Fair value of net assets
In a business combination, fair value of identifiable net assets is the recognised fair value of identifiable assets acquired less liabilities assumed at acquisition. It can differ from the subsidiary’s book net assets, for example where land is undervalued. FA goodwill calculations use acquisition-date amounts. Subsequent extra depreciation on a fair value uplift affects post-acquisition results.
Worked example
Subsidiary book net assets are $100,000, but land has a $30,000 fair value uplift: identifiable net assets for the simplified acquisition working are $130,000.
Common mistake
Do not use year-end net assets in the acquisition-date goodwill calculation or include internally calculated goodwill as an identifiable net asset.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | F2 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |