Page 319 - F3 -FA Integrated Workbook STUDENT 2018-19

Consolidated financial statements I

3.4 Other adjustments – fair value adjustments

At the date of acquisition, the group accounts must recognise and account for the
subsidiary's net assets at their fair value. If you are told in the question that the fair
value of e.g. land and/or buildings exceeds its carrying amount in the subsidiary’s
SOFP, then you must adjust as follows.

The adjustment:

 Increase NCAs to bring up to fair value

 Increase subsidiary retained earnings (both columns W2 – assuming that the
asset has not been sold)

In practical terms, this is included in (W2) dealing with the net assets of the
subsidiary

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