The correct answers are: To present fairly the position of the group; To comply with IFRS 3.

Part of giving a fair presentation of the position of the group is showing the fair value of all the group's assets and liabilities. Therefore if this has not been done already in the individual subsidiaries' books it should be done on consolidation.

IFRS 3 specifies that goodwill is the difference between the value of a business as a whole and the fair value of its net assets. Therefore in order to calculate goodwill, the net assets of the acquiree must be stated at fair value.

Prudence is not the key issue in using fair values. Prudence generally has a fairly low profile in IFRS rules.

A statement of financial position does not aim to show the most up-to-date value of all the assets and liabilities of the group. Some historic costs may be very out of date and no fair value adjustments at all need to be made to the parent's figures. Fair values are required simply to make a realistic estimate of purchased goodwill.