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Step disposals – Control to no control – ACCA (SBR) lectures

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  1. Hi,

    Thank you always for the lectures. Would you mind writing out the journal entries in relation to this disposal? They don’t add up….

    Dr. Cash $120m
    Dr. NCI (Equity) $53m
    Cr. Goodwill $38m
    Cr. Profit on disposal $30m

    • Hello,

      I don’t know how write entire entries, but in my opinion NCI should be in Credit. Because we sold Mogs and our NCI is increase instead decrease.

      • The NCI has to be debit as you derecognize it from your books (group accounts). If you no longer have the subsidiary, than you can’t have the NCI. The entries are just as you see them from the video – debits are pluses, credits are minuses.

        DR – Bank
        DR – Investment at FV (the remaining part)
        DR – NCI (as you no longer have it)
        CR – Net assets of the sub (as you no longer have the sub)
        CR – Goodwill (as you no longer have the sub, so you do not have goodwill anymore)
        CR – Gain on disposal

  2. Hi,

    If we are no longer consolidating then we are removing the net assets and goodwill, i.e. the entire subsidiary, from the group accounts. To calculate the group profit or loss on disposal we need to look at what the entire subsidiary is worth, so we don’t just look at the proceeds as this is what we get for selling our shareholding, we also need to look at the value of what we do no own (the NCI) and add this to the proceeds to get the value of the entire subsidiary.

    Thanks

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