Consolidated statement of financial position

What the consolidated statement shows

A consolidated statement of financial position presents the parent and its subsidiaries as one economic entity. You add together 100% of the assets and liabilities of the parent and each subsidiary, then show who owns the result: the parent's shareholders and the non-controlling interest (NCI).

The five standard workings

1. Group structure: the parent's percentage and the date of acquisition.
2. Net assets of the subsidiary: share capital, retained earnings and fair value adjustments, at acquisition and at the reporting date.
3. Goodwill: consideration + NCI at acquisition − net assets at acquisition.
4. Non-controlling interest: NCI at acquisition + NCI share of post-acquisition reserves.
5. Group retained earnings: the parent's retained earnings + the group share of the subsidiary's post-acquisition reserves − adjustments such as goodwill impairment and unrealised profit.

Worked example

A parent buys 80% of a subsidiary for $600,000. At acquisition the subsidiary's identifiable net assets have a fair value of $500,000, and NCI is measured at its fair value of $140,000.

• Goodwill = $600,000 + $140,000 − $500,000 = $240,000.

During the year the parent sells goods to the subsidiary for $100,000, at a 25% mark-up on cost. Half the goods are still in the subsidiary's inventory at the year end.

• Profit on the sale: $100,000 × 25/125 = $20,000.
• Unrealised profit: $20,000 × 1/2 = $10,000. Reduce group inventory and the parent's retained earnings by $10,000, because the parent made the sale.

Adjustments to watch for

• Fair value adjustments to the subsidiary's assets at acquisition, and any extra depreciation they cause.
• Intra-group balances between receivables and payables, including cash in transit.
• Goodwill impairment, split between the parent and NCI when NCI is at fair value.

Common mistakes

• Taking unrealised profit from the wrong company's reserves.
• Forgetting the extra depreciation on a fair value uplift.
• Including pre-acquisition profits in group retained earnings.

Where this leads

Consolidation skills are tested again, in more complex groups, in ACCA SBR.