Hi,
If you were looking to sell a subsidiary, parent company owns 90% (no goodwill, company was formed by our group) - what would the entries be for a "sale of subsidiary" versus "sale of assets".
I think for sale of subsidiary the balance sheet gets reversed with a gain/loss on sale going to P&L but there will obviously be some element to account for the 10% NCI
Cheers in advance,
Nat
Sale of Subsidiary with NCI
Re: Sale of Subsidiary with NCI
parent would just have gain or loss on disposal compared to carrying value of investment in subsidiary. so assume you're thinking about consolidated accounts?
Re: Sale of Subsidiary with NCI
If the company'd been created by parent, you do nothing, just run the consolidation, and the P&L in conso should be equal to the P&L in statutory.
Illustration :
Parent P :
Investments in Child A : 90
Bank :10
Issued capital social : -100
Child A :
Assets : 100
Capital : -100
Conso P :
Bank : 10
Assets : 100
Issuued capital social : -100
NCI : -10
Parent P sold Child A for 100.
Economic gain of the operation :
Net assets Child A : 100 * 90% = 90
Net gain of the operation : 100 -90 = 10
Parent P = Conso P :
Bank : 110
Issued capital social : -100
P&L : -10
So Your consolidated Equity will be increased by 10 from the P&L
And your consolidated NCI will decrease by 10 because of the derecognition/disposal.
Illustration :
Parent P :
Investments in Child A : 90
Bank :10
Issued capital social : -100
Child A :
Assets : 100
Capital : -100
Conso P :
Bank : 10
Assets : 100
Issuued capital social : -100
NCI : -10
Parent P sold Child A for 100.
Economic gain of the operation :
Net assets Child A : 100 * 90% = 90
Net gain of the operation : 100 -90 = 10
Parent P = Conso P :
Bank : 110
Issued capital social : -100
P&L : -10
So Your consolidated Equity will be increased by 10 from the P&L
And your consolidated NCI will decrease by 10 because of the derecognition/disposal.
Re: Sale of Subsidiary with NCI
Consolidation relies heavily on the efficiency of the software. An efficient software coupled with a good up stream parametrage, can cut the consolidation staff by half. But still you need people to analyse the figures and there are plenty of cases not in the textbook which need human intervention to adjust.
PS : In France, the conso software mostly used is SAP BFC (former Cartesis Magnitude), and Tagetik as a rising star.
What are the software used in your country ?
PS : In France, the conso software mostly used is SAP BFC (former Cartesis Magnitude), and Tagetik as a rising star.
What are the software used in your country ?
Re: Sale of Subsidiary with NCI
of course but we're striving to understand underlying technical accounting in this community!
Re: Sale of Subsidiary with NCI
on the original question:
Entries for a loss of control over a subsidiary are summarised here:
https://ifrscommunity.com/knowledge-bas ... of-control
If you sell underlying assets of the subsidiary, but without losing control of the entity, you won't derecognise NCI, so the gain on disposal in conso P/L will be higher by that amount (i.e. the value of NCI). On the other hand, you have to allocate that gain on disposal of assets to NCI as usual. As a result, when that subsidiary pays dividend, a larger portion of it (earned on disposal of assets) goes to the NCI.
Entries for a loss of control over a subsidiary are summarised here:
https://ifrscommunity.com/knowledge-bas ... of-control
If you sell underlying assets of the subsidiary, but without losing control of the entity, you won't derecognise NCI, so the gain on disposal in conso P/L will be higher by that amount (i.e. the value of NCI). On the other hand, you have to allocate that gain on disposal of assets to NCI as usual. As a result, when that subsidiary pays dividend, a larger portion of it (earned on disposal of assets) goes to the NCI.