Disposal of a foreign subsidiary
On loss of control, IFRS 10 requires derecognition of subsidiary assets and liabilities and recognition of any retained interest at fair value, with a resulting gain or loss. IAS 21 addresses the cumulative exchange differences related to the foreign operation, including reclassification to profit or loss on disposal when required. A partial disposal without loss of control has different consequences.
Worked example
A parent sells all of its foreign subsidiary and loses control. It applies the loss-of-control calculation and reclassifies the relevant accumulated translation reserve as required, rather than assuming that every exchange difference arose on the sale date.
Common mistake
Recycling the entire foreign currency translation reserve on any partial sale that does not lose control, or treating held-for-sale classification alone as a completed disposal.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Supporting | September 2026–June 2027 |