Hi All
Need some help at understanding real life application on ias36 and ifrs5.
Let's say the parent owns 100% of the Sub for $1100. During the year, the parent decides to sell the Sub. As I understand correctly, before the sales, parent does the impairment test for the sub and it's determined that the carrying amount is bigger than recordable amount by 1000. Below is the entry.
DR impairment loss 100
CR goodwill 50 (assumed it was recognized prior)
CR assets within CGU 50
Question 1
Do we recognize above entry from parent's, sub's book, or consol?
Question 2.
When we reclassify the sub into "held for sales" (DR non current asset held for sales), would the parent book the net amount after the impairment of $1000 (being 1100-100) or the investment cost paid of $1100?
Question 3.
Just say the parent is able to sell the Sub, what is the entry from the sub to deconsolidate from parent? Is below correct?
From Sub;
DR investment from parent 1100
CR new owner investment 1100
Regards
Sowrudy
Application of IAS36 and IFRS5
Re: Application of IAS36 and IFRS5
You need to be clear whether your looking at separate (investment in sub) or consolidated (goodwill + net assets) financial statements of the parent. Impairment testing in subsidiary's financial statements are another story (but disappointing cash flow projections may trigger an impairment loss in subsidiary's separate financial statements too)
Re: Application of IAS36 and IFRS5
Hi Marek, thanks for the reply. Let's say I need to close the book right now, and need to make decision on this, so based on my hypnosis, I will do below approach.
Step1
I do the impairment test for sub to determine its FV and book the impairment loss in Subs.
Step2
Once I done the impairment journal in Sub, from parent''s book, I move "investments in sub" to "non current asset held for sales" measured at cost (the price initially paid to acquired the sub).
Step3
When I prepare the consol on subsequent reporting period, I simply do NOT include Sub in the console as it has been classified as HFS from parent's book.
Please kindly advise if any of above step is incorrect
Regards
Sowrudy
Step1
I do the impairment test for sub to determine its FV and book the impairment loss in Subs.
Step2
Once I done the impairment journal in Sub, from parent''s book, I move "investments in sub" to "non current asset held for sales" measured at cost (the price initially paid to acquired the sub).
Step3
When I prepare the consol on subsequent reporting period, I simply do NOT include Sub in the console as it has been classified as HFS from parent's book.
Please kindly advise if any of above step is incorrect
Regards
Sowrudy