Changes in ownership of a subsidiary after control is obtained

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08 Mar 2008

One of the more controversial issues in the IASB's recently completed amendments to IAS 27 Consolidated and Separate Financial Statements was how to account for changes in ownership of a subsidiary after control is obtained.

During its deliberations, the IASB considered six methods that were being used in practice and reached the following decisions:
  • Partial disposal of an investment in a subsidiary while control is retained. This is accounted for as an equity transaction with owners, and gain or loss is not recognised.
  • Acquiring additional shares in the subsidiary after control was obtained. This is accounted for as an equity transaction with owners (like acquisition of 'treasury shares'). Goodwill is not remeasured
The IASB staff has prepared an explanatory note describing the various methods and explaining why the Board decided that such transactions should be accounted for within equity. You can Download the Explanatory Note from the Business Combinations project page on the IASB's website.

 

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