1 Groups and consolidation: an overview

fair value adjustment
. The proforma for goodwill will now look as follows. 
Goodwill 
$ 
$ 
Consideration transferred 
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 
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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
426
 
QUESTION 
Fair value of assets on acquisition
 
P Co acquired 100% of the ordinary shares of S Co on 1 September 20X5. At that date the fair value of 
S Co's land and buildings was $23,000 greater than their carrying value and retained earnings were 
$21,000. The statements of financial position of both companies at 31 August 20X6 are given below.
P CO 
STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 20X6 
$ 
$ 
Assets 
Non-current assets 
Land and buildings 
63,000 
Investment in S Co at cost 
67,000 
130,000 
Current assets 
82,000 
Total assets
212,000 
Equity and liabilities 
Equity 
Ordinary shares of $1 each 
80,000 
Retained earnings 
112,000 
192,000 
Current liabilities 
20,000 
Total equity and liabilities
212,000 
S CO 
STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 20X6
$ 
$ 
Assets 
Land and buildings 
28,000 
Current assets 
43,000 
Total assets
71,000 
Equity and liabilities 
Equity 
Ordinary shares of $1 each 
20,000 
Retained earnings 
41,000 
61,000 
Current liabilities 
10,000 
Total equity and liabilities
71,000 
Required
Prepare P Co's consolidated statement of financial position as at 31 August 20X6.