Financial Reporting · Preparation of consolidated financial statements for a simple group

How to Prepare a Consolidated Statement of Financial Position

Updated 11 October 2026 · Fact-checked

A consolidated statement of financial position shows a parent and its subsidiaries as one entity. Add 100% of their assets and liabilities line by line, remove the investment in the subsidiary and its equity, record goodwill, and show the non-controlling interest and group reserves. Use a net assets table to get the numbers.

Understand Consolidated Statement of Financial Position

A parent that controls a subsidiary must present group accounts under IFRS 10. The group is shown as a single economic entity. The parent's own statement of financial position shows the investment in the subsidiary as one asset. The group statement replaces that one line with the subsidiary's actual assets and liabilities.

The key idea is 100% consolidation. If the parent owns 80% of the subsidiary, you still add 100% of the subsidiary's assets and liabilities. Control is what matters, not the percentage owned. The 20% that outsiders own is shown within equity as the non-controlling interest (NCI).

The parent's investment and the subsidiary's share capital are two sides of the same internal transaction. They are eliminated. The difference between what the parent paid (plus the NCI) and the fair value of the subsidiary's net assets at acquisition is goodwill. Goodwill is shown as a non-current asset.

Only profits earned after acquisition belong to the group. The subsidiary's pre-acquisition reserves are part of what the parent bought, so they go into the goodwill calculation. The parent's share of post-acquisition profit goes into group retained earnings. The NCI's share goes into NCI.

In the exam, do not build the statement by guessing. Draw the group structure, then work through standard workings: net assets table, goodwill, NCI, and group retained earnings. Then add across.

Key rules to remember

Goodwill: Goodwill = Consideration transferred + NCI at acquisition − Fair value of net assets of subsidiary at acquisition; NCI at acquisition is either its share of net assets (proportionate method) or fair value (full goodwill method). Use the method the question tells you.
NCI at the reporting date: NCI = NCI at acquisition + NCI % × post-acquisition profit of subsidiary; Under the proportionate method, NCI at acquisition = NCI % × net assets at acquisition. Under the fair value method, use the given fair value of the NCI.
Group retained earnings: Group RE = Parent RE + Parent % × post-acquisition RE of subsidiary (− any goodwill impairment, parent's share); Post-acquisition RE = subsidiary RE at reporting date − subsidiary RE at acquisition. Impairment of full goodwill is shared with NCI.
Net assets table: Share capital + Reserves = Net assets, at acquisition and at reporting date; The difference between the two columns is the post-acquisition profit.
Group share capital: Group share capital and share premium = Parent's only; The subsidiary's share capital is eliminated against the investment.
Consolidated assets and liabilities: Parent + Subsidiary (100%) ± fair value adjustments ± consolidation adjustments; Remove intragroup balances and unrealised profit in inventory.

How to solve Consolidated Statement of Financial Position questions

Use the same order every time. It keeps the workings tidy and earns method marks even if one number is wrong.

1Read the question and write the group structure: who owns what percentage, and the acquisition date. Confirm control (usually over 50% of votes).
2Set up the net assets table for the subsidiary: share capital, reserves, and any fair value adjustments, in two columns (acquisition and reporting date).
3Calculate goodwill: consideration + NCI at acquisition − net assets at acquisition. Deduct any impairment later if given.
4Calculate NCI: NCI at acquisition plus its share of post-acquisition profit, less its share of any goodwill impairment under the full goodwill method.
5Calculate group retained earnings: parent RE plus parent's share of post-acquisition profit of the subsidiary, less the parent's share of goodwill impairment and any unrealised profit adjustments.
6Make consolidation adjustments: eliminate intragroup receivables and payables, remove unrealised profit from inventory and non-current assets, and add fair value uplifts.
7Build the statement: add parent and subsidiary line by line at 100%, then add the adjustments. Replace the investment with goodwill. Show share capital of the parent only, group reserves and NCI.
8Check that total assets minus total liabilities equals total equity including NCI.

Quickest way: Net assets table first, then add across

When to use it: Use this in Section C when time is short and the question has only a few adjustments. It also works for objective test questions on goodwill or NCI.

Write the net assets table at once. Do the goodwill and NCI figures straight from it.
Tick each adjustment in the question as you deal with it so none is missed.
Do the retained earnings working before the statement. It uses the same post-acquisition figure as NCI.
Add across the statement with separate columns for parent, subsidiary and adjustments.
Finish with the balance check. If it does not balance, look first for a missed intragroup balance or unrealised profit.

Common mistakes in Consolidated Statement of Financial Position

Adding only the parent's percentage of the subsidiary's assets and liabilities.
Students link ownership percentage to how much is consolidated.
Fix: Consolidate 100% of assets and liabilities where there is control. The NCI line accounts for the outside share.
Using the subsidiary's net assets at the reporting date in the goodwill calculation.
Students take the latest figure from the statement of financial position.
Fix: Goodwill uses net assets at the acquisition date. Reporting date figures are used for NCI and reserves only through post-acquisition profit.
Including the subsidiary's whole retained earnings in group retained earnings.
Pre-acquisition and post-acquisition profits are mixed up.
Fix: Include only the parent's share of the increase in the subsidiary's reserves since acquisition.
Forgetting to eliminate intragroup receivables and payables.
The balances sit in the separate statements and are easy to overlook.
Fix: Read the notes for intragroup balances, cancel them, and deal with any cash or goods in transit.
Showing the subsidiary's share capital in the group statement.
Students add equity across as well as assets.
Fix: Show the parent's share capital and share premium only. The subsidiary's equity is eliminated.
Calculating NCI as a percentage of the subsidiary's net assets at acquisition only.
The post-acquisition step is forgotten.
Fix: Add the NCI's share of post-acquisition profit to its acquisition value.

