1 Groups and consolidation: an overview

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
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Study Guide 
Intellectual level
G Preparing simple consolidated financial statements 
1 Subsidiaries 
(c) Describe the components of and prepare a consolidated
statement of financial position or extracts thereof, including:
(i) Fair value adjustments at acquisition on land and 
buildings (excluding depreciation adjustments) 
(ii) Fair value of consideration transferred from cash and 
shares (excluding deferred and contingent consideration) 
(iii) Elimination of intra-group trading balances
(excluding cash and goods in transit) 
(iv) Removal of unrealised profit arising on intra-group trading
(v) Acquisition of subsidiaries part way through the financial 
year 
S 
(d) Calculate goodwill (excluding impairment of goodwill) using the 
full goodwill method only as follows:
Fair value of consideration 
X 
Fair value of non-controlling interest 
X 
Less fair value of net assets at acquisition 
(X) 
Goodwill at acquisition 
X
S 
 
1
Summary of consolidation procedures 
Basic consolidation consists of two procedures. 

Cancelling out items which appear as an asset in one company and a liability in another 

Then adding together all the uncancelled assets and liabilities on a line by line basis 
The asset 'investment in subsidiaries' in the parent company accounts always cancels with the share 
capital of the subsidiary companies. The only share capital in the consolidated accounts is that of the 
parent company.
How are consolidated financial statements prepared? We will consider the basic procedures in the rest of 
this chapter. 
1.1 Basic consolidation procedure 
The accounting requirement for consolidated financial statements are set out in paragraph B86 of
IFRS 10. The preparation of a consolidated statement of financial position, in a very simple form, 
consists of two procedures. 
(a) 
Take the individual accounts of the parent company and each subsidiary and