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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 

 

424

 

Applying this to our example, the working will look like this.

 

 

 

$      

$      

Consideration transferred* 

 

80,000 

Less value of identifiable assets acquired and liabilities assumed: 

    Ordinary share capital 

50,000 

    Retained earnings at acquisition 

 

10,000 

 

 

 (

(60,000) 

Goodwill 

 

 20,000 

* This is the cost of the investment in Sing Co's statement of financial position. 

SING CO

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20X1 

 

 

$    

Assets  

 

Non-current assets  

 

   

Goodwill arising on consolidation 

 

20,000 

Current assets  

 

100,000 

 

  

120,000 

Capital and reserves 

 

Ordinary shares 

 

75,000 

Retained earnings 

 

  45,000 

 

 

120,000 

2.2.2 Example: goodwill and pre-acquisition profits continued

 

Suppose that a year has passed, and you now wish to prepare the consolidated statement of financial 

position for the Sing group as at 31 March 20X2. The individual statements of financial position are as 

follows.  

SING CO 

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20X2 

 

 

$      

Assets 

Non-current assets 

   Investment in 50,000 shares of Wing Co at cost 

80,000 

Current assets 

 

  50,000 

Total assets 

 

130,000 

Equity and liabilities 

Equity 

   Ordinary shares 

75,000 

   Retained earnings 

 

  55,000 

Total equity and liabilities 

 

130,000 

 

WING CO  

STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20X2 

 

$      

Current assets 

 

80,000 

Equity 

   50,000 ordinary shares of $1 each 

50,000 

   Retained earnings 

 

30,000 

 

 

80,000 

Prepare the consolidated statement of financial position as at 31 March 20X2.

 

Solution 

We can see from the individual statements of financial position that Wing Co has generated profits of 

$20,000 since being owned by Sing Co, as the retained earnings balance has increased from $10,000 

on acquisition to $30,000 at 31 March 20X2. These profits belong to the group and should be 

consolidated. The technique to adopt here is to produce a new working: Retained earnings. A proforma 

working is set out below. 

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CHAPTER 24  

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  THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION