ACCA FR Mid-Year Acquisition 2026: Time-Apportion the P&L, Not the Net Assets
The bottom line
On a mid-year acquisition you time-apportion the subsidiary's income and expenses — but you consolidate its net assets in full at the reporting date. Mix these two up and your entire group profit is wrong. It's one of the most repeated errors in the FR examiner's reports.
Why students lose the marks
When a parent buys a subsidiary part-way through the year, you only own the results from the acquisition date. So every line in the subsidiary's statement of profit or loss — revenue, cost of sales, expenses — is brought in at 100%, then restricted for the months owned. Bring in a full year and you've inflated group revenue and profit by the pre-acquisition period you never controlled.
The flip side trips up just as many candidates. The statement of financial position is a snapshot at the year end. You already own the subsidiary at that date, so you add 100% of its net assets — no time-apportioning. Candidates who "helpfully" pro-rate the net assets throw away easy marks.
The one thing you do time-apportion on the balance-sheet side is the extra depreciation on a fair value adjustment. The December 2025 FR examiner's report flagged this directly: common errors were treating the fair value uplift as if it never depreciated, or failing to time-apportion that extra depreciation for the post-acquisition period.
Worked example
Parent acquires 80% of Sub on 1 October. Group year end is 31 December — so Sub is owned for 3 months. Sub's revenue for the full year is $12m.
Wrong: add the full $12m to group revenue. Group revenue is now overstated by $9m, and every downstream figure — gross profit, profit for the year, retained earnings, NCI — is wrong.
Correct: add 3/12 × $12m = $3m. Do the same for every one of Sub's P&L lines.
Now the fair value adjustment. Say Sub's plant was uplifted by $2m at acquisition with a 5-year remaining life. Extra depreciation is $400k per year — but only 3/12 = $100k hits the post-acquisition consolidated P&L. At the year end, though, the plant sits in the group SOFP at the full fair-value carrying amount. Time-apportion the depreciation; never time-apportion the asset.
What to do
1. Label the timeline first. Before touching numbers, write the acquisition date, the year end, and "months owned = X/12" at the top of your working. It stops you pro-rating the wrong statement.
2. Split your brain by statement. P&L = time-apportion. SOFP = full amount at year end. Say it out loud in the exam if you have to.
3. Deal with the fair value depreciation separately. Calculate the annual charge, apply the months-owned fraction to the P&L, and leave the asset's carrying value alone.
The takeaway
FR global pass rates sit around the low-to-mid 50s, and the consolidation question is where the marks are won or lost. Getting the mid-year mechanics right is pure method — no judgement, no interpretation. Learn the split once and it's marks in the bank every sitting. Time-apportion the profit. Consolidate the assets in full. Don't let a date cost you the paper.