How is equity displayed in a consolidated SFP?

In a consolidated statement of financial position (SFP), equity is presented in a manner that reflects the ownership interests of the parent company and any subsidiaries. The correct answer outlines that equity includes the parent's share capital along with the parent's share of the subsidiary's post-acquisition reserves.

This is important for a couple of key reasons. First, the consolidated SFP is designed to present the financial position of the entire group as a single economic entity. Therefore, the equity section must show not only the capital contributed by the parent company but also the retained earnings generated by the subsidiaries since the date of acquisition. This differentiation is crucial because it highlights the ongoing operations of the subsidiaries and how they contribute to the overall equity of the group.

The concept of post-acquisition reserves is particularly significant because any profits or losses generated by the subsidiary after acquisition directly impact the group’s consolidated equity. By including these reserves, the consolidated SFP provides a more comprehensive view of the financial strength of the entire group.

Additionally, recognizing both the parent's share capital and their portion of the subsidiaries' post-acquisition earnings accurately reflects the total interests of the parent in the subsidiaries, clarifying the investment value from the perspective of the parent company.