asset to equity swap

[Leo]

Hi,

I have a quick question. Within the same group, a subsidiary B transfers all its net asset to subsidiary A, in exchange, subsidiary A issue shares to Subsidiary B.

My initial guess is that subsidiary B can record the investment in subsidiary A at cost with cost based on the fair value of the investment in A. However, looking at an IFRIC updates, it says that

"holds an initial investment in another entity (investee). The investment is an investment in an equity instrument as defined in paragraph 11 of IAS 32 Financial Instruments: Presentation. The investee is not an associate, joint venture or subsidiary of the entity and, accordingly, the entity applies IFRS 9 Financial Instruments in accounting for its initial investment (initial interest)."

Can Sub B still account for the investment in sub A at cost, even if it holds less than 20% or, not an associate, JV or sub?

[Marek Muc]

My initial guess is that subsidiary B can record the investment in subsidiary A at cost with cost based on the fair value of the investment in A.

It's either at cost or at fair value, you can't have both. It seems to fall under IFRS 9, i.e. initial measurement at fair value.
https://ifrscommunity.com/knowledge-bas ... easurement

For A, it appears to be a business combination under common control.

[Leo]

Yes, agreed, at cost with cost being the fair value of the consideration given, in this case, the nets assets transferred.