Subsidiary to Associate

Hi Mike,

I need some help with a group account adjustment.

Company p aquired 70% of company s’s one million £1 ord shares for £6 many years ago.

At the date of aquisition the carrying value of s’s net assets was £5m and this was deemed to be the same as their fair value.

The NCI was measured using the proportion of net assets method.

Goodwill arising on the aquisition has never been impaired.

On 31st Oct 20×3 p sold 300,000 of its shares in S for £6.5m.

The Fair value of the interest retained was £9.5m. The retained earnings of s were £9m as at 30th april 20×3 (reporting date).

The only entry posted in p’s individual financial statement is to record the cash received and to credit these proceeds to a suspense acc.

From the above i understand that p has lost its control over s from 70% to now 40% and is therefore now an associate.

From my study notes i understand i must consolidate the accounts uptill the date the control is lost and then treat as a associate with just one line on the p/l.

I understand i have to do the working out for the gain/loss to the group. I think i need to work out the goodwill at date of disposal, net assets at date of disposal and carrying value of NCI at date of disposal.. Is this correct?

I have worked out the goodwill to be £2.5m but am unsure if this is correct. Please can you advise me on how to do the workings for this?

Thank you.