Hi All.
We are busy with a restructuring within the group and need some assistance.
Holdco owns 100% of Company A and Company A owns 100% of Company B.
Management wants to change the shareholding, where Holdco will directly own 100% of Company A and 100% of Company B.
Questions:
Is this restructuring, where Company A is no longer an intermediate company, a common control transaction?
What will happen with the investment in subsidiary of Company A in Company B? It is currently accounted for at cost.
Do we need any additional disclosures on a group level?
Much appreciated.
Group Restructuring - Common control
Re: Group Restructuring - Common control
It is a common control transaction but not a business combination under common control because no party gains control over a business that it didn't already control.
Regarding A's separate financial statements, see https://ifrscommunity.com/knowledge-bas ... tatements/
Regarding A's separate financial statements, see https://ifrscommunity.com/knowledge-bas ... tatements/
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- Posts: 6
- Joined: 01 Nov 2023, 14:53
Re: Group Restructuring - Common control
Thanks. I do have the following journals in Holdco's separate records:
Dr Investment in subsidiary XX
Cr Contribution (Equity) XXXXX
To recognise the aquisition of Company B
Company A:
Dr Distribution (Equity) XXXX
Cr Investment in subsidiary XXXX
Will the distribution reserve be disclosed separately in the separate financial statements or will it form part of retained earnings?
Dr Investment in subsidiary XX
Cr Contribution (Equity) XXXXX
To recognise the aquisition of Company B
Company A:
Dr Distribution (Equity) XXXX
Cr Investment in subsidiary XXXX
Will the distribution reserve be disclosed separately in the separate financial statements or will it form part of retained earnings?
Re: Group Restructuring - Common control
If it's the distribution approach you've chosen, then, in Hodco, it should go to P&L, and impairment considerations in Hodco around it's investment in Company A.
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- Posts: 6
- Joined: 01 Nov 2023, 14:53
Re: Group Restructuring - Common control
Thanks! I realised it when I posted it that Holco should go for P&L which I agree with.
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- Posts: 6
- Joined: 01 Nov 2023, 14:53
Re: Group Restructuring - Common control
It is an upstream transfer and effectively, Holdco will need to recognise the dividend through P&L.
Re: Group Restructuring - Common control
If Subsidiary A doesn’t have enough accumulated profits, this should be recognised as a decrease in the investment in A.