(b) Importance of fair values upon consolidation
IFRS 3 considers it important to consolidate the net fair values of the identifiable assets and liabilities of an acquired subsidiary upon consolidation as this treatment best reflects the correct value of the subsidiary at the time of its acquisition. This is also consistent with the concept of historical cost as
items are shown at their value when acquired.
The alternative would be to consolidate the book values of the assets and liabilities. This treatment would lead to out of date values being used for some of the items in the statement of financial position and therefore a different goodwill figure would arise which would in effect incorporate any fair value adjustments. Put simply this would lead to a misallocation of fair value adjustments to the
goodwill caption.
Fair values allow the users of the accounts to see the value of the items acquired and the resulting goodwill figure. | 
