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  1. Hello sir,
    need ur help.
    B co acquired 18520000 $1 ordinary shares in M co @ 1st november. B co owns $150000 of M co loan notes. B co paid $34000000 for shares. What is the fair value of consideration and how to treat loan notes in group accounts.

  5. it implies as we paid to previous shareholders what they earned but suffered this at all. Why shouldnt we include whole 15000? it’s not ours but we bought it and we should benefit from this. But i dont understand how:(

  6. why the profits earned are not distributed among previous shareholders? extra transfers…im not getting logic…
    if par value is say $1 then we buying it:
    market value + any undistributed profits/number of shares?
    confused.

  10. Sir,

    I have questions!

    Why is the share capital of S not included in the consolidated statement? What happens to the share capital of S?

    Why is the investment on S ($10,000) replace as the fair value of assets and liabilities on S?
    I don’t get how the investment of $10,000 could equate to the above mentioned point.

    A really big thank you!

    • The share capital of the subsidiary will never appear in the Consolidated statement.

      The purpose of the statement is to show the Group as if it was one big company including all the assets and liabilities of the entire Group, The shareholders who control the whole Group are those of the parent company.

      In the example to which you referring, P acquired 100% of the share capital of S on incorporation (i.e. the date the S was formed). You will know from earlier studies that the capital in a business is always equal to the net assets of the business.

      At the date P acquired the shares, the share capital of S was 10,000. Therefore the net assets of S were also 10,000. P paid 10,000 for 100% of the shares, and so the investment equalled the net assets!

      Obviously (as you will see in later examples in this chapter and in the next chapter) more likely is that the Parent acquires the shares at a later date, and that they acquire less than 100%. All of that is dealt with in the later examples in this chapter and in the next chapter.

      However, neither the share capital of the subsidiary not the cost of the investment in the Subsidiary will ever appear in the Consolidated statement (for the reasons above).

  12. I would be grateful if you could tell me in which lecturer the new additional rules regarding subsidiary recognition were conveyed. Actually I dont have enough time to listen to all lecturers. thank you.

  15. In Example # 1:

    Company P acquired 100% Ordinary Shares of S on the date of incorporation.Then how the retained earnings (8,000) arrived in the S company?

  17. i have a small doubt! suppose company A becomes the parent company of company B by purchasing $60000 of $100000 shares. Do we show the ‘$40000 shares’ of company B along with company A’s shares in the consolidated financial statements…? or do we only show parent company’s shares there?

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