ACCA FR Syllabus D. Preparation Of Financial Statements - Make sure you use FV of Net Assets Acquired - Notes 5 / 5
A subsidiary is brought into group accounts at FAIR value at acquisition
Here's a subsidiary at Book Value
| Property, plant and equipment | 47,400 |
| Financial asset: equity investments | 7,500 |
| Inventory | 20,400 |
| Trade Receivables | 14,800 |
| Bank | 2,100 |
| Equity shares of $1 each | 40,000 |
| Retained earnings | 26,600 |
| 10% loan notes | 8,000 |
| Trade Payables | 17,600 |
| NET ASSETS at book value | 66,600 |
Audio Player
The FAIR Values of the above net assets were the same as their book value with the exception of PPE which had a FV $3000 in excess of the book value
Here's the subsidiary at FAIR Value
| Property, plant and equipment | 47,400 + 3,000 |
| Financial asset: equity investments | 7,500 |
| Inventory | 20,400 |
| Trade Receivables | 14,800 |
| Bank | 2,100 |
| Equity shares of $1 each | 40,000 |
| Retained earnings | 26,600 |
| Revaluation Reserve | 3,000 |
| 10% loan notes | 8,000 |
| Trade Payables | 17,600 |
| NET ASSETS at fair value | 69,600 |
Audio Player
Once the FV of the NA has been calculated, the total goes into the goodwill calculation as follows:
| FV of Consideration | X |
| NCI | X |
| FV of Net Assets Acquired | (X) |
|---|---|
| Goodwill | X |