Change in
ownership
IFRS 3 .41-.42
IFRS 10 .23-.26
IFRS 12 .18-. 19
1
,SCENARIOS
1. Subsidiary increase %, therefore still subsidiary
a. 60%-> 80%
b. PURCHASE
c. Therefore, don’t lose control= equity transactions IFRS 10. 23
d. “changes in ownership” this is the NEW reserve in equity in SCE no effect on PL
e. I will have to purchase some of the shares from NCI ( B96)
f. You have to do an additional journal at year end for the additional portion purchased from NCI
DR NCI (SFP) (Decrease with the portion sold to the parent
CR Investment (SFP) (new cost price paid)
DR/CR change in ownership reserve (SCE) ( Dr Goodwill or CR gain on bargain purchase)
2. Subsidiary decrease %, therefore still subsidiary
a. 80%-> 60%
b. DISPOSAL OF PART INTEREST IN SUBSIDIARY
c. Therefore, don’t lose control = equity transactions IFRS 10. 23
d. “Changes in ownership” this is the NEW reserve in equity in SCE NO effect of PL
e. Might have a profit or loss in the separate records (profit or loss on disposal of investment in subsidiary)
f. GAIN/LOSS for the group = proceeds less net assets sold
i. This is recognized in equity “changes in ownership reserve”
ii. This is NOT reflected in the PL because the status didn’t change thus it is a movement of equity
iii. GOODWILL does NOT realize! Because our status isn’t changing we still have ownership
Journal:
Dr Gain (P) (P/L) Gain on disposal of part interest for the parent
only (derecognising)
Dr/Cr Change in ownership reserve (SCE) - group gain / loss (recognising )
Cr NCI (SFP) - increased with portion that
P sold (NCI receives more shares now because
we sold them )
Dr Investment (SFP) - ‘write-back’ of excess
elimination
How to work out new interest shareholding:
If the question says that we sold 25% our interest in the subsidiary:
➢ 25% x our original number of shares held = number of shares sold
➢ Original number of shares- number of shares sold = remaining number of shares
➢ Remaining number of shares / share capital of subsidiary = NEW % shareholding
2
, 3. Subsidiary decrease % to zero (LOSE control) IFRS 10 B98 formula!!!
a. 80%-> 0
b. Parents gain/loss on disposal on interest in subsidiary = proceed – CA
c. Sub to passive interest (20%)
d. Sub to associate
e. 3 stages of the financial year
i. Accounting from the beginning of the fin year until the date of the disposal
ii. Accounting on the date of disposal (when we lose control)
iii. Accounting for the period
f. Procedure
i. Derecognize all assets and liabilities including goodwill of the subsidiary
1. Because we NO longer have a subsidiary
ii. Derecognize CA of any NCI
iii. Recognize:
1. FV of the consideration received
2. Recognize resulting difference as gain/loss in PL attributable to parent (this is NOT the same as the
gain/ loss in the separate records and thus eliminate PL from separate records) IFRS 10. B98
g. Because at year end, I no longer have a subsidiary everything that I want to include in the consolidated
statements I have to JOURNALISE all the entries
PROFIT ON DISPOSAL OF SHARES- GROUP
IFRS 10 B98 method
derecognize assets and liabilities ()
this is the TOTAL NAV on the date of disposal
remember that this is representative of 100% of the NAV of the subsidiary
(The total column in analysis on date of disposal)
derecognize goodwill ()
the TOTAL NAV used above does NOT include the goodwill & therefore
derecognize goodwill separately
NB!! NET amount= after taking into account any impairment
derecognize NCI xxx
xxx
recognize proceeds xxx
selling price
gain/loss on disposal ()/xx
Dr Gain on disposal of shares (parent) - Remove gain (P) – separate records!!
