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 assets: | ||
| Property, plant and equipment | 49,400 | 6,500 |
| Investment in Star Limited | 20,000 | - |
| Current assets: | ||
| Inventory | 30,000 | 6,400 |
| Trade receivables | 6,800 | 4,600 |
| Cash and bank | 2,300 | 5,500 |
| Total assets | 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
- Sun Limited acquired 100% of the ordinary shares of Star Limited and so became the parent company; Star Limited is the subsidiary. 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 (NA) of subsidiary computation
You must beware and carefully ensure you get the NA computation correct. Once you get it wrong, it will carry over to W3, W4 and W5, which would greatly impact your score. Below is the NA schedule:
| 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. Check whether the question gives the subsidiary’s equity at both dates. If it does not, you may need to work out the retained earnings at acquisition from the information given. 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
| $'000 | |
|---|---|
| Consideration | 20,000 |
| NCI @ acquisition date | 0 |
| Net assets at 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
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) | 0 |
| PURP adjustment (if any) | (0) |
| NCI at reporting date | 0 |
W5: Group retained earnings at reporting date
| $'000 | |
|---|---|
| Parent’s retained earnings at reporting date | 23,000 |
| Parent’s share of post-acquisition profit (100%*500) | 500 |
| PURP adjustment (if any) | (0) |
| Group retained earnings at reporting date | 23,500 |
Group retained earnings = 100% of the parent’s retained earnings at the reporting date + the parent’s % share of the subsidiary’s post-acquisition profit (W2) − any PURP adjustment.
Preparation of the consolidated statements of financial position
-
Write the name of the group.
Sun Group Limited
-
Write the title of the statement exactly as the requirement states it.
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 assets 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 assets: | |
| Property, plant and equipment (49,400 + 6,500) | |
| Investment in Star Limited (20,000 + 0) | |
| Goodwill* | |
| Current assets: | |
| Inventory (30,000 + 6,400) | |
| Trade receivables (6,800 + 4,600) | |
| Cash and bank (2,300 + 5,500) | |
| Total assets | |
| 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 the subsidiary’s equity is its share of the subsidiary’s net assets at the acquisition date: share capital (11,000) plus pre-acquisition retained earnings (3,500) = 14,500 (W2). The investment of 20,000 is cancelled against this 14,500, and the 5,500 difference is goodwill (W3).
Share capital is removed on the face of the consolidated statement. Pre-acquisition retained earnings are removed too, which is why W5 includes only the subsidiary’s post-acquisition profit, not its full retained earnings balance. The parent’s investment and the subsidiary’s pre-acquisition equity represent the same economic interest from different perspectives, so eliminating them prevents double-counting 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 assets: | |
| 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 assets: | |
| 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 assets | 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: Amounts in this illustration are in $'000, so $200,000 is shown as 200. In the exam, check whether amounts are stated in thousands; if not, write them in full.