Subsidiary not consolidated under previous GAAP
Background
Entity A”s date of transition to IFRSs is 1 January 2012. Under its previous GAAP, Entity A did not consolidate its 75 percent interest in Entity B, which it acquired in a business combination on 15 July 2009. On 1 January 2012:
(a) the cost of Entity A”s investment in Entity B is $180.
(b) under IFRSs, Entity B would measure its assets at $500 and its liabilities (including deferred tax under IAS 12) at $300. On this basis, Entity B”s net assets are $200 under IFRSs.
Application of requirements
Entity A consolidates Entity B. The consolidated statement of financial position at 1 January 2012 includes:
(a) Entity B”s assets at $500 and liabilities at $300;
(b) non-controlling interests of $50 (25 per cent of [$500 – $300]); and
(c) goodwill of $30 (cost of $180 less 75 per cent of [$500 – $300]). Entity A tests the goodwill for impairment under IAS 36 and recognises any resulting impairment loss, based on conditions that existed at the date of transition to IFRSs.