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We have a sub group within our business which has a Holding company called HoldCo. The HoldCo had bunch of real estate assets which have now been transferred to their respective legal entities. My question is on the stand alone financial statements for the HoldCo. I am of the opinion that we simply show the transfer of assets as transfer out to related parties / wholly owned subsidiaries and give appropriate disclosures of the fact.

Is the treatment correct or do we need to restate comparatives to reflect transactions with entities under common control? I am not sure why this would be required but one of the auditors have suggested that.

For assets which are to be transferred in 2020, do we need to show those assets as held for sale for 2019 YE stand alone FS? I don't think it is required but, again the auditors seem to be insisting on this treatment.

Are those assets the substantially the whole business of the group, or just incidental?

Not sure how it would meet the definition of held for sale because evidently they weren't! Eg for this to apply the asset must be 'actively marketed'.

Were they sold to the subsidiary at market price, or transferred for nil consideration ie 'contributed'?

for assets held for sale, you don't restate comparatives anyway (IFRS 5.40)

however, for discontinued operations, you do (IFRS 5.34), so maybe the auditors had discontinued operations in mind?

Transferred as shareholder contribution, which is why I do not understand where the held for sale/discontinued operations classification came from.

Well those assets are commercial real estate properties, which is the core business of that particular sub group. After these transfers the HoldCo will have investments in individual legal entities, where each legal entity would hold one asset.

The question of restatement of comparatives was more from business combinations under common control, since each real estate asset qualifies as a separate business on its own.

well, as you surely know, BCUCC are not yet in the scope of IFRS

my personal opinion is that there is no basis to restate comparatives, frankly speaking I don't know the direction of IASB's deliberations on this subject (I'm waiting for the DP)

do you plan to recognise the sale at FV? i.e. recognise any gain/loss in Hold Co's accounts?

I assume the transfer was done at it's carrying value and shown as a capital contribution, ie DR investment in subsidiary CR asset?

I know it is often done this way, but in my opinion the starting point should be that the investment in subsidiary is recognised at cost as per IAS 27, i.e. cash or fair value of other consideration given

Sounds like the assets may be investment property, so possibly at FV anyway. Need more info!

Yes the asset(s) are investment properties, carried at fair value.

Marek, that is what we did. We transferred the investment property, it's related tenant balances (both assets and liabilities). So the accounting entry is simply credit to all the assets, debit to liabilities and the net amount is debited to Investment in subsidiary. This is how the transfers were accounted for and disclosures to the same effect were given in the stand alone financial statements.

Honestly don't think it is required to be complicated more than this.

nauman wrote: ↑16 Jun 2020, 11:25 Transferred as shareholder contribution, which is why I do not understand where the held for sale/discontinued operations classification came from.

For discontinued operations, you don't need an actual sale, other ways of discontinuing are also in the scope

I agree, based on what you've said, and of course no impact at all on group.

Which audit firm is getting excited about it? I assume Big 4....

Honestly don't think it is required to be complicated more than this.

I also agree with your approach, but mainly thanks to the fact that properties were carried at fair value, otherwise it wouldn't be so obvious to me

JRSB wrote: ↑16 Jun 2020, 12:32 Which audit firm is getting excited about it? I assume Big 4....

Yes, one of the big 4