This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice (http://www2.deloitte.com/ca/en/legal/cookies.html) for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

Subsidiaries – April 2015 PEAC Meeting

  • ASPE_AcSB Image
  • ASPE - Meeting Image

Apr 29, 2015

At its meeting on April 1, 2015, the Private Enterprise Advisory Committee discussed the following issues regarding the accounting for a subsidiary using the cost method.

Overall Principle

The Committee noted that the AcSB had decided at its February 2015 meeting that the overall principle should be that the cost of a subsidiary at the date of acquisition is determined in the same manner, regardless of how the subsidiary is accounted for subsequently. Consequently, the determination of the initial carrying amount of a subsidiary should be consistent with Section 1582, Business Combinations, when the subsidiary is subsequently accounted for using the cost method in accordance with Section 1591, Subsidiaries. The Committee agreed to recommend to the AcSB that this overall principle, together with a description of what comprises cost, should be included in Section 1591. (The Committee also noted that the AcSB had decided, for cost/benefit reasons, that the previously held investment in the acquiree should not be remeasured in a step acquisition and that bargain purchase gains should not be recognized.)

Impairment of a Subsidiary

The Committee agreed to recommend to the AcSB that a cross-reference to the impairment provisions in Section 3051, Investments, should be included in Section 1591.

Accounting for Acquisition-related Costs on a Step Acquisition

The Committee noted that the AcSB had decided that when a step acquisition occurs, the new cost of the subsidiary should be the sum of the carrying amount of the previously owned investment and the cost of the incremental investment. The Committee discussed how transaction costs that were previously capitalized in accordance with Section 3856, Financial Instruments, should be accounted for when an investment becomes a subsidiary, given that acquisition-related costs incurred when acquiring a subsidiary are required to be expensed. The Committee agreed to recommend to the AcSB that these previously capitalized transaction costs should not be required to be expensed but should continue to be included in the carrying amount of the subsidiary.

Presentation

The Committee agreed to recommend to the AcSB that the presentation guidance in Section 3051 relating to subsidiaries and investments in other entities accounted for using the cost or the equity method should be included in Section 1591.

Disclosure

The Committee agreed to recommend to the AcSB that certain disclosure requirements in Sections 1582 and 1591 should be amended based upon the AcSB’s decisions regarding the accounting for a subsidiary using the cost method.

Transition provisions

The Committee agreed to recommend to the AcSB that the proposed amendments relating to the application of the cost method should be applied prospectively to new acquisitions of subsidiaries and investments accounted for using the cost method in accordance with Section 3051. 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.