Worked examples

Example 1

P acquired 80% of S for ₹6,00,000 when S's retained earnings were ₹1,00,000. S's share capital is ₹2,00,000. At the reporting date S's retained earnings are ₹2,50,000. Use the proportionate method for NCI. Calculate goodwill, NCI and the amount of S's profits included in group retained earnings.

Show the solution

Net assets at acquisition = 2,00,000 + 1,00,000 = ₹3,00,000.
Net assets at reporting date = 2,00,000 + 2,50,000 = ₹4,50,000.
Post-acquisition profit = 2,50,000 − 1,00,000 = ₹1,50,000.
NCI at acquisition = 20% × 3,00,000 = ₹60,000.
Goodwill = 6,00,000 + 60,000 − 3,00,000 = ₹3,60,000.
NCI at reporting date = 20% × 4,50,000 = ₹90,000. Check: 60,000 + 20% × 1,50,000 = 90,000.
Group share of post-acquisition profit = 80% × 1,50,000 = ₹1,20,000.

Answer: Goodwill ₹3,60,000; NCI ₹90,000; S's profits added to group retained earnings ₹1,20,000.

Example 2

P owns 75% of S, acquired when S had share capital of ₹1,00,000 and retained earnings of ₹80,000. P paid ₹2,10,000. NCI is measured at the proportionate share of net assets. At the reporting date P's retained earnings are ₹4,00,000 and S's are ₹1,40,000. P's inventory includes no intragroup profit. P has a payable of ₹15,000 to S, and S shows a matching receivable. P's other net assets are as shown in these totals: P's total assets are ₹9,00,000 including the investment, and total liabilities are ₹2,00,000. S's total assets are ₹3,50,000 and total liabilities are ₹1,10,000. Prepare the group totals for assets, liabilities, and equity.

Show the solution

Net assets of S at acquisition = 1,00,000 + 80,000 = ₹1,80,000. Net assets at reporting date = 1,00,000 + 1,40,000 = ₹2,40,000. Check from totals: 3,50,000 − 1,10,000 = 2,40,000. Good.
Post-acquisition profit = 1,40,000 − 80,000 = ₹60,000.
NCI at acquisition = 25% × 1,80,000 = ₹45,000.
Goodwill = 2,10,000 + 45,000 − 1,80,000 = ₹75,000.
NCI at reporting date = 45,000 + 25% × 60,000 = 45,000 + 15,000 = ₹60,000.
Group retained earnings = 4,00,000 + 75% × 60,000 = 4,00,000 + 45,000 = ₹4,45,000.
Total assets = P 9,00,000 − investment 2,10,000 + S 3,50,000 + goodwill 75,000 − intragroup receivable 15,000 = ₹11,00,000.
Check step by step: 9,00,000 − 2,10,000 = 6,90,000; + 3,50,000 = 10,40,000; + 75,000 = 11,15,000; − 15,000 = ₹11,00,000. This confirms total assets of ₹11,00,000.
Total liabilities = 2,00,000 + 1,10,000 − 15,000 = ₹2,95,000.
Net assets = 11,00,000 − 2,95,000 = ₹8,05,000.
Equity: P's share capital and premium = P's net assets at reporting date less P's retained earnings. P's net assets = 9,00,000 − 2,00,000 = 7,00,000, so P's share capital and other equity = 7,00,000 − 4,00,000 = ₹3,00,000.
Group equity = 3,00,000 + 4,45,000 + NCI 60,000 = ₹8,05,000. This equals net assets.

Answer: Goodwill ₹75,000; group total assets ₹11,00,000; total liabilities ₹2,95,000; equity ₹8,05,000 made up of P's share capital and other equity ₹3,00,000, retained earnings ₹4,45,000 and NCI ₹60,000.

Exam tips

In Section C, show the net assets table, goodwill, NCI and retained earnings workings clearly. Markers give credit for correct method even when a figure is wrong.
In objective test questions, read for the method of measuring NCI. Proportionate and fair value methods give different goodwill and NCI.
Always check the balance: net assets must equal total equity including NCI. It catches most errors quickly.
Scan the notes for intragroup balances, unrealised profit, fair value adjustments and impairment before you start. These are the usual hidden adjustments.
Label each working and refer to it in the statement. A clear layout saves time and protects marks.

Practice questions from Preparation of consolidated financial statements for a simple group

Consolidated Statement of Financial Position in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consolidated Statement of Financial Position: frequently asked questions

Why do we consolidate 100% of a subsidiary that we only partly own?

The parent controls all of the subsidiary's assets and liabilities, whatever its percentage. Consolidating 100% reflects that control. The part owned by outsiders is shown separately as non-controlling interest within equity.

How do I calculate non-controlling interest in ACCA FR?

Start with NCI at acquisition. This is either its percentage of net assets (proportionate method) or its fair value (full goodwill method). Add its percentage of the subsidiary's post-acquisition profit, and deduct its share of any goodwill impairment under the full goodwill method.

What is the difference between pre-acquisition and post-acquisition reserves?

Pre-acquisition reserves existed when the parent bought control. They are part of net assets acquired and go into the goodwill calculation. Post-acquisition reserves are the increase since then, and the group takes its share into retained earnings.

What goes in the consolidated statement of financial position equity section?

Show the parent's share capital and share premium only, then group retained earnings and other reserves, then NCI. The subsidiary's share capital is eliminated against the parent's investment.