Loss of control of a subsidiary
On losing control, the parent derecognises the subsidiary’s assets, liabilities and related non-controlling interest from consolidated financial statements. It recognises consideration received and any retained investment at fair value, and calculates the resulting gain or loss including relevant accumulated other comprehensive income as required. The remaining investment is then accounted for under the relevant standard. Distinguish a change in ownership that leaves control intact: that is an equity transaction.
Worked example
A parent sells its entire holding in a subsidiary for $800,000 and loses control. The group carrying amount of the subsidiary’s net assets including recognised goodwill is $700,000, and the carrying amount of non-controlling interest is $100,000. With no retained investment or other adjustments, group gain is $800,000 + $100,000 − $700,000 = $200,000.
Common mistake
Derecognising only the proportion sold after control is lost, or recognising a disposal gain when the parent still controls the subsidiary.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |
