This question was on consolidation. Part (a) required candidates to calculate consolidated goodwill and part (b) required extracts of the main line items of the consolidated statement of profit or loss.

The question included the treatment of fair value of plant at acquisition, unrealised profit in inventory and goodwill impairment. Most candidates scored well on part (a), many gaining full marks.

The two most common errors relating to the consideration were using the share price of the subsidiary where it should have been that of the parent, and failing to discount the deferred consideration (using $1.54 instead of $1.40).

A slightly unusual aspect of calculating the subsidiary's net assets at acquisition was that the preacquisition profits needed to be increased for an amount of borrowing cost (interest) that should have been capitalised under IFRS.

This adjustment cause difficulty for many candidates (it was commonly ignored or deducted from pre-acquisition profits and/or not time apportioned), but other than this, most candidates were able to calculate the net assets at acquisition.