At the beginning of its current financial year, AB Limited holds 90% equity interest in BC Limited. During the financial year, AB Limited sells 70%…

(a) Paragraph 25 of Ind AS 110 states that, “if a parent loses control of a subsidiary, the parent: (a) derecognises the assets and liabilities of the former subsidiary from the consolidated balance sheet. (b) recognises any investment retained in the former subsidiary at its fair value when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant Ind AS. That fair value shall be regarded as the fair value on initial recognition of a financial asset in accordance with Ind AS 109 or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture. (c) recognises the gain or loss associated with the loss of control attributable to the former controlling interest.” Paragraph B98 (c) of Ind AS 110 states that, on loss of control over a subsidiary, a parent shall reclassify to profit or loss, or transfer directly to retained earnings if required by other Ind AS, the amounts recognised in other comprehensive income in relation to the subsidiary on the basis specified in paragraph B99. As per paragraph B99, if a parent loses control of a subsidiary, the parent shall account for all amounts previously recognised in other comprehensive income in relation to that subsidiary on the same basis as would be required if the parent had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income would be reclassified to profit or loss on the disposal of the related assets or liabilities, the parent shall reclassify the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses control of the subsidiary. If a revaluation surplus previously recognised in other comprehensive income would be transferred directly to retained earnings on the disposal of the asset, the parent shall transfer the revaluation surplus directly to retained earnings when it loses control of the subsidiary. In view of the basis in its consolidated financial statements, AB Limited shall: (a) re-classify the FVOCI reserve in respect of the debt investments of 5.4 crore (90% of 6crore) attributable to the owners of the parent to the statement of profit or loss in accordance with paragraph B5.7.1A of Ind AS 109, Financial Instruments which requires that the cumulative gains or losses previously recognised in OCI shall be recycled to profit and loss upon derecognition of the related financial asset. This is reflected in the gain on disposal. Remaining 10% (i.e.,0.6 crore) relating to non-controlling interest (NCI) is included as part of the carrying amount of the non-controlling interest that is derecognised in calculating the gain or loss on loss of control of the subsidiary. (b) transfer the reserve relating to the net measurement losses on the defined benefit liability of 2.7 crore (90% of 3crore) attributable to the owners of the parent within equity to retained earnings. It is not reclassified to profit or loss. The remaining 10% (i.e.,0.3 crore) attributable to the NCI is included as part of the carrying amount of NCI that is derecognised in calculating the gain or loss on loss of control over the subsidiary. No amount is reclassified to profit or loss, nor is it transferred within equity, in respect of the 10% attributable to the non-controlling interest. (c) reclassify the cumulative gain on fair valuation of equity investment of 3.6 crore (90% of 4crore) attributable to the owners of the same parent from OCI to retained earnings under equity as per paragraph B5.7.1 of Ind AS 109, Financial Instruments, which provides that in case an entity has made an irrevocable election to recognise the changes in the fair value of an investment in an equity instrument not held for trading in OCI, it may subsequently transfer the cumulative amount of gains or loss within equity. The remaining 10% (i.e.,0.4 crore) related to the NCI are derecognised along with the balance of NCI and not reclassified to profit and loss. (d) reclassify the foreign currency translation reserve of 7.2 crore (90% × 8 crore) attributable to the owners of the parent to statement of profit or loss as per paragraph 48 of Ind AS 21 ‘The Effects of Changes in Foreign Exchange Rates', which specifies that the cumulative amount of exchange differences relating to the foreign operation, recognised in OCI, shall be reclassified from equity to profit or loss on the disposal of foreign operation. This is reflected in the gain on disposal. Remaining 10% (i.e.,0.8 crore) relating to the NCI is included as part of the carrying amount of the NCI that is derecognised in calculating the gain or loss on the loss of control of subsidiary, but is not reclassified to profit or loss in pursuance of paragraph 48B of Ind AS 21, which provides that the cumulative exchange differences relating to that foreign operation attributed to NCI shall be derecognised on disposal of the foreign operation, but shall not be reclassified to profit or loss. The impact of loss of control over BC Limited on the consolidated financial statements of AB Limited is summarised below: (₹ in crore) Particular Amount (Dr) Amount (Cr) P&L Impact RE Impact Gain / Loss on Disposal on Investments Bank 56 Non-controlling interest (Derecognised) 6 Investment at FV (20% Retained) 16 Gain on Disposal (P&L) 18 18 balancing figure De-recognition of total net assets of subsidiary 60 Reclassification of FVTOCI reserve on debt instruments to profit or loss FVTOCI reserve on debt instruments (6 cr. x 90%) 5.4 5.4 To Profit and loss 5.4 Reclassification of net measurement loss reserve to profit or loss Reserve and Surplus 2.7 -2.7 To Net measurement loss reserve (FVTOCI) [(3 cr. x 90%)] 2.7 Reclassification of FVTOCI reserve on equity instruments to retained earnings FVTOCI reserve on equity instruments (4 crux 90%) 3.6 To Reserve and Surplus 3.6 Foreign currency translation reserve reclassified to profit or loss Foreign currency translation reserve (FVOCI) [8 cr. x 90%] 7.2 To Profit and loss 7.2 Total 30.6 0.9