In the FR exam, this can be worth many marks and contain many forms of adjustment. Each of these lines will be looked at in turn for the major elements which need to be included.1. Consideration paidThe consideration paid for a subsidiary can take many forms. The common situations arising in the FR exam are that the parent pays for the subsidiary in cash immediately, in cash payable in the future (deferred consideration), in cash payable in the future but where that payment is dependent on certain events (contingent consideration), or through an issue of its own shares to the original shareholders of the subsidiary. In addition to this, candidates will need to know the correct treatment for professional fees incurred as part of the acquisition.Cash consideration This is the simplest amount of consideration and represents the cash already paid by the parent as part of the acquisition. You will be told this and it will usually be included in the ‘investments’ line of the parent’s stateme...
