6.1 Group Disposals

Question 1

What is a group disposal

Answer 1

When a parent sells its shares in a subsidiary

Question 2

Where does a group disposal need to be reflected

Answer 2

Parents own accounts & Group accounts

Question 3

How do you calculate the gain to the parent

Answer 3

+ Sales proceeds
- Carrying amount of investment (cost)
= Gain/(loss) to parent

Question 4

How do you report the gain to the parent

Answer 4

The gain/loss is reported as an exceptional item*:
* It must be disclosed as a separate line on the parent’s SP/L
* Be shown after operating profit.

Question 5

What is an exceptional item

Answer 5

Companies alert us that their operating profit has been affected by events that are unlikely to reoccur in the future with the use of Exceptional Items.

Question 6

What is an extraordinary item

Answer 6

These are another level of rare and should only be listed in the most unusual circumstances

Question 7

What do you show on the FS for disposal of whole subsidiary

Answer 7

Group Statement of Profit or Loss
* 100% of the subsidiary’s results consolidated up to date of disposal
o or shown separately as a discontinued operation
* Show gain/(loss) on disposal

Group Statement of Financial Position
* At year-end, no shares are held, therefore disposed subsidiary is not represented in the group SFP
* Gain/loss on disposal included within retained earnings.