1 Groups and consolidation: an overview

 
 
(15 marks) 
 EXAM FOCUS POINT 
We have allocated 15 marks to the above question, as an indication of the type of question that could 
arise in the exam. However, the ACCA examining team has indicated that a 15 mark consolidation 
question could include a small amount of interpretation, which is covered in Chapter 26. A combined 
consolidation and interpretation question is included in the Practice Question Bank. 
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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
438
 
ANSWER 
Singe Co has made a profit of $24,000 ($39,000 – $15,000) for the year. This is assumed to have 
arisen evenly over the year; $6,000 in the 3 months to 31 March and $18,000 in the 9 months after 
acquisition. The company's pre-acquisition retained earnings are therefore as follows. 
$
Balance at 31 December 20X4 
15,000 
Profit for three months to 31 March 20X5 (
3
/
12 

24,000)
6,000 
Pre-acquisition retained earnings 
21,000 
The balance of $4,000 on the revaluation surplus is all pre-acquisition. 
HINGE CO 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X5 
$ 
$ 
Assets 
Non-current assets 
Property, plant and equipment (32,000 + 30,000) 
62,000 
Goodwill (W1) 
22,000 
84,000
Current assets (85,000 + 43,000) 
128,000
Total assets
212,000
Equity and liabilities 
Equity attributable to owners of the parent 
Ordinary shares of $1 each 
100,000 
Revaluation surplus (W3) 
7,000 
Retained earnings (W2) 
54,400 
161,400
NCI (W4) 
10,600
Total equity 
172,000
Current liabilities (20,000 + 20,000) 
40,000
Total equity and liabilities 
212,000
Workings
1 
Goodwill
$ 
$
Fair value of consideration transferred 
50,000 
Fair value of NCI
7,000 
Less net acquisition-date fair value of identifiable assets acquired 
and liabilities assumed: 
Ordinary share capital 
10,000 
Retained earnings at acquisition (as above) 
21,000 
Revaluation 
surplus 
4,000 
(35,000) 
Goodwill 
22,000 
2 
Retained earnings

Hinge Co 

Singe Co 
$
$
Per question 
40,000 
39,000 
Pre-acquisition retained earnings (W2) 
(21,000) 
18,000 
Group share of post-acquisition retained earnings 
Singe Co: $18,000 

80% 
14,400
54,400 
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CHAPTER 24
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THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION