12-13-2009, 06:27 AM
Dear
Important question is whether the further transaction results in a control being lost. If we already hold a subsidiary and later we disposed some shares in that subsidiary, which does not result in a control being lost then this transaction should be treated as treasury transaction.
It is imortant to understand that goodwill shall only be determined once the control is achieved, later if you further acquire or dispose off some shares in that subsidiary which does not affect your controlling status then there is no need to re-compute the goodwill. Such transactions shall be dealt as treasury transactions (i.e. transaction which will be setteled and accounted for in the equity).
Read Paragraph 30 and 31 of IAS-27 in this regard.
30. Changes in a parent's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners)
31. In such circumstances the carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary.<b> Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received shall be recognised <font color="maroon">directly in equity</font id="maroon"> and attributed to the owners of the parent.</b>
Please also read BC-58 of Basis for Conclusion on IAS-27 under sub-heading Multiple Arrangements.
I am also posting here a link of Deloitte's guidance on revised IFRS-3 and IAS-27 - Business Combination and Changes in Ownership Interests. It is very useful guide to equip you with the required knowledge of consolidation.
http//www.iasplus.com/dttpubs/0807ifrs3guide.pdf
It's chapter 12 is all about step acquisitions and partial disposals.
<b>Page 100</b> of the above mentioned guidance provides, <b>"there is no consequential adjustment to the carrying amount of goodwill, and no gain or loss is recognised in profit or loss."</b>
It further states, <b>"For a transaction between the parent and non-controlling interests, IAS 27(2008) does not give detailed guidance as to how to measure the amount to be allocated to the parent and noncontrolling interest to reflect a change in their relative interests in the subsidiary. More than one approach may be possible. In most cases, however, the best approach may be to recognise any difference between the fair value of the consideration paid and the non-controlling interest, in terms of existing carrying amount, directly in equity attributable to the parent."</b>
I hope It helps!
Regards,
Muhammad Amir
Important question is whether the further transaction results in a control being lost. If we already hold a subsidiary and later we disposed some shares in that subsidiary, which does not result in a control being lost then this transaction should be treated as treasury transaction.
It is imortant to understand that goodwill shall only be determined once the control is achieved, later if you further acquire or dispose off some shares in that subsidiary which does not affect your controlling status then there is no need to re-compute the goodwill. Such transactions shall be dealt as treasury transactions (i.e. transaction which will be setteled and accounted for in the equity).
Read Paragraph 30 and 31 of IAS-27 in this regard.
30. Changes in a parent's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with owners in their capacity as owners)
31. In such circumstances the carrying amounts of the controlling and non-controlling interests shall be adjusted to reflect the changes in their relative interests in the subsidiary.<b> Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received shall be recognised <font color="maroon">directly in equity</font id="maroon"> and attributed to the owners of the parent.</b>
Please also read BC-58 of Basis for Conclusion on IAS-27 under sub-heading Multiple Arrangements.
I am also posting here a link of Deloitte's guidance on revised IFRS-3 and IAS-27 - Business Combination and Changes in Ownership Interests. It is very useful guide to equip you with the required knowledge of consolidation.
http//www.iasplus.com/dttpubs/0807ifrs3guide.pdf
It's chapter 12 is all about step acquisitions and partial disposals.
<b>Page 100</b> of the above mentioned guidance provides, <b>"there is no consequential adjustment to the carrying amount of goodwill, and no gain or loss is recognised in profit or loss."</b>
It further states, <b>"For a transaction between the parent and non-controlling interests, IAS 27(2008) does not give detailed guidance as to how to measure the amount to be allocated to the parent and noncontrolling interest to reflect a change in their relative interests in the subsidiary. More than one approach may be possible. In most cases, however, the best approach may be to recognise any difference between the fair value of the consideration paid and the non-controlling interest, in terms of existing carrying amount, directly in equity attributable to the parent."</b>
I hope It helps!
Regards,
Muhammad Amir
