# Pre-acquisition reserves

> The reserves a subsidiary held at the date it was acquired. They belong to the previous owners, so they are eliminated against the parent's investment and are not part of group reserves.

Source: https://finconsol.com/blog/glossary/pre-acquisition-reserves/ (updated 28 October 2026)

## Why does it matter in a group?

Pre-acquisition reserves are what the subsidiary had earned before the group bought it. They were paid for in the price, so on consolidation they are eliminated together with the share capital against the parent's investment. What remains is [goodwill](/blog/glossary/goodwill/). Reserves earned after the [acquisition date](/blog/glossary/acquisition-date/) are post-acquisition. They stay in group reserves, shared with the [non-controlling interest](/blog/glossary/non-controlling-interest/) where there is one. Getting the split wrong changes goodwill and the profit the group appears to have earned since the purchase.

## A small example

Zenvara pays GBP 5,000,000 for all of Palmridge, whose share capital is 1,000,000 and pre-acquisition reserves 3,000,000. The elimination entry removes 1,000,000 plus 3,000,000 against the investment of 5,000,000. The 1,000,000 left is goodwill.