Cr Gain on disposal of shares (group) - Include gain (Group) “change in ownership”
Dr NCI (P/L)
Dr COS (P/L) - Include SOCI items for period while subsidiary
Dr Tax (P/L)
Cr Revenue (P/L)
Cr RE - begin - include RE » was subsidiary at beg. of year
3
, 4. Associate increase % to become a subsidiary
a. 40% -> 90%
b. Split your year into sections
i. Part 1= still associate (treat like usual associate, 1st analysis of associate )
1. 20%- 50%
2. Equity account
ii. Part 2 = a subsidiary (then you start a separate analysis of subsidiary)
1. Greater than 50%
2. Consolidate
c. Separate records of P= initial COST + payment for further investment
d. Group perspective
i. Initially we have associate
1. Investment at cost + attributable portion of reserves SINCE acquisition in SFP
2. Recognize dividends received and attributable share in profit of associate
ii. Obtain further %
1. Obtain control and it now becomes a sub
2. I need to remeasure prev held equity interest( CA of associate ) to FV IFRS 3 par 42
3. GW is determined on date of acquisition ( control is obtained) IFRS 3 par 32 calculation of goodwill
e. Dividend declaration date is important because it will show us which analysis we put the dividend in !!! (Does
it relate to period while Associate or relate to period when it was a subsidiary)
f. Look at profit carefully for:
i. Transactions on a specific date
ii. Intragroup transactions
iii. Sale of a vehicle for a specific date
iv. Remember we are always using profit AFTER tax
DR Investment (SFP)
CR RE-Beg (SCE)
CR Revaluation surplus (SCE)
CR Share of profit of associate (PL)
CR Share other comprehensive income of associate (OCI) (this is the current year revaluation)
(equity account while associate ) (these are the figures in the analysis of the associate )
DR Investment (SFP)
CR Remeasurement gain (PL)
OR DR remeasurement loss (PL)
(remeasurement on date on change in ownership )
DR Share Capital (SFP)
DR RE (SCE)
CR Investment (SFP)
(elimination)
DR Goodwill (SFP)/ CR gain on bargain purchased (PL)
CR NCI (SFP)
(this arises from the change from subsidiary to associate)
DR revenue (PL)
CR COS (PL)
CR Tax (PL)
4
ownership
IFRS 3 .41-.42
IFRS 10 .23-.26
IFRS 12 .18-. 19
1
,SCENARIOS
1. Subsidiary increase %, therefore still subsidiary
a. 60%-> 80%
b. PURCHASE
c. Therefore, don’t lose control= equity transactions IFRS 10. 23
d. “changes in ownership” this is the NEW reserve in equity in SCE no effect on PL
e. I will have to purchase some of the shares from NCI ( B96)
f. You have to do an additional journal at year end for the additional portion purchased from NCI
DR NCI (SFP) (Decrease with the portion sold to the parent
CR Investment (SFP) (new cost price paid)
DR/CR change in ownership reserve (SCE) ( Dr Goodwill or CR gain on bargain purchase)
2. Subsidiary decrease %, therefore still subsidiary
a. 80%-> 60%
b. DISPOSAL OF PART INTEREST IN SUBSIDIARY
c. Therefore, don’t lose control = equity transactions IFRS 10. 23
d. “Changes in ownership” this is the NEW reserve in equity in SCE NO effect of PL
e. Might have a profit or loss in the separate records (profit or loss on disposal of investment in subsidiary)
f. GAIN/LOSS for the group = proceeds less net assets sold
i. This is recognized in equity “changes in ownership reserve”
ii. This is NOT reflected in the PL because the status didn’t change thus it is a movement of equity
iii. GOODWILL does NOT realize! Because our status isn’t changing we still have ownership
Journal:
Dr Gain (P) (P/L) Gain on disposal of part interest for the parent
only (derecognising)
Dr/Cr Change in ownership reserve (SCE) - group gain / loss (recognising )
Cr NCI (SFP) - increased with portion that
P sold (NCI receives more shares now because
we sold them )
Dr Investment (SFP) - ‘write-back’ of excess
elimination
How to work out new interest shareholding:
If the question says that we sold 25% our interest in the subsidiary:
➢ 25% x our original number of shares held = number of shares sold
➢ Original number of shares- number of shares sold = remaining number of shares
➢ Remaining number of shares / share capital of subsidiary = NEW % shareholding
2
, 3. Subsidiary decrease % to zero (LOSE control) IFRS 10 B98 formula!!!
