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Hi guys, how should I account for a subsidiary that commenced liquidation during the financial year and has yet to complete the process as at year-end in the consolidated financial statements? Should the parent still consolidate the subsidiary, if this is the case, should it be prepared in break-up basis? Or should I treat it as under IFRS 5 (assets held for sale or discontinued operation)?
It’s no longer a subsidiary! We no longer have control – that control is now in the hands of the liquidator. Show it as an asset held at its fair value as at the date the liquidation procedure started
So all the accounting treatment and disclosure we should follow IFRS 5, NCAHFS (even if it is not to be disposed through selling/ held primarily for the purpose of being traded)?
If it’s year end is Dec’2014 but the liquidation started in Jun’14, I should take Jun’14 figures? How about the transactions that happened after Jun’14?
It’s profit for the year is shown as a separate line as “Profit for the year from discontinued operation” in consolidated SOPL? And assess any impairment before consolidation?
First, I presume that it’s not held for sale – the liquidator is appointed to close it down and kill it
Second, you’ll consolidate the profit or loss for the period up to June (but then no more) and shown separately as a discontinued operation
Thanks Mike! It’s always such a big confusion for me when it comes to NCAHFS and DO!
The disposal group classified as asset held for sale in balance sheet, the balance consisted of assets and liabilities and reserve only? Share capital is eliminated and retained earnings is consolidated to Group’s?
And if there is a foreign subsidiary, translation of the functional currency to presentation currency before consolidate, all balance sheet items are translated at closing rate? Including share capital, reserve and non-monetary assets?
“assets and liabilities and reserve only? Share capital is eliminated and retained earnings is consolidated to Group’s?” Subsidiary share capital never appears in the consolidation. Reserves are part of net assets (reserves + capital = net assets)
“And if there is a foreign subsidiary, translation of the functional currency to presentation currency before consolidate, all balance sheet items are translated at closing rate? Including share capital, reserve and non-monetary assets?”
Yes, yes, yes, yes and yes
If you want, yes it can be. I always adopt the alternative approach of converting everything at closing rate.
BPP and Kaplan seem to want to translate capital and pre-acq retained earnings at opening rate
I think my way is easier
if Company A 100% owns a subsidiary Company B, and Co.B 100% owns Co. C.
Supposed Co.B no need to present consolidated financial statement as it fulfills all the criteria in FRS 27 para10, should Co.A conso Co.B only or conso both Co. B and C?There’s no need for company B to prepare group accounts – “where the parent company is itself a wholly owned subsidiary of another”
It can if it wishes, but does not HAVE to
Whether it does or not, company A must prepare group accounts incorporating the results of all its subsidiaries (unless immaterial)
In answer to your question, A must consolidate both B and C
Ok?
What about the 100% subsidiary commence liquidation at the fye but the parent company did not do consol as there is one ultimate holding company? There is impairment loss recognise in the previous year
We would consolidate the year’s results for the period up to, but not beyond, the date the subsidiary commenced liquidation. After that date the parent no longer has control and the company is therefore no longer a subsidiary.
We would omit it from the statement of financial position
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What impact will be in the consolidated FS if the company under liquidation has investments whithin other group subsidiaries?
Should the vallue of these investments be extracted from the company net assets ?
thank you
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