Entity A holds 75% ownership of Entity B's 100,000 shares. For its separate financial statements, Entity A accounts for the shares at fair value under IFRS 9 (meaning that unit of account is each share). For its consolidated financial statements, Entity A accounts for the shares as a cash-generating unit. The quoted price is $10 per share, and there is a $2 control premium per share. What would be the fair value for the separate and consolidated financial statements?
A) Separate statements - $750,000; Consolidated statements - $900,000
B) Separate statements - $750,000; Consolidated statements - $750,000
C) Separate statements - $750,000; Consolidated statements - $600,000

Question

Quizplus · Accepted Answer

For the separate financial statements, the fair value is calculated based on the quoted price of $10 per share for the 75,000 shares Entity A holds in Entity B, resulting in $750,000. For the consolidated financial statements, the control premium of $2 per share is also considered, leading to a fair value calculation of $10 + $2 = $12 per share for the 75,000 shares, totaling $900,000.

Entity a Holds 75% Ownership of Entity B's 100,000 Shares