1 Groups and consolidation: an overview

shares in the subsidiary 
at a price 
greater or less than 
their face (or 'par') value
. The asset will appear in the parent company's accounts at cost, while 
the equity will appear in the subsidiary's accounts at par value. This raises the issue of 
goodwill
, 
which we will deal with next. 
(b) 
Even if the parent company acquired shares at par value, it 
may not 
have 
acquired all the shares 
of the subsidiary
(so the subsidiary may be only partly owned). This raises the issue of 
non-
controlling interests
, which we will deal with later in the chapter.
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CHAPTER 24
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THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
 
421 
 
2
Goodwill arising on consolidation 
Goodwill arising on consolidation is recognised as an intangible asset in the consolidated statement of 
financial position (IFRS 3, para. 32). 
In the examples we have looked at so far the cost of shares acquired by the parent company has always 
been equal to the par value of those shares. This is seldom the case in practice and we must now 
consider some more complicated examples. We will do this through the following example.
2.1 Example: goodwill arising on consolidation 
P Co purchased all of the share capital (40,000 $1 shares) of S Co for $60,000 in cash. The statements 
of financial position of P Co and S Co prior to the acquisition are as follows. 
STATEMENTS OF FINANCIAL POSITION AS AT 31.12.X1 
 P Co 
 S Co 
Non-current assets
$'000 
$'000 
Property, plant and equipment 
100 
40 
Cash at bank 
60 
– 
Total assets
160 
40 
Equity and liabilities
Share capital 
160 
40 
Total equity and liabilities
160 
40 
Firstly we will examine the entries made by the parent company in its own statement of financial position 
when it acquires the shares.