When consolidating, AASB3: Business Combinations (paragraph 32) requires the recognition of goodwill on acquisition, being the excess of the consideration transferred by the acquirer, compared to the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this Standard. Within the consolidation journal entry where goodwill is recognised, the group therefore also eliminates the investment in the subsidiary, and the fair value of the issued capital and reserves of the subsidiary at the date of acquisition.

Critically reflect on the merits and shortcomings of these consolidation accounting requirements.

In your response you should also discuss how these requirements might impact on the information needs of two key user groups: existing shareholders of the ultimate parent, and a non-controlling interest shareholder of a subsidiary.