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Moyes

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Moyes

  • This topic has 3 replies, 2 voices, and was last updated 2 months ago by Stephen Widberg.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 16, 2022 at 11:51 pm #671659
    Varun.J.Thakkar
    Participant
    • Topics: 47
    • Replies: 50
    • ☆☆

    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?

    November 17, 2022 at 8:25 am #671680
    Stephen Widberg
    Keymaster
    • Topics: 12
    • Replies: 2842
    • ☆☆☆☆☆

    IN FUTURE, PLEASE SHOW TOPIC NOT QUESTION NAME AS THREAD HEADER 🙂

    There is no right answer – you have to define HFS and discontinuance and then give your view.

    The answer says it might be HFS.

    They are testing whether you can have a (short) discussion.

    November 17, 2022 at 9:59 am #671697
    Varun.J.Thakkar
    Participant
    • Topics: 47
    • Replies: 50
    • ☆☆

    I get the final point but…
    “Therefore situations where the parent is committed to lose
    control should trigger a reclassification as held for sale”
    On what basis did they conclude that?
    Like i didnt get how did they came to that conclusion

    November 18, 2022 at 9:32 am #671796
    Stephen Widberg
    Keymaster
    • Topics: 12
    • Replies: 2842
    • ☆☆☆☆☆

    I cannot read their mind. 🙂

    I suppose that the current shareholders must have agreed to the granting of the option, therefore suggesting that they plan to sell.

    Best I can do.

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