1 Groups and consolidation: an overview

 EXAM FOCUS POINT 
If there is a difference between the carrying amount and the fair value of a subsidiary's land and 
buildings in an exam question, you will be given the fair value. 
The ACCA examining team commented that in the December 2013 exam, the question on the 
calculation of goodwill had a low pass rate. In calculating goodwill, some students incorrectly used the 
net assets at the 
year-end
date instead of at the 
acquisition date
. Students were required to derive the 
net assets at the acquisition date by deducting post-acquisition retained earnings from net assets at the 
year end. 
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CHAPTER 24
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THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
 
427 
ANSWER 
P CO 
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 20X6 
$
$ 
Non-current assets 
Land and buildings (63,000 + 28,000 + 23,000*) 
114,000 
Goodwill (W1) 
3,000 
117,000 
Current assets (82,000 + 43,000) 
125,000 
242,000 
Equity and liabilities 
Equity 
Ordinary shares of $1 each (P Co only) 
80,000 
Retained earnings (W2) 
132,000 
212,000 
Current liabilities (20,000 + 10,000) 
30,000 
242,000 
* The $23,000 fair value adjustment is added to the land and buildings balance, so that the 
consolidated statement of financial position shows the fair value of land and buildings acquired.
Workings 
1 
Goodwill
$ 
$ 
Consideration transferred 
67,000 
Less net acquisition-date fair value of identifiable assets acquired 
and liabilities assumed: 
Ordinary share capital 
20,000 
Retained 
earnings 
21,000 
Fair value adjustment at acquisition 
23,000 
(64,000) 
Goodwill 
3,000 
2 
Retained earnings
 P Co
 S Co 
$ 
$ 
Per question 
112,000 
41,000 
Pre-acquisition retained earnings 
(21,000) 
20,000 
Post-acquisition retained earnings of S Co
20,000 
Group retained earnings 
132,000 
 
2.4 Types of consideration transferred 
The consideration paid by the parent for the shares in the subsidiary can take different forms. For 
example, the parent could pay cash for the subsidiary, as we have assumed so far. However, the parent 
could pay a combination of cash as well as shares in itself, or perhaps just shares in itself to acquire the 
subsidiary.
The following example shows the effect of consideration in the form of shares on the consolidated 
statement of financial position.