Chapter 21 - Group Disposals Flashcards
If a parent sells all its shares in the sub what do we account for?
we account for the disposal both in the parent’s books and in the consolidated accounts
How do we calculate the gain or loss in the parent’s accounts?
calculated as the sale proceed less the carrying amount of the investment (original cost of the investment)
What is the gain or loss reported as in the parent’s financial statements?
as an exceptional item so must be disclosed separately on the face of the parent’s SPL below profit from operations.
In the group financial statements how is the sub carried?
not carried at its original cost.
What does the subs carrying amount in the group financial statements comprise of?
the fair value of its net assets and goodwill, less any non-controlling interest
How is the profit on disposal calculated in the consolidated financial statements?
by comparing the sale proceeds to the carrying amount of the subsidiary in the group accounts
How is tax payable calculated?
on parent’s profit NOT group profit
If the sub gets sold how is this shown on the SFP?
Subs assets and liabilities will not be consolidated. The subs goodwill and non-controlling interest will be removed
If the sub gets sold how is this shown on the SPL?
The subs results must be consolidated up to the date of disposal. There will also be a group gain or loss on disposal included.
How do we calculate the group profit or loss on disposal?
Proceeds on disposal. X
Less
Carrying value of subs
at disposal (X)
Subs net assets at dis (X)
Subs goodwill at disposal (X)
less
NCI at disposal (X)
Do company’s pay tax on consolidated accounts?
no just individual