a. 80%-> 0
b. Parents gain/loss on disposal on interest in subsidiary = proceed – CA
c. Sub to passive interest (20%)
d. Sub to associate
e. 3 stages of the financial year
i. Accounting from the beginning of the fin year until the date of the disposal
ii. Accounting on the date of disposal (when we lose control)
iii. Accounting for the period
f. Procedure
i. Derecognize all assets and liabilities including goodwill of the subsidiary
1. Because we NO longer have a subsidiary
ii. Derecognize CA of any NCI
iii. Recognize:
1. FV of the consideration received
2. Recognize resulting difference as gain/loss in PL attributable to parent (this is NOT the same as the
gain/ loss in the separate records and thus eliminate PL from separate records) IFRS 10. B98
g. Because at year end, I no longer have a subsidiary everything that I want to include in the consolidated
statements I have to JOURNALISE all the entries
PROFIT ON DISPOSAL OF SHARES- GROUP
IFRS 10 B98 method
derecognize assets and liabilities ()
this is the TOTAL NAV on the date of disposal
remember that this is representative of 100% of the NAV of the subsidiary
(The total column in analysis on date of disposal)
derecognize goodwill ()
the TOTAL NAV used above does NOT include the goodwill & therefore
derecognize goodwill separately
NB!! NET amount= after taking into account any impairment
derecognize NCI xxx
xxx
recognize proceeds xxx
selling price
gain/loss on disposal ()/xx
Dr Gain on disposal of shares (parent) - Remove gain (P) – separate records!!
Cr Gain on disposal of shares (group) - Include gain (Group) “change in ownership”
Dr NCI (P/L)
Dr COS (P/L) - Include SOCI items for period while subsidiary
Dr Tax (P/L)
Cr Revenue (P/L)
Cr RE - begin - include RE » was subsidiary at beg. of year
3
, 4. Associate increase % to become a subsidiary
a. 40% -> 90%
b. Split your year into sections
i. Part 1= still associate (treat like usual associate, 1st analysis of associate )
1. 20%- 50%
2. Equity account
ii. Part 2 = a subsidiary (then you start a separate analysis of subsidiary)
1. Greater than 50%
2. Consolidate
c. Separate records of P= initial COST + payment for further investment
d. Group perspective
i. Initially we have associate
1. Investment at cost + attributable portion of reserves SINCE acquisition in SFP
2. Recognize dividends received and attributable share in profit of associate
ii. Obtain further %
1. Obtain control and it now becomes a sub
2. I need to remeasure prev held equity interest( CA of associate ) to FV IFRS 3 par 42
3. GW is determined on date of acquisition ( control is obtained) IFRS 3 par 32 calculation of goodwill
e. Dividend declaration date is important because it will show us which analysis we put the dividend in !!! (Does
it relate to period while Associate or relate to period when it was a subsidiary)
f. Look at profit carefully for:
i. Transactions on a specific date
ii. Intragroup transactions
iii. Sale of a vehicle for a specific date
iv. Remember we are always using profit AFTER tax
DR Investment (SFP)
CR RE-Beg (SCE)
CR Revaluation surplus (SCE)
CR Share of profit of associate (PL)
CR Share other comprehensive income of associate (OCI) (this is the current year revaluation)
(equity account while associate ) (these are the figures in the analysis of the associate )
DR Investment (SFP)
CR Remeasurement gain (PL)
OR DR remeasurement loss (PL)
(remeasurement on date on change in ownership )
DR Share Capital (SFP)
DR RE (SCE)
CR Investment (SFP)
(elimination)
DR Goodwill (SFP)/ CR gain on bargain purchased (PL)
CR NCI (SFP)
(this arises from the change from subsidiary to associate)
DR revenue (PL)
CR COS (PL)
CR Tax (PL)
4
