Question

Which of the following statements is incorrect?

		Where the parent entity has acquired its investment in the subsidiary for a cost less than the fair value of the subsidiary’s identifiable net assets acquired, the goodwill should be recognised in consolidated assets.
		Consolidation adjusting entries are not posted to the accounts of either the parent entity or its subsidiaries.
		Where consolidation worksheet adjusting entries from the previous reporting period are still relevant in the current reporting period, they are repeated in the current period consolidation.
		The investment elimination entry is repeated in consolidation worksheets in each successive reporting period because consolidation worksheet adjusting entries do not carry forward from one reporting period to the next.

Answer 1

The following statement is incorrect:

Where the parent entity has acquired its investment in the subsidiary for a cost less than the fair value of the subsidiary’s identifiable net assets acquired, the goodwill should be recognised in consolidated assets.

It is corrected as under:

Where the parent entity has acquired its investment in the subsidiary for a cost less than the fair value of the subsidiary’s identifiable net assets acquired, the negative goodwill should be recognised below the goodwill heading.

It should be recognized in the profit and loss account in the periods in which the non monetary assets acquired are depreciated or sold.