Moyes

Q)
Moyes holds a 52% equity
interest in Watson. Watson has previously issued share options to other entities which are
exercisable in the year ending 30 September 20X9. It is highly likely that these options would
be exercised which would reduce Moyes’ interest to 35%. The directors of Moyes require
advice as to whether this loss of control would require Watson to be classified as held for
sale and reclassified as discontinued.

Solution- At face value, Watson would not appear to meet this definition as no sales transaction is to take place.
IFRS 5 does not explicitly extend the requirements for held for sale to situations
where control is lost. However, the Board have confirmed that in instances where
control is lost, the subsidiary’s assets and liabilities should be derecognised. Loss of
control is a significant economic event and fundamentally changes the investor–
investee relationship. Therefore situations where the parent is committed to lose
control should trigger a reclassification as held for sale. Whether this should be extended to situations where control is lost to other causes would be judgemental. It
is possible therefore that Watson should be classified as held for sale.

Sir can you pls tell what the solution is saying..Like if the parent loses control it(subsidiary) should be classified as held for sale? Why?