
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THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION