Acquisition of a subsidiary that is not a business Entity A pays £160,000 to acquire an 80% controlling interest in the equity shares of entity B, which holds a single property that is not a business. The fair value of the property is £200,000. An unrelated third party holds the remaining 20% interest in the equity shares. The fair value of the non-controlling interest is £40,000. Tax effects and any transaction costs, if any, are ignored in this example.
Entity A therefore records the following accounting entry:
|
£m |
£m |
|
|
Investment property |
200,000 |
|
|
Non-controlling interest |
40,000 |
|
|
Cash |
160,000 |
|
Variation
The facts are the same as above, except that Entity A pays £170,000 to acquire the 80% interest due the inclusion of a control premium. In this case, Entity A therefore records the following accounting entry:
|
£m |
£m |
|
|
Investment property |
210,000 |
|
|
Non-controlling interest |
40,000 |
|
|
Cash |
170,000 |
|