FR Walkthrough: Group Statement of Financial Position — Goodwill and NCI

ExpertMinds Editorial·3 June 2026·10 min read

A step-by-step worked example of an ACCA FR consolidation question: goodwill under IFRS 3, non-controlling interest at fair value, post-acquisition retained earnings, and inter-company eliminations.

Consolidation questions are the most consistently examined topic in FR. They appear in Section B (OT cases) and Section C (constructed response, up to 20 marks). The examiner reports that candidates frequently confuse the date of acquisition retained earnings with post-acquisition earnings, misapply the NCI calculation, and miss inter-company eliminations. This walkthrough covers the core 4-step process.

Key fact:FR exam: 3 hours · 100 marks · Section A (15 OT, 30 marks) · Section B (15 OT cases, 30 marks) · Section C (2 constructed response, 40 marks). Consolidation questions appear in Section B and Section C every sitting.

Penrose Co acquired 80% of the ordinary share capital of Salton Co on 1 April 20X3 for $3,200,000 when Salton Co's retained earnings were $680,000 and its share capital was $1,000,000. At acquisition, the fair value of Salton Co's net assets equalled book value except for land, which had a fair value $120,000 above carrying amount. The fair value of the NCI at acquisition was $740,000. At 31 March 20X4 (reporting date), Salton Co's retained earnings were $920,000. Goodwill has been impaired by $80,000 during the year. There is an inter-company loan of $200,000 from Penrose to Salton. Prepare the goodwill calculation, NCI figure, and explain the treatment of the inter-company loan for the consolidated statement of financial position.

[12 marks]

Step 1 — Calculate Goodwill at Acquisition (IFRS 3)

Consideration + NCI at acquisition − Net assets at acquisition

Goodwill = Consideration paid + NCI at fair value − Net assets of Salton at acquisition. Net assets at acquisition = Share capital ($1,000,000) + Retained earnings at acquisition ($680,000) + Land fair value uplift ($120,000) = $1,800,000. Goodwill = $3,200,000 + $740,000 − $1,800,000 = $2,140,000.

Component	$
Consideration paid (80%)	3,200,000
NCI at fair value (20%)	740,000
Total	3,940,000
Less: Net assets at acquisition	(1,800,000)
Goodwill at acquisition	2,140,000
Less: Impairment during year	(80,000)
Goodwill in consolidated SoFP	2,060,000

Watch out:NCI method trap: the question specifies "NCI at fair value" — this is the full goodwill method (IFRS 3 option 1). If the question had said "NCI at proportionate share of net assets", you would calculate NCI as 20% × $1,800,000 = $360,000, and only the parent's share of goodwill would appear. The question will always tell you which method to use. Do not guess.

Watch out:Fair value adjustments trap: the land uplift of $120,000 increases net assets at acquisition. Candidates who use book value net assets ($1,680,000 instead of $1,800,000) overstate goodwill by $120,000. Always check whether fair value adjustments are given before calculating goodwill.

Step 2 — Non-Controlling Interest in the Consolidated SoFP

NCI = NCI at acquisition + NCI share of post-acquisition retained earnings − NCI share of impairment

Post-acquisition retained earnings of Salton = $920,000 (at reporting date) − $680,000 (at acquisition) = $240,000. NCI share of post-acquisition earnings = 20% × $240,000 = $48,000. NCI share of goodwill impairment (full goodwill method): impairment is allocated to both parent and NCI in their ownership ratio. NCI bears 20% × $80,000 = $16,000. NCI in consolidated SoFP = $740,000 + $48,000 − $16,000 = $772,000.

Watch out:Impairment allocation trap under full goodwill method: when NCI is measured at fair value, goodwill impairment is split between the parent and NCI in the ownership ratio (80:20). Under the proportionate method, all impairment goes to the parent. Many candidates allocate all impairment to retained earnings regardless of method — check the question's NCI basis before allocating.

Step 3 — Post-Acquisition Retained Earnings (Group)

Parent retained earnings + Parent share of Salton post-acquisition earnings − Parent share of impairment

Group retained earnings = Penrose Co retained earnings + (80% × $240,000 post-acquisition earnings) − (80% × $80,000 goodwill impairment). = Penrose RE + $192,000 − $64,000 = Penrose RE + $128,000. The land fair value uplift does not affect retained earnings (it is an asset revaluation at acquisition, not a profit).

Step 4 — Inter-Company Loan Elimination

Cancel the intra-group receivable and payable against each other

Penrose Co shows a loan receivable of $200,000 (an asset). Salton Co shows a loan payable of $200,000 (a liability). On consolidation, both are eliminated — they net to zero in the group SoFP. No net effect on consolidated net assets. If there is an interest charge on the loan, the intra-group interest income (Penrose) and interest expense (Salton) are also cancelled.

Tip:Intra-group balances rule: any transaction between parent and subsidiary creates a receivable in one entity and a payable in the other. On consolidation, treat the group as a single entity — cancel both sides. Common intra-group items: loans, current accounts, dividends receivable/payable, management fees, and unrealised profit on inventory.

Key fact:Unrealised profit (PURP) — not in this question but in many: if the parent sold inventory to the subsidiary (or vice versa) and it remains unsold, eliminate the unrealised profit from group retained earnings and reduce the inventory balance. On downstream sales (parent to sub), PURP reduces parent retained earnings. On upstream sales (sub to parent), PURP is split between parent and NCI in their ownership ratio.

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