Free Subsidiary from controlling shareholder

All topics related to IFRS Standards.
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SaadOlath
Posts: 44
Joined: 22 Dec 2019, 10:50

Free Subsidiary from controlling shareholder

Post by SaadOlath »

Usually investment in subsidiary is the purchase consideration, paid to acquire a Subsidiary.

What if, the Subsidiary was gifted by the Ultimate Shareholder?

At Consolidation level, Investment in Subsidiary is usually offset against Share Capital of the Subsidiary. Therefore, I believe that investment in Subsidiary cannot be Nil, even, if no consideration has been paid. Otherwise, you will get a - ve figure, when offsetting Investment in Subsidiary against Share Capital of Subsidiary.

Several auditors maintain that Investment in Subsidiary value should be Nil, bcz, no consideration was paid.

Idk, if there's any guidance from IFRS.

Please advise?
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Marek Muc
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Posts: 1035
Joined: 15 Oct 2018, 17:21
Location: Warsaw, Poland

Re: Free Subsidiary from controlling shareholder

Post by Marek Muc »

no, there's no guidance in IFRS, so you need to develop your accounting policy

I would record the investment at fair value with a corresponding increase in equity representing capital contribution
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JRSB
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Posts: 317
Joined: 01 Mar 2020, 01:10
Location: London, UK

Re: Free Subsidiary from controlling shareholder

Post by JRSB »

I agree with Marek.

Several auditors? Sounds problematic
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Andreas Kyriacou
Posts: 20
Joined: 13 Dec 2019, 13:31

Re: Free Subsidiary from controlling shareholder

Post by Andreas Kyriacou »

Fair Value classification with the credit entry to shareholder contributions is what u should do.

Agreed! ;)
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