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AnybodY There Who Can help me in disposal and acquisation Consalidation

0 Votes
May 6th 2014 AN ACCA USER 280 Points

2 Replies

+2 Votes

Sure Husnain,

Let me know which of the question you want to get answered. However, for illustration purpose I can quote you an example here.

If a parent have 80% ownership of a subsidiary and sells 50% of it.

When you sell 50%, you lose control & it is a subsidiary disposal but you end up keeping influence, you end up with an associate. From the parental point of view, the parent has 80% of ownership & then the parent sells 50% & it still has 30% of the shares & all that is fine from parents point of view.

From the point of view of the group there have to have a subsidiary disposal because we have lost control but also have to have a sub acquisition. So what we are deemed to have done is to have sold the whole sub, completely sold the sub & bought back an associate. Now it is true that we lost control of the subsidiary but it is not true that we have sold the 30% but we are deemed to have it sold it in order to give us a full disposal. So when we actually sell the 50% we are deemed to have sold the 30% and bought it back, sold the 30% and bought it back. We are deemed to have sold the whole 80% & bought back 30%

Actual Proceeds 50%
Deemed Sales Proceeds 30%
NCI 20% (You also got to derecognise the Non Controlling Interest, You can’t lose control & keep your NCI)
[If you look this, it adds up to 100%= 50%+30%+20%] (So, you got 100% at the top of the calculation & then you got 100% of the subsidiary at the bottom) (100% of the subsidiary is all of the net assets & all of the goodwill & that’s gonna give you the profit on disposal).
Net Assets
Profit on disposal

So your calculation are gonna look like this:

Actual Sale Proceeds 50%
Deemed Sale Proceeds 30%
NCI 20%
Net Assets
Profit on Disposal

There is a question from June 2010 (Ashanti) that have subsidiary disposal pint

Here you can see the examiner answer on page 4 which have same calculation from june 2010

Also here is an examiners article from February 2009 that also illustrate it with example.

May 7th 2014 AN ACCA USER 460 Points
0 Votes

I agree with the response provided by MALIK SAFFI UR REHMAN MANSOOR who cites the Ashanti example from June 2010. If the Ashanti problem seems daunting for you then try to obtain a distance learning text which breaks down the four disposal scenarios exclusively and without other issues to complicate the matter as normally experienced in an examination question.

May 8th 2014 AN ACCA USER 260 Points