after the sale the parent accounts for its remaining 15 interest as an available for 611710

Disposal of a subsidiary

A parent sells an 85% interest in a wholly owned subsidiary as follows:

• after the sale the parent accounts for its remaining 15% interest as an available-for-sale investment;
• the subsidiary did not recognise any amounts in other comprehensive income;
• net assets of the subsidiary before the disposal are $500;
• cash proceeds from the sale of the 85% interests are $750; and
• the fair value of the 15% interest retained by the parent is $130.

The parent accounts for the disposal of an 85% interest as follows:

The gain recognised on the loss of control of the subsidiary is calculated as follows:

Example 8.5: Step-disposal of a subsidiary (1)

A parent controls 70% of a subsidiary. The parent intends to sell all of its 70% controlling interest in the subsidiary. The parent could structure the disposal in two different ways:

• the parent could initially sell 19% of its ownership interest without loss of control and then, soon afterwards, sell the remaining 51% and lose control; or
• the parent could sell its entire 70% interest in one transaction.

In the first case, any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration received upon sale of the 19% interest would be recognised directly in equity, while the gain or loss from the sale of the remaining 51% interest would be recognised in profit or loss. In the second case, however, a gain or loss on the sale of the whole 70% interest would be recognised in profit or loss.