Acca financial Accounting (FA) Study Text ac ca (FA)

participants at the measurement date." 

i.e. it is an exit price

 

(IFRS 13, 

para 9). 

The need to account on a fair value basis reflects the fact that the statement of 

financial position often values items (mainly non

­

current assets) at their historic 

cost less depreciation. This could mean the carrying amount of assets is 

significantly different to their current market values, particularly in the case of 

assets that tend to appreciate in value, such as land and buildings. 

 

---

 

Consolidated statement of financial position  

416

 

KAPLAN PUBLISHING

 

 

Fair values  

 

The subsidiary’s identifiable assets and liabilities are included in the 

consolidated accounts at their fair values for the following reasons. 

•

 

Consolidated accounts are prepared from the perspective of the 

group, rather than from the perspectives of the individual entities. 

The book values of the subsidiary’s assets and liabilities are largely 

irrelevant, because the consolidated accounts must reflect their cost 

to the group (i.e. to the parent), not their original cost to the 

subsidiary. The cost to the group is their fair value at the date of 

acquisition. 

•

 

Purchased goodwill is the difference between the value of an 

acquired entity and the aggregate of the fair values of that entity’s 

identifiable assets and liabilities. If fair values are not used, the 

value of goodwill will be meaningless.