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Step acquisitions
Investment (10%)
At fair value as an available-for-sale financial asset (or at fair value through profit or loss).
+ 70% = 80% Investment (10%) to subsidiary (80%) [IFRS 3 (revised) paras 41-42]
Remeasure investment to fair value. Recognise gain/loss in profit or loss and recycle AFS reserve. Determine goodwill as follows: FV consideration + amount of NCI (fair value or share in net assets) + FV previously held investment - FV net assets.
+ 10% = 35%
+ 10% = 90% + 45% = 80% Subsidiary (80%) to subsidiary (90%) [IAS 27 (revised) paras 30-31]
No FV exercise. Adjust controlling interest and NCI. Difference between FV of consideration and amount of NCI adjustment goes to equity (attributed to owners of parent).
- 30% = 60% Subsidiary (90%) to subsidiary 60%) [IAS 27 (revised) paras 30-31]
Adjust controlling interest and NCI. Difference between FV of consideration and amount of NCI adjustment goes to equity (attributed to owners of parent).
Step disposals
Subsidiary (60%) to investment (10%) [IAS 27R paras 34/37]
Derecognise goodwill, assets and liabilities. Derecognise NCI including other comprehensive income items attributable to them. Initially recognise investment at its fair value at the date control is lost. Recycle entire AFS reserve and CTA as part of gain/loss on sale. Transfer entire IAS 16 revaluation reserve within equity to retained earnings. Recognise gain/loss on sale in profit or loss attributable to the parent.
- 50% = 10%
- 20% = 40%
- 10% = 30%
- 30% = 10%
Note: IMoA = PwCs IFRS Manual of Accounting