Reclassification of other comprehensive income
A parent sells a 70% interest in a 90%-owned subsidiary to a third party. The subsidiary had recognised, in its own financial statements, the following:
- a revaluation reserve in respect of property, plant and equipment of €2 million;
- a surplus on available-for-sale investments of €3 million;
- a cumulative actuarial loss of €1.5 million; and
- a cumulative translation difference of €4 million.
The parent:
- transfers the entire revaluation surplus of €2 million related to property, plant and equipment within equity, 90% of the balance is attributable to the parent, while the remaining 10% is attributable to the non-controlling interest;
- accounts for the surplus on the available-for-sale investments using one of the following approaches:
- approach (1): the parent reclassifies its €2.7 million interest in the surplus on available-for-sale investments to profit or loss for the period;
- approach (2): the entire €3 million surplus on available-for-sale investments is reclassified to profit or loss for the period. 90% of the balance (i.e. €2.7 million) is attributable to the parent, while the remaining 10% (i.e. €0.3 million) is attributable to the non-controlling interest;
- does not reclassify the actuarial loss of €1.5 million to profit or loss;
- reclassifies cumulative translation differences of €3.6 million (= 90% × €4 million) relating to the parents interest to profit or loss, while the €0.4 million (= 10% × €4 million) relating to the non-controlling interest is derecognised but is not reclassified to profit or loss.