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Consolidated statement of financial position

2.2 Fair value of subsidiary net assets

IFRS 3 requires that the subsidiary’s assets and liabilities are recorded at their fair
values in order to calculate goodwill.

Where assets and liabilities are not carried at their fair value, adjustments will
therefore be necessary. These will be adjusted on (W2) and on the statement of
financial position. Take care to complete both sides of the adjustment.

Typical fair value adjustments could include:

 Property, plant and equipment

– Adjustments to depreciating assets will need to reflect any post-acquisition
depreciation in the Reporting Date column of (W2).

 Inventory

– Remember to amend adjustments to inventory in the Reporting date
column to allow for any inventory sold in the post-acquisition period.

 Intangible assets not recognised by the subsidiary

– This type of asset (e.g. an internally generated brand), although not
recognised by the subsidiary will need to be added to the subsidiary’s
assets as a consolidation adjustment, reflecting any post-acquisition
amortisation as necessary.

 Contingent liabilities

– Again these will not be recognised by the subsidiary and will need to be
deducted from (W2) and inserted on the consolidated statement of
financial position, reflecting any post-acquisition adjustment as necessary.

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