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Hi,
It’s now clear to me that when a parent company sells a share of its interest in a subsidiary and control is retained, the operation is regarded as a transaction between equity participant and there is no need to calculate a group gain or loss on disposal.
However, the parent company in its separate financial statements might have recognised a gain from the disposal of the interest.
How this should be dealt with for consolidation when the question remains silent on the matter?
Should we need first to account for the disposal + gain/loss in the parent’s financial statement before proceeding to consolidation when it clearly appears in the question that the investment in subsidiary appearing on the face of the parent’s SFP is the original amount before the disposal.
I don’t know if I made my point clear since it’s quite confused in my mind.
Thank you in advance.
Hi,
You are correct that in the parent’s separate financial statements there is a gain/loss on disposal. This would be treated based upon the legal form of the transaction, in that it is the disposal of shares. Therefore the gain/loss is calculated by comparing the proceeds to the carrying amount of the shares disposed of.
Thanks
Thank you P2-D2.
Does this gain/loss in the separate FS of the parent need to be cancelled/reversed for consolidation purposes or no adjustment is required?
Thanks in advance.
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