Impairment of subsidiary

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SaadOlath
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Impairment of subsidiary

Post by SaadOlath »

In the FS of the Parent Company, investment in subsidiary is impaired completely. However, the Parent still control the subsidiary.

At consolidation level, Is it permissible to exclude the subsidiary?
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Marek Muc
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Re: Impairment of subsidiary

Post by Marek Muc »

To exclude from consolidation? No, why would you, this subsidiary is still part of the group.
SaadOlath
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Re: Impairment of subsidiary

Post by SaadOlath »

In the book of the Parent Company, Investment in subsidiary is Nil.

At consolidation level, investment in subsidiary needs to be offset against share capital of the subsidiary.

Should I reverse the impairment?
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Marek Muc
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Re: Impairment of subsidiary

Post by Marek Muc »

Impairment of shares is reversed in consolidated financial statements. However , assets of this subsidiary may be impaired and an impairment loss on them may be needed in consolidated financial statements
JRSB
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Re: Impairment of subsidiary

Post by JRSB »

Was it a business combination at group level? There may be goodwill, intangibles recognised at group level etc also impaired.
Student of IFRS.
SaadOlath
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Re: Impairment of subsidiary

Post by SaadOlath »

Yes, it's a business combination at group level.
jonyicheng
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Re: Impairment of subsidiary

Post by jonyicheng »

The impairment of the subsidiary is also reversed at the consolidation level in addition to the usual elimination of subsidiary share capital against the cost of investment. The impairment is a company level accounting entry.

If you have goodwill relating to this business combination, this may be subjected to be impaired.
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nauman
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Re: Impairment of subsidiary

Post by nauman »

Exactly as @jonyicheng said, when you are performing consolidation you reverse the impairment against i.e. credit Retailed earnings / impairment charge and debit the investment in subsidiary and then the investment in subsidiary is eliminated against share capital / pre-acquisition reserves of the subsidiary.
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