An Immediate Parent Entity May Purchase Shares in Its Subsidiary

An immediate parent entity may purchase shares in its subsidiary in separate transactions with long periods of time between transactions.It is possible that one transaction may give rise to goodwill on consolidation and another to an excess.How would the excess on consolidation be calculated and treated in the consolidated accounts?

A) The difference between the fair value of the total consideration paid in all transactions to date should be compared to the proportion of the fair value of the net assets of the subsidiary as at the last purchase date. An excess arises where the consideration is less than the share of the fair value of the net assets purchased. The excess should be eliminated pro-rata against the subsidiary's monetary items. Where the excess is greater than the amount of non-monetary items the balance should be eliminated against the non-monetary assets of the subsidiary.
B) The difference between the fair value of the consideration paid for the shares and the fair value of the proportion of net assets acquired in each transaction should be calculated separately. An excess arises where the consideration is less than the share of the fair value of the net assets purchased. The excess should be recognised as revenue.
C) The difference between the value of the total consideration paid in all transactions to date should be compared to the proportion of the book value of the net assets of the subsidiary as at the last purchase date. An excess arises where the consideration is less than the share of the fair value of the net assets purchased. The excess should be amortised over a period of not greater than 10 years.
D) The difference between the fair value of the consideration paid for the shares and the fair value of the proportion of net assets acquired in each transaction should be calculated. While the Standard does not permit goodwill to be recognised on a purchase of further shares after control has been achieved, an excess will be recognised if the consideration is less than the share of the fair value of the net assets purchased. The excess should be eliminated pro-rata against the subsidiary's monetary items. The excess should be amortised over a period of not greater than 10 years.