ACCA FA Syllabus G. Preparing Simple Consolidated Financial Statements - Fair Value of Assets and Liabilities - Notes ^{7 / 11}

The fair value of assets and liabilities is defined in IFRS 3 as ‘the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction’.

IFRS 3 requires that the subsidiary’s assets and liabilities are recorded at their fair value for the purposes of the calculation of goodwill and production of consolidated accounts.

Adjustment required

Adjustments will therefore be required where the subsidiary’s accounts themselves do not reflect fair value.

1. Adjust both columns of the net assets calculation to bring the net assets to fair value at acquisition and reporting date.

2. At the reporting date, make the adjustment on the face of the SFP when adding across assets and liabilities.