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Gain or loss on disposal of subsidiary net asset (step disposal)

Forums › Ask CIMA Tutor Forums › Ask CIMA F2 Tutor Forums › Gain or loss on disposal of subsidiary net asset (step disposal)

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • August 11, 2021 at 10:40 am #631186
    saadkx
    Member
    • Topics: 19
    • Replies: 22
    • ☆

    hi,
    on disposal of subsidiary shares without loosing control ,if we had a gain we,
    dr bank
    cr nci
    cr reserve
    it seems like we are treating it as unrealized gain as we do not take it into the profit/loss a/c
    and also cr reserve instead of retain earning.
    it is a realized gain just like other disposals as we have actually receive cash , not just paper gain….then why the treatment of unrealized gain just like revaluation gain?

    October 6, 2021 at 9:14 pm #637169
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7156
    • ☆☆☆☆☆

    Hi,

    Think of it as a reserve transfer in the group accounts, similar to that seen when transferring some of the revaluation surplus to the retained earnings.

    In the individual accounts there would be a profit or loss on disposal as we have sold shares. In the group accounts there is just a change in ownership, so no profit or loss as there is no disposal of shares in the group, just a transfer of the amounts of the net assets owned. The transfer of ownership therefore takes place in the group SOCIE.

    Hope that clears it up.

    Thanks

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