Selling a minorities of shareholding

[Leo]

Hi,

If a parent that hold 100% of the shareholding sell a minority to another external entity. Which standard this transaction will be falling into?

Thanks'

[DJP]

IFRS 10 (paragraph 23)

[Leo]

Thanks DJP, "Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (ie transactions with owners in their capacity as owners)."

Would it be IAS 32 that deals with equity transactions?

[DJP]

IAS 32 tells you what an equity instrument is, not how to deal with changes in a group structure.

In a nutshell, if you reduce your stake in a sub without losing control:
- you shall not recalculate goodwill
- a profit or loss does not arise in the consolidated financial statements, and
- the increase in the NCI will be the share of the net assets and goodwill (if you recognised NCI at fair value) of the sub at the date of disposal which the parent has effectively sold

So your entries will be:
DR Cash
CR NCI
DR/CR Other components of equity (balancing figure)

[Leo]

Thanks DJP, for this I know.
My question is more conceptual, you see that often when there is a transaction over the shares, involving contingent considerations, deferred considerations, put, call over NCI etc... The standard often mention IFRS3, but rarely in case that it's not a transfer of business.

[Leo]

But I guess it can also apply to minority shareholding transfer.

[Marek Muc]

Thanks DJP, for this I know.

So why ask in the first place?

[Leo]

Silly of me

[Marek Muc]

Yep, it would be a much better use of DJP's precious time to answer this question instead
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