Walkthrough question one (100% ownership)
This chapter walks through how to prepare a consolidated statement of financial position for a 100% owned subsidiary when there are post-acquisition activities.
Learning objectives
By the end of this chapter, you should be able to prepare a full consolidated statement of financial position.
Illustration 1: 100% owned subsidiary
On November 30, 2025, Sun Limited acquired 100% of the ordinary shares of Star Limited for $20 million. The retained earnings for Star Limited on that date was $3.5 million. The statements of financial position for both companies as of December 31, 2025, are as follows:
Statement of financial position as at 31 December, 2025
| Sun Limited | Star Limited | |
|---|---|---|
| $'000 | $'000 | |
| Non-current asset: | ||
| Property, plant and equipment | 49,400 | 6,500 |
| Investment in Star Limited | 20,000 | - |
| Current asset: | ||
| Inventory | 30,000 | 6,400 |
| Trade receivables | 6,800 | 4,600 |
| Cash and bank | 2,300 | 5,500 |
| Total asset | 108,500 | 23,000 |
| Equity: | ||
| Share capital | 70,000 | 11,000 |
| Retained earnings | 23,000 | 4,000 |
| Liabilities: | ||
| Trade payables | 15,500 | 8,000 |
| Total equity and liabilities | 108,500 | 23,000 |
Required: Prepare the consolidated statement of financial position for Sun Limited and its subsidiary as at December 31, 2025. Suggested solution: Work through each working yourself using the procedures, then compare your answer with the suggested solution.
W1: Group structure
Work it out and compare with the suggested solution.
- Star Limited acquired 100% shares of Sun Limited, hence, became the parent company. Because 100% voting rights were acquired, there wouldn’t be any NCI.
- The acquisition date is 30 November 2025. The requirement of the question was for you to prepare the consolidated statement of financial position as at 31 December 2025 (i.e., the reporting date). The acquisition date is a month earlier than the reporting date. The post-acquisition period is one month.
You don’t need to provide all these explanations. All you need to do is present it in this form.
| Parent company | Sun Limited |
|---|---|
| Ownership | 100% |
| NCI holding | 0% |
| Acquisition date | 30 November 2025 |
| Reporting date | 31 December 2025 |
| Post-acquisition period | One month |
W2: Net assets of subsidiary computation
Work it out and compare with the suggested solution.
You must beware and carefully ensure you get the NA computation correct. Once you get it wrong, it will carry over to both W3, W4, and W5, which would greatly impact your score. Here’s the table in markdown format:
| Amount @acquisition date | Amount @reporting date | Post-acquisition profit | |
|---|---|---|---|
| $'000 | $'000 | $'000 | |
| Share capital | 11,000 | 11,000 | 0 |
| Retained earnings | 3,500 | 4,000 | 500 |
| Totals | 14,500 | 15,000 | 500 |
Post-acquisition profit is the net asset item amount at the reporting date minus the amount at the acquisition date. The reporting date is one month after the acquisition date. When there is a post-acquisition period, the question will clearly state the amounts for each equity item. You will typically be informed whether the equity amounts at the reporting date have changed since the acquisition date. Ordinary share capital usually remains unchanged, so amounts at the reporting date are most likely the same as at the acquisition date. However, retained earnings change with profit earned each period and are therefore unlikely to remain the same at the reporting date. Note this, so you can carefully compute the NA.
W3: Goodwill at reporting date
Work it out and compare with the suggested solution.
| $'000 | |
|---|---|
| Consideration | 20,000 |
| NCI @ acquisition date | 0 |
| Net asset @acquisition date | (14,500) |
| Goodwill at acquisition date | 5,500 |
NCI is zero because it is a 100% acquisition of the subsidiary. There is no impairment of goodwill; hence, the same amount applies at reporting.
W4: NCI at reporting date
Work it out and compare with the suggested solution.
The NCI portion is zero; hence, this is automatically zero. However, this is the presentation.
| $'000 | |
|---|---|
| NCI @ acquisition date | 0 |
| NCI share of post-acquisition profit (0%*$500,000) | 0 |
| PURP adjustment (if any) | (0) |
| NCI at reporting date | 0 |
W5: Group retained earnings at reporting date
Work it out and compare with the suggested solution.
| $'000 | |
|---|---|
| Parents RE @ acquisition date | 23,000 |
| Parent’s share of post-acquisition profit (100%*$500,000) | 500 |
| PURP adjustment (if any) | (0) |
| Group retained earnings at reporting date | 23,500 |
Note: It is the parent’s 100% retained earnings plus their % share of the post-acquisition profit from W2 and any adjustment from PURP.
