Illustration

In this lesson

1. 0:00 Consolidation illustration overview
2. 0:36 Understanding parent-subsidiary structure
3. 1:15 Calculating retained earnings at acquisition
4. 3:01 Handling unrealised profit adjustments
5. 6:10 Calculating goodwill and group retained earnings
6. 8:14 Building the consolidated statement of financial position

About this lesson

The scenario involves Illinois acquiring 80% of Virginia mid-year, requiring you to handle post-acquisition profits, unrealised intercompany transactions, goodwill calculation, and noncontrolling interest — all the elements you'll face in real exam questions. You'll work through a step-by-step process that covers establishing the group structure, cancelling the investment, calculating retained earnings at acquisition, adjusting for unrealised profit, computing goodwill, determining group retained earnings, rolling forward the noncontrolling interest, and finally aggregating all assets and liabilities into the consolidated statement. The illustration shows you both the traditional journal approach and the more efficient adjustment method, giving you flexibility in how you tackle similar problems under exam conditions. This worked example is designed to consolidate your understanding of how each consolidation component fits together in practice. If you find yourself uncertain about any particular figure or calculation — whether that's goodwill, noncontrolling interest, or the treatment of intercompany transactions — you can revisit the specific sections to reinforce those techniques before attempting your own questions.

Duration: 10m