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Consolidated financial statements I

Acquisition accounting

2.1 Acquisition accounting

IFRS 10 requires acquisition accounting to be used when preparing consolidated
financial statements. Application of IFRS 10 requires the following.

 The share capital and share premium of the parent is always the share capital
and share premium of the group in the consolidated SOFP. This reflects the fact
that it is a SOFP which consists of all assets and liabilities under the control of
the parent.

 The cost of the investment in the subsidiary in the parent's SOFP is replaced by
a goodwill asset in the consolidated SOFP.

 The assets and liabilities of the parent and subsidiary are added together on a
line-by-line basis.

 Adjustments are made to record the subsidiary’s net assets at their fair value.

 Intra-group transactions and balances must be eliminated - any amounts owing
or owed between the parent and subsidiary are cancelled and excluded from
the consolidated SOFP.

 Unrealised profit on intra-group transactions must be eliminated (PURP).

 The amount attributable to the non-controlling interest is calculated and
presented as part of the equity section of the consolidated SOFP.

 Uniform accounting policies must be used when preparing the consolidated
financial statements.

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