Proforma for disposal of subsiduary in BPP Study textbook is the following
Fair value of consideration received...................X
Fair value of investment retained......................X
Less
Net assets at date of disposal %................(X)
Goodwill..............................................(X)
Gain/Loss...............................................X
The question is
In Q1 of December 2009 , the following information is given
On 30 June 2008, Grange had acquired a 100% interest in Sitin, a public limited company, for a cash consideration
of $39 million. Sitin’s identifi able net assets were fair valued at $32 million.
On 30 November 2009, Grange disposed of 60% of the equity of Sitin when its identifi able net assets were
$36 million. Of the increase in net assets, $3 million had been reported in profi t or loss and $1 million had been
reported in comprehensive income as profi t on an available-for-sale asset. The sale proceeds were $23 million
and the remaining equity interest was fair valued at $13 million. Grange could still exert signifi cant infl uence after
the disposal of the interest. The only accounting entry made in Grange’s fi nancial statements was to increase cash
and reduce the cost of the investment in Sitin.
In answers net assets at date of disposal is taken for 100 % instead of 60 %, is it the right solution?? If yes in which cases we should take 100% of net assets and in which case only our share?
Thanx
Fair value of consideration received...................X
Fair value of investment retained......................X
Less
Net assets at date of disposal %................(X)
Goodwill..............................................(X)
Gain/Loss...............................................X
The question is
In Q1 of December 2009 , the following information is given
On 30 June 2008, Grange had acquired a 100% interest in Sitin, a public limited company, for a cash consideration
of $39 million. Sitin’s identifi able net assets were fair valued at $32 million.
On 30 November 2009, Grange disposed of 60% of the equity of Sitin when its identifi able net assets were
$36 million. Of the increase in net assets, $3 million had been reported in profi t or loss and $1 million had been
reported in comprehensive income as profi t on an available-for-sale asset. The sale proceeds were $23 million
and the remaining equity interest was fair valued at $13 million. Grange could still exert signifi cant infl uence after
the disposal of the interest. The only accounting entry made in Grange’s fi nancial statements was to increase cash
and reduce the cost of the investment in Sitin.
In answers net assets at date of disposal is taken for 100 % instead of 60 %, is it the right solution?? If yes in which cases we should take 100% of net assets and in which case only our share?
Thanx
