This was a 15 mark question requiring the calculation of extracts from the consolidated statement of financial position for goodwill, retained earnings and non-controlling interest.

Pleasingly this question was very well answered and some candidates gained full marks.

However, a word of caution – a number of candidates produced a full consolidated statement of financial position which was not asked for and so merely wasted time.

The calculation of goodwill involved dealing with a share exchange, deferred consideration and fair value adjustments.

Most candidates correctly calculated the consideration for the acquisition; the main problems were in calculating the net assets at the date of acquisition.

A common error was not time apportioning the $3,000 loss for the year and many candidates treated this as profit.

Another common error was to either ignore, or not realise, that the unrecorded deferred tax in the subsidiary's financial statements should be recognised as an asset on consolidation (due to the circumstances described in the question).

Many candidates scored well in the calculation of retained earnings, however some had difficulty calculating the post-acquisition profits of the subsidiary.

In particular they did not account for a loss on equity investments or adjust for the over-depreciation on the fair value (which was below the carrying amount of the plant in the subsidiary's financial statements); many candidates seemed to think the plant was under-depreciated.

Other common omissions were: incorrect deductions of the unrealised profit in inventory (especially using margin rather than mark-up) and ignoring (or not time apportioning) the unwinding of the finance cost on the deferred consideration.

Most candidates gained full marks for the calculation of non-controlling interest even if they had made a previous error in the calculation of the subsidiary's post-acquisition profits.

It is important that candidates realise that errors in previous calculations are not penalised in subsequent calculations. This principle is referred to as method marking or applying the 'own-figure' rule.