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CIMA - F2 > Chapter 13 - Disposals & Reorganisations > Flashcards

Chapter 13 - Disposals & Reorganisations Flashcards

1
Q

Disposal

A

Dispose of some or all of the shares in a subsidiary

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2
Q

Impact on Control

A

Subsidiary&raquo_space; Full disposal&raquo_space; control lost

Subsidiary&raquo_space; partial disposal&raquo_space; Subsidiary to Associate&raquo_space; Control lost

Subsidiary&raquo_space; partial disposal&raquo_space; Subsidiary to Trade Investment&raquo_space; Control lost

Subsidiary&raquo_space; partial disposal&raquo_space; Subsidiary to Smaller subsidiary&raquo_space; Control decreased

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3
Q

Loss of Control

A

Completely remove subsidiary from the accounts

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4
Q

Loss of control

A

Fair value of subsidiary and the removing the value it is recorded in the accounts

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5
Q

Full Disposal

SOFP De-consolidation

A
  • Add cash proceeds from disposal
  • Add parent’s profit to retained earnings
  • Add the Tax Liability
  • Remove the Subsidiary from the books
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6
Q

Full Disposal

Income Statement De-Consolidation

A
  • Add the profit on Disposal
  • Charge the income tax
  • Aggregate the parent and subsidiary
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7
Q

Proforma

Group Profit on Disposal

A 
Cash proceeds
Add: Remaining investment 
Add: NCI
= FV of Subsidiary 
Less: Net Assets
Less: Goodwill 
= Group Profit on Disposal
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8
Q

Disposal

Subsidiary to Associate

A

Include in SOFP
Group investment in Associate

Include in Income Statement
Geoup share of Associate profits

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9
Q

Subsidiary to Associate

SOFP process

A

1) Add cash proceeds from the disposal
2) Add parent’s profit to retained earnings
3) Add Tax Liability
4) Remove Subsidiary from books
5) Show the Investment in the Associate

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10
Q

Subsidiary to Trade Investment

SOFP Process

A

1) Add cash proceeds from the disposal
2) Add parent’s profit to retained earnings
3) Add Tax Liability
4) Remove Subsidiary from books
5) Show it as Trade Investment

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11
Q

Control to Control Disposal

A

Company reduces shareholding but still maintains control

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12
Q

Reduction in Control

A

Change in structure impacts the parent’s equity.

FV of Consideration Received
Less: Increase in NCI in the neat assets at disposal
= Adjustment to Parent’s Equity

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13
Q

Reduction in Control

A
  • No gain or loss on disposal to be calculated

- no change to the carry value of goodwill

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14
Q

Group re-organisation or re-structuring

A

> Creation of a parent entity
Promotion of a sub-subsidiary
Demotion of Subsidiary
Formation of a new Subsidiary based on intra-Group Share transfer

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15
Q

Reasons for Group Re-organisation

A 
> Potential Tax Advantages
> Divisionalisation
> Demerger
> To Sell a Subsidiary 
> Reverse Acquisition
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CIMA - F2 (23 decks)

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