1 Groups and consolidation: an overview

 
425 
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