Don’t rush, go through the workings and ensure you can do it by yourself before you proceed to the consolidation process.
Preparation of the consolidated statements of financial position
-
Write down the group name company.
Sun group limited
-
Write the title of the financial statements per the requirements. Please take note and don’t forget this in any way.
Consolidated statement of financial position as at December 31, 2025
Let’s move to the consolidation of the statements. There is no intra-group transaction in this question; hence, only procedures 1 and 2 would be illustrated.
Consolidation procedure 1
Combining items of assets, liabilities, equity, income, expenses, and cash flows of the parent with those of its subsidiaries. - Combine here means add (+).
Recopy the items on the statement of financial position systematically, and open a bracket after copying each element on the financial statement. In the bracket, add the respective amounts of the item for both the parent and subsidiary, except for retained earnings.
- Goodwill and NCI would be introduced into the statement under non-current asset and equity respectively. In addition,Retained earnings would be changed to Group (consolidated) retained earnings.
This should look like this.
Sun Group Limited
Consolidated Statement of Financial Position as at 31 December, 2025
| $'000 | |
|---|---|
| Non-current asset: | |
| Property, plant and equipment (49,400 + 6,500) | |
| Investment in Star Limited (20,000 + 0) | |
| Goodwill* | |
| Current asset: | |
| Inventory (30,000 + 6,400) | |
| Trade receivables (6,800 + 4,600) | |
| Cash and bank (2,300 + 5,500) | |
| Total asset | |
| Equity: | |
| Share capital (70,000 + 11,000) | |
| Group retained earnings* | |
| Non-controlling interest* | |
| Liabilities: | |
| Trade payables (15,500 + 8,000) | |
| Total equity and liabilities |
*These are the additional items that are most likely to be added to the original statement of financial position given to you in the question.
Consolidation procedure 2
Offsetting (eliminating) the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary. - Offset means subtract (minus/reduce/cancel out).
-
Any acquisition made by a company is an investment and that creates a non-current asset. In that view, Sun Limited presented the consideration (i.e.carrying amount of the parent’s investment) as part of their non-current asset. This, per the consolidation procedure, must be eliminated.
-
The parent’s portion of equity in the subsidiary is the share (ordinary) capital of the subsidiary. This must also be eliminated.
The parent’s investment in the subsidiary’s share capital amounts must not be consolidated (i.e., must be eliminated). The parent’s investment in the subsidiary and the subsidiary’s share capital represent the same economic interest from different perspectives. Elimination prevents double-counting of equity within the consolidated single economic entity.
You can go ahead and eliminate these two items by subtracting and closing all the brackets.
Sun Group Limited
Consolidated Statement of Financial Position as at 31 December, 2025
| $'000 | |
|---|---|
| Non-current asset: | |
| Property, plant and equipment (49,400 + 6,500) | 55,900 |
| Investment in Star Limited (20,000 + 0 - 20,000) | 0 |
| Goodwill (W3) | 5,500 |
| Current asset: | |
| Inventory (30,000 + 6,400) | 36,400 |
| Trade receivables (6,800 + 4,600) | 11,400 |
| Cash and bank (2,300 + 5,500) | 7,800 |
| Total asset | 117,000 |
| Equity: | |
| Share capital (70,000 + 11,000 - 11,000) | 70,000 |
| Group retained earnings (W5) | 23,500 |
| Non-controlling interest (W4) | 0 |
| Liabilities: | |
| Trade payables (15,500 + 8,000) | 23,500 |
| Total equity and liabilities | 117,000 |
This is the consolidated statement of financial position. Note: Investment in Star Limited and*NCI are both zero. It means they do not affect the statement. Thus, some choose not to show it on the face of the financial statement. This was shown just to help you understand the procedure. In your exams, it may not be required to be presented.
Note: Throughout the illustration, we hung three zeros (i.e., $'000), meaning $200,000 should be written as $200. In the exams, check whether zeros are hung or otherwise. Where no zeros are hanged, all the amounts must be written with all the zeros.
WARNING: Go over this as much as you can. Make sure you are able to do all the workings as well as the consolidation procedures before you proceed.