Disposal of subsidiary
Posted: 18 Jul 2020, 15:53
Hi all, i have a scenario on the below for which any input is appreciated!
Company sold subsidiary (held at cost because exempt from consolidation under IFRS 10) to a third party in August 2019. The final consideration is subject to the purchase price allocation (PPA) exercise done by the buyer and adjusted accordingly. Under IFRS 3:45, the buyer has 1 year from the date of transaction to complete this. A preliminary gain on disposal of $100m is recorded in FY19 FS (with YE 31 Dec 2019) and the buyer has paid the preliminary consideration in full in 2019 upfront first.
As at the date of issuance of the FY19 FS in July 2020, the PPA exercise had just been completed and the final consideration decreased by $20m (i.e. gain on disposal is now $80m). Should the company need to adjust FY19 FS for this event, or disclose in FY19 FS as a non-adjusting subsequent event under IAS 10 and show restated comparative figures in the FY20 FS for this $20m, or should they expense this $20m in the FY20 profit or loss as they refund the buyer of $20m?
Thank you!
Company sold subsidiary (held at cost because exempt from consolidation under IFRS 10) to a third party in August 2019. The final consideration is subject to the purchase price allocation (PPA) exercise done by the buyer and adjusted accordingly. Under IFRS 3:45, the buyer has 1 year from the date of transaction to complete this. A preliminary gain on disposal of $100m is recorded in FY19 FS (with YE 31 Dec 2019) and the buyer has paid the preliminary consideration in full in 2019 upfront first.
As at the date of issuance of the FY19 FS in July 2020, the PPA exercise had just been completed and the final consideration decreased by $20m (i.e. gain on disposal is now $80m). Should the company need to adjust FY19 FS for this event, or disclose in FY19 FS as a non-adjusting subsequent event under IAS 10 and show restated comparative figures in the FY20 FS for this $20m, or should they expense this $20m in the FY20 profit or loss as they refund the buyer of $20m?
Thank you!