1 Groups and consolidation: an overview

 EXAM FOCUS POINT 
You are highly likely to get a question requiring the calculation of goodwill in your exam so make sure 
you go through this section carefully, working through all the examples and the question. The ACCA 
examining team has highlighted the calculation of goodwill as a topic which is poorly answered in the 
exams. 
 EXAM FOCUS POINT 
There is a technical article on the ACCA's website on the preparation of consolidated financial 
statements, written by a member of the examining team. We recommend that you read this article – 
called 'Preparing simple consolidated financial statements' – as part of your studies for the FFA/FA 
exam. 
There is also an article specifically on the consolidated statement of financial position – called 
'Preparing a group statement of financial position' – and we recommend you read this article as well.
Furthermore, it is advisable to note the following common errors in preparing consolidated financial 
statements, highlighted by the examining team: 
(a) 
In valuing goodwill, deducting the fair value of the NCI from the consideration instead of 
adding it on. 
(b) 
Not adjusting for intra-group balances. Amounts owed between the parent and subsidiary 
should be eliminated from receivables and payables in the consolidated statement of financial 
position. 
(c) 
Not adjusting for intra-group transactions. Intra-group sales should be eliminated from revenue 
and cost of sales in the consolidated statement of profit or loss. 
(d) 
Incorrectly adding together the equity share capital of the parent and subsidiary. The share 
capital in the consolidated statement of financial position should be only that of the parent.
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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS