1 Groups and consolidation: an overview

 
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To do this, we usually assume that the subsidiary's 
profits accrue evenly
over the year. Then we can take 
the profit for the year and calculate the pre- and post-acquisition profits based on the number of months 
the parent has owned the subsidiary. 
QUESTION 
Acquisition during the year
 
Hinge Co acquired 80% of the ordinary shares of Singe Co on 1 April 20X5. On 31 December 20X4 
Singe Co's accounts showed a revaluation surplus of $4,000 and retained earnings of $15,000. The fair 
value of the NCI at acquisition was $7,000. The statements of financial position of the two companies at 
31 December 20X5 are set out below.
HINGE CO 
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X5 
$ 
$ 
Assets
Non-current assets 
Property, plant and equipment 
32,000 
16,000 ordinary shares of 50c each in Singe Co 
50,000 
82,000 
Current assets 
85,000 
Total assets
167,000 
Equity and liabilities
Equity 
Ordinary shares of $1 each 
100,000 
Revaluation surplus 
7,000 
Retained earnings 
40,000 
147,000 
Current liabilities 
20,000 
Total equity and liabilities
167,000 
SINGE CO 
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20X5 
$ 
$ 
Assets 
Property, plant and equipment 
30,000 
Current assets 
43,000 
Total assets
73,000 
Equity and liabilities 
Equity 
20,000 ordinary shares of 50c each 
10,000 
Revaluation surplus 
4,000 
Retained earnings 
39,000 
53,000 
Current liabilities 
20,000 
Total equity and liabilities
73,000 
Required 
Prepare the consolidated statement of financial position of Hinge Co at 31 December 20X5. You should 
assume that profits have accrued evenly over the year to 31 December 20X5.