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suppose an entity already acquired 20% equity on 1st april 2011and acquired another 40% on 1st march 2013 at which time the acquired 20% equity changes in fair value from 500 dollars to 2000dollars and we are not told whether the original 20% equity was acquired for strategic or for speculative purposes.
I can’t imagine that the examiner would not tell you (point 1)
If the 20% had been acquired with a view to achieving ultimate control and, under IFRS 10, it gave effective control given the wide distribution of the remaining 80%, then it could be argued that it should be treated as a subsidiary with effect from 1 April, 2011 (from your post)
Otherwise I presume that it would have to be treated as an associate (dependent upon who held the other 80%) if our 20% gave us a significant influence.
Upon 2nd acquisition, there would be a deemed disposal of the original 20% with the profit being recognised by the parent in its own statement of Comprehensive Income and the $2,000 would then also be included in the cost of acquisition together with the additional cost of the next 40% acquisition
Does that answer you?
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