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b shares of subs
1. in sub book cannot classify as equity instrument as has a financial liability to deliver cash to ethan.? is this right
2. How is it treated in Ethans books?
3.what does this mean :
In the subs book, the B shares would also be treated as a financial liability, the intra group element of this liability (70%) would cancel against the investment in B shares in the parent ( Ethans) SOFP.The shares owned by external parties would not cancel; they would remain a financial liability. It is incorrect to treat as NCI because they are not entity. ?
1) Correct, by way of dividend (“if, and only if, the instrument does not include a contractual obligation either to deliver cash or another financial asset”)
2) In Ethan’s own records, it will be shown as a financial asset
3) The financial asset in Ethan will cancel against 70% of the now-re-classified financial liability in the subsidiary.
Correct, because the B shares are not equity, the uncancelled shares owned by outsiders will be shown as a financial liability and not as non-controlling interest
thanks. can you briefly explain as to how the financial asset in ethan will cancel out the fin liability in the sub?
grp dr financial asset
sub CR liabilitywhen it comes to consolidation accounts the Dr and CR for this transaction cancels? is this right
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