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ACCA Applied Knowledge · Financial Accounting · Subsidiaries

Alpha acquired 80% of the equity shares of Beta. In Alpha's consolidated statement of financial position, which of the following describes how Beta's net assets are presented?

A subsidiary's assets and liabilities are consolidated in full, line by line, at 100%. The portion of net assets belonging to outside shareholders is shown as non-controlling interest within equity, not as a liability and not by including only the parent's percentage.

  1. AOnly 80% of each of Beta's assets and liabilities is included
  2. B100% of Beta's assets and liabilities are included, with the 20% not owned shown as non-controlling interest within equityCorrect
  3. CBeta's net assets are shown as a single line called investment in subsidiary
  4. D100% of Beta's assets are included but the non-controlling interest is shown as a liability

Explanation

IFRS 10 requires full (line-by-line) consolidation: 100% of the subsidiary's assets and liabilities are included. The share not owned by the parent is presented as non-controlling interest within equity. Including only 80% describes proportionate consolidation, which is not allowed for subsidiaries.

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