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Disposal of subsidiary

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Disposal of subsidiary

  • This topic has 3 replies, 3 voices, and was last updated 7 years ago by shiridiprasad.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 6, 2018 at 11:31 am #450308
    drishti1234
    Member
    • Topics: 13
    • Replies: 9
    • ☆

    Sir, what do we mean by a parent company selling its shareholding to one of its subsidiary?

    May 8, 2018 at 11:30 am #450570
    Kim Smith
    Keymaster
    • Topics: 134
    • Replies: 8304
    • ☆☆☆☆☆

    The learning outcome related to disposal of a subsidiary is:
    h) Explain and illustrate the effect of
    the disposal of a parent’s investment
    in a subsidiary in the parent’s
    individual financial statements
    and/or those of the group (restricted
    to disposals of the parent’s entire
    investment in the subsidiary).
    (That is, P sells its entire investment in S to another (3rd) party.)
    You will find a useful article specifically on this LO on ACCA’s www at https://www.accaglobal.com/uk/en/student/exam-support-resources/fundamentals-exams-study-resources/f7/technical-articles/learning-outcomes.html

    May 8, 2018 at 3:28 pm #450618
    drishti1234
    Member
    • Topics: 13
    • Replies: 9
    • ☆

    Thankyou sir.

    May 20, 2018 at 8:30 pm #453037
    shiridiprasad
    Member
    • Topics: 1
    • Replies: 3
    • ☆

    That means, the parent company is transferring the shares it holds in a company to its subsidiary, now the subsidiary company shall own the shares in the company instead of the parent company and since the parent company controls the subsidiary we can say the parent company still indirectly through its subsidiary company holds the shares.

    Hope the following example helps:
    P (parent company), S( subsidiary company) X(company in which P has a shareholding).
    P transfers shares held in X to S, now S is the shareholder in X.
    Since S is a subsidiary of P, P has control over S, therefore indirectly holding shares in X.
    From Consolidation point of view, P can still consolidate X if it can establish the existence of a control relationship between P and X or ever through the shareholding held by S, as its considered shares in X are still held by P but now indirectly.

    Hope this answers you query.

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