Associate to subsidiary

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rganesh
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Joined: 20 Mar 2022, 05:18

Associate to subsidiary

Post by rganesh »

A big thanks to everyone that makes this forum & website so informative and useful. I just stumbled on to it through google link and found it awesome.

A question that I searched but could not find answer - apologies if there's a link or post already on it that I could not find.

When associate co becomes subsidiary, in mid year, what should be disclosure of "Share of profit/loss in assoc co" already recognised in Consolidated Group P&L and reported in quarterly financial statements?
Should it continue to show up in YTD P&L all the way to end of fiscal year?
Or de-recognised?

Any links to examples would be of great help.

Thanks in advance!
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Marek Muc
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Re: Associate to subsidiary

Post by Marek Muc »

Hi and welcome to the forums :)

You don't reverse or derecognise the share of profit of associate that you recognised before obtaining control. So you'll keep this P&L line in full year financial statements even though the entity in question is a subsidiary at year-end.

I don't think this is discussed in IFRS, it's just reasoning from general principles
pub_acco
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Re: Associate to subsidiary

Post by pub_acco »

IAS 28.22 says "An entity shall discontinue the use of the equity method from the date when its investment ceases to be an associate" and IFRS 10.20 says "Consolidation of an investee shall begin from the date the investor obtains control of the investee". So it's official :)
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Marek Muc
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Re: Associate to subsidiary

Post by Marek Muc »

you're absolutely right!
rganesh
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Re: Associate to subsidiary

Post by rganesh »

Thanks very much to both!
regards
Leo
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Joined: 05 Apr 2020, 22:31

Re: Associate to subsidiary

Post by Leo »

So at the year end, in the P&L of the consolidated statements :

in the line called "Share of profit/loss in assoc co", there should be the first half year's result of the associate * % of control
And in the consolidated statements of the group, only the second half year's result of the acquiree will be integrated and shown

Right ?
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Marek Muc
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Re: Associate to subsidiary

Post by Marek Muc »

Yes
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