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Dear Tutor,
Hope you are well and thank you for your nice lectures on consolidation.
I just have a small question about acquiring the subsidiary through share for share exchange :
When the company issue shares to acquire the subsidiary, the parent company must record Dr Investment & Cr share Cr share premium.
So in this case in fact the subsidiary own some of the parents shares. So why we do not deduct this part from the equity section of the consolidated statement of financial position. In my country we have to deduct the shares of parent owned by subsidiary from the equity part. It is not the same in IFRS? No adjustment is needed in exam? Why? ( because in fact the parent is somehow buying back its own share when we are preparing the consolidated statement of financial position)Thank you
Hi,
Thanks for the kind comments, and glad you enjoyed them.
Your understanding of the accounting for the issue of shares by the parent is correct, however these shares are being issued to the shareholders of the subsidiary and not to the subsidiary itself. Therefore there is no accounting for the ownership of the shares in the group accounts as they are not owned by the subsidiary.
Thanks
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