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Chapter 21

1.2 Step acquisition

A step acquisition is where control is achieved over a subsidiary in
stages, often by buying blocks of shares at different times, e.g.

30% of 70% of
shares shares

The accounting treatment of a step acquisition is as follows:

 Pre-existing holding (e.g. 30% above) – account for in accordance with the
relevant standard (e.g. IAS 28 Investments in Associates and Joint Ventures)
up to the date control is achieved

 When control is achieved – revalue the pre-existing holding to fair value and
record the gain or loss in profit or loss.

 Consolidate as normal, calculating goodwill as follows:

$m
Fair value of consideration for new shares X
Fair value of previous shares X
NCI at acquisition X
Fair value of net assets at acquisition (X)
–––––
Goodwill at acquisition date X
–––––

Illustrations and further practice

Now try Illustration 2 from Chapter 21.

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