How are identifiable assets and liabilities treated in consolidated financial statements?

In the context of consolidated financial statements, identifiable assets and liabilities of a subsidiary are recognized and measured at their fair value at the acquisition date. This approach aligns with the requirements of accounting standards, which mandate that when a parent company acquires a subsidiary, it must assess the fair value of the acquired assets and liabilities in order to reflect the true economic condition and future cash flows associated with the acquisition.

Using fair value provides a more accurate representation of the net assets acquired, particularly in cases where the historical cost of the assets may not reflect their current market value. This is particularly important for financial reporting, as it ensures that the consolidated financial statements present a more realistic picture of the group’s financial position.

In contrast, other options like historical cost or carrying amounts do not take into consideration the adjustments necessary to equate to current market conditions, potentially leading to a misrepresentation of the organization’s financial health post-acquisition. The estimated realizable value is also related to a different context, primarily focusing on the value that an asset might fetch upon sale rather than reflecting its immediate fair market value at the time of acquisition. Thus, fair value is the most appropriate metric for measuring identifiable assets and liabilities in consolidated financial statements.