I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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Retained earnings 

 

  P Co 

S Co 

 

 $ 

$ 

Per question 

 X 

X  

Pre-acquisition retained earnings 

 (X) 

 

  

  X  

Post-acquisition retained earnings of S Co  

 X 

 

Group retained earnings 

 X 

 

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

 

Retained earnings 

 

 Sing Co 

 Wing Co 

 

 $      

 $ 

Per question 

 55,000 

30,000 

Pre-acquisition retained earnings 

 

 (10,000) 

 

 

 20,000 

Post-acquisition retained earnings of Wing Co 

 20,000 

   

Group retained earnings 

 75,000 

 

The goodwill calculation will be the same as before, as it is based on the net assets of Wing Co, which 

includes retained earnings, at the acquisition date.  

SING GROUP 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 20X2 

 

 

$     

Assets  

 

Non-current assets  

 

   

Goodwill arising on consolidation 

 

20,000 

Current assets (50,000 + 80,000) 

 

130,000 

 

  

150,000 

Equity and liabilities 

 

Ordinary shares (Sing only) 

 

75,000 

Retained earnings (see working above) 

 

  75,000 

 

 

150,000 

2.3 Fair value of net assets at acquisition

 

The land and buildings of the subsidiary may be worth more than their carrying amount at acquisition. If 

this is the case, it must be taken into account in the consolidated financial statements, as follows.  

(a) 

The subsidiary's land and buildings must be included in the consolidated statement of financial 

position at their fair value. 

(b) 

The difference between the fair value of the subsidiary's land and buildings and the carrying value 

of those land and buildings must be taken into account in the goodwill calculation. This is known 

as a 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