Group disposals

Question 1

When a shareholding in a subsidiary is disposed of it must be reflected in:

Answer 1

• the parent company’s individual financial statements and
• the group financial statements

Question 2

What is the calculation the gain/loss on disposal?

Answer 2

Sale proceeds x
Carrying amount of investment (x)
= Parent gain/loss on disposal x(x)

Question 3

The gain is reported as an exceptional item

Answer 3

• must be disclosed separately on the face of the parent’s SPL
• after profit from operations

Question 4

What is the impact of disposal on the financial statement of profit or loss?

Answer 4

• 100% of the subsidiary’s results consolidated up to date of disposal
• gain(loss) on disposal

Question 5

What is the impact of disposal on the financial statement of financial position?

Answer 5

• at the year-end no shares are held by the parent and therefore the disposed subsidiary is not included in the group statement of financial position
• gain/loss on disposal to be included within retained earnings

Question 6

Gain on disposal

Answer 6

Sale proceeds x
Net assets at date of disposal x
Net goodwill at date of disposal x
NCI at date of disposal (x)
(x)
Group gain/loss on disposal = x/(x)

Question 7

Carrying amount of goodwill at the date of disposal

Answer 7

Consideration transferred x
NCI at acquisition (fair value or proportional method) x
100% of the fair value of net assets at acquisition
(x)
= Goodwill at acquisition x
Less: Impairments to date of disposal (x)
= Goodwill at disposal x

Question 8

Carrying amount of net assets at date of disposal

Answer 8

Net assets b/f x
Profit/(loss) for current period to disposal date x/(x)
Dividends paid prior to disposal (x)

Question 9

Non-controlling interest (NCI) at disposal
Fair value method

Answer 9

NCI at acquisition x
NCI % of S’s retained profits post-acquisition up to disposal x
NCI % of impairment (x)

Question 10

Non-controlling interest (NCI) at disposal
Proportion of net assets method

Answer 10

NCI at acquisition x
NCI % of S’s retained profits post-acquisition up to disposal