Question 1 - Part c

In this lesson

1. 0:00 Step acquisitions: Associate to subsidiary
2. 1:04 Calculating gain or loss on step acquisition
3. 8:23 Fair value adjustments at acquisition
4. 10:06 Land revaluation and deferred tax
5. 14:41 Inventory fair value adjustment
6. 19:33 Internally generated intangibles recognition
7. 24:05 Goodwill calculation using proportionate method
8. 31:05 Exam strategy and marking best practice

About this lesson

This is a two-part requirement worth eight marks total, examining your ability to explain and apply IFRS 3 principles when a company increases its shareholding from associate to subsidiary status. Part C focuses on two key areas. First, you'll learn how to identify and account for a step acquisition—when an investor's shareholding crosses the control threshold. You'll discover how to calculate the gain or loss on the step acquisition by comparing the fair value of the original investment to its carrying value as an associate, and understand why goodwill and non-controlling interest (NCI) must be recalculated at this point. Second, you'll work through fair value adjustments for identifiable assets and liabilities at acquisition, including land, inventory, and internally generated intangibles, applying deferred tax correctly to each adjustment. A crucial learning point covered here is the distinction between individual and group financial statements. You'll see how internally generated databases cannot be recognised in the subsidiary's own accounts but can be recognised separately from goodwill on consolidation if they're identifiable and have a readily determinable fair value. Throughout the lesson, the tutor demonstrates the practical approach of preparing the consolidated statement of financial position spreadsheet alongside the written explanations, ensuring consistency across all parts of the question and maximising marks. You'll also learn the proportionate method for calculating NCI using the fair value of net assets at acquisition, a core technique for SBR and F2 Advanced Financial Reporting papers.

Duration: 36m