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Hi sir,
I would like to know in what circumstance would a disposal of subsidiary be classified under discontinued operation?
And how the disposal of subsidiary will be accounted for in Parent company and Group if it’s under discontinued operation and also if it’s not?Thanks.
Kind regards.
if it is a discontinued operation there must be a separate disclosure for all operations relating it. Non current assets for a discontinued operation be indicated as current assets
If the subsidiary is a major component of the group or it represents a separate major line of activity for the group then it’s operations have to be shown in the Statement of Profit or Loss account but as a discontinued operation. It will be shown separately from the Continued operations of the Group in The Group statement of profit or loss.
The parent company will derecognise the cost of investment in its Individual Statement of Financial Position and recognise the profit or loss on disposal with the associated tax liability, if a profit is made.
In the Group statement, the fair value of assets and liabilities at the date of disposal will be ascertained derecognised from the Group statement of financial position.
The fair value of the Net assets at disposal date will be deducted from the disposal proceeds to recognise the profit in the Group statement of profit or loss. The tax liability from the parent individual statement of profit or loss will be the same as that to be recognised in the Group statement of profit or loss. This is because the tax man taxes the parent company for the transaction and not the Group.
I hope i’ve explained it well.
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