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Sir,when we dispose a subsidiary, we do not include the assets and liabilities of the associate. And to calculate the profit or loss on disposal, we deduct the net assets of the subsidiary.
Then why do we include the retained earnings of the subsidiary for the duration the subsidiary was acquired? We also deduct the post acquisition retained earnings to arrive at the profit on disposal figure, then shouldn’t the post acquisition retained earnings be excluded?
And how is a subsidiary shown in consolidated financial statements when the subsidiary is classified as held for sale?
Thanks
“And how is a subsidiary shown in consolidated financial statements when the subsidiary is classified as held for sale?” – this is P2 rather than F7!
You buy an asset for $100
Over the next 10 years, that asset earns for you $70
After 10 years you sell the asset for $120
How much has that original investment earned for you?
$70 + $20 = $90
Why would you exclude the $70 – it’s been credited into your consolidated retained earnings and now you’re making a profit on sale of a further $20
Is that any easier for you?
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