Question Five: (5 marks) (A1, D1)

Part A: (3 marks)

In a business combination resulting in a parent-subsidiary relationship, the identifiable net assets of the subsidiary must be reflected in the consolidated balance sheet at their current values on the date of the business combination. Does this require the subsidiary to enter the current fair values of the identifiable net assets in its accounting records? Explain.

Part B: (2 marks)

The controller of Ahmed Corporation, which has just become the parent of Hassan Company in a business combination, inquires if a consolidated income statement is required for the year ended on the date of business combination. What is your reply? Explain.