a.

Inventories

b. Plant Assets

Preparation of Consolidated Statement of Financial Position at Date of Acquisition – Wholly

Owned Subsidiary

The following are the accounting procedures for the preparation of the consolidated statement

of financial position for a parent and its wholly owned subsidiary:

• The amounts of the consolidated assets and liabilities (except goodwill) are the parent

company’s book values and the subsidiary’s current fair values.

• Intercompany accounts (parent’s investment account and subsidiary’s equity accounts)

are excluded (eliminated) from the consolidated statement of financial position.

• The book value of the net asset is adjusted to their current fair values.

• Goodwill is recognized in the consolidated statement of financial position, if the

consideration given (price paid) exceeds the fair value of the subsidiary’s identifiable net

assets. On the other hand, of the consideration given is less than the fair value of the

subsidiary’s identifiable net assets, gain on acquisition (closed to parent’s retained

earnings) is recognized.

Preparation of Consolidated statement of financial position at Date of Acquisition – Partially

Owned Subsidiary
the consolidation of a parent company and its partially owned subsidiary differs from the

consolidation of a wholly owned subsidiary in one major aspect – the recognition of

noncontrolling interest (formerly minority interest). Non-controlling interest (NCI) represents

the claims of the other stockholders other than the parent company (controlling interest) to

the net income or losses and net assets of the subsidiary.

Non-controlling interest is recognized only in the consolidation process. It is not a result of any

business transaction or event of either the parent or the subsidiary and therefore not recorded

in the books of the either the parent or the subsidiary.

Measurement of Non-Controlling Interest

IFRS 3 (2008) provides two options of measuring non-controlling interest in an acquiree:

 At fair value, or

 At the non-controlling interest’s proportionate share of the acquiree’s identifiable net

assets (Proportionate Method).

There is no requirement within IFRS 3 (2008) to measure non-controlling interest on a

consistent basis for similar types of business combinations and therefore, an entity has a free

choice between the two options for each transaction undertaken. However the fair value

option is more appropriate than the non-controlling interests’ proportionate share of the

acquiree’s identifiable net assets, since it results in the recognition of the non-controlling

interest’s share of goodwill [IFRS 3 (2008).]