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Dear Sir,
I was going through example 6 (Rage and Machine) of SBR Technical Article, Business Combinations – IFRS 3 (Revised), through the link below:
I see a loss on disposal of controlling stake is calculated to be $2 million. With limited understanding on this subject, I have calculated a gain of $1.9 million as below:
Disposal Proceeds 65
Add: FV of remaining stake 25
90Less: Interest in Subsidiary Disposed of:
Net Assets of Subsidiary 83
Carrying Value of goodwill at disposal date 12
Less: Carrying Value of NCI at Disposal Date (6.9)
88.1Profit/(Loss) on Disposal 1.9
I have reviewed my calculations a few times but unable to understand where I am going wrong and I would be grateful to you if you could help me understand the calculation please.
Many thanks in advance.
Regards,
NitinIn my opinion your calculation seems to be right, going by the way study text materials treat this type of loss of control transaction. The area of contention was the way NCI was treated on disposal. The study texts suggest that it should be derecognised but in this example it was not considered for derecognition. Rather, the part of the post acquisition reserve that was taken to OCI was recycled wholly, on the disposal, for derecognition and this was in line with the suggested treatment in the article. The way the article treated it is alien to the suggested ways in study texts that I’ve read treated it, except there has been a revision to the standard approving of such treatment lately.
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