A Ltd. owns 100% of a subsidiary B Ltd. It disposes of 60% of its interest in the subsidiary for 360 million and loses control of the subsidiary. It…

CA Final · Financial Reporting · RTP · September 2025
A Ltd. owns 100% of a subsidiary B Ltd. It disposes of 60% of its interest in the subsidiary for 360 million and loses control of the subsidiary. It will de-consolidate the subsidiary and account for the remaining 40% interest as an associate using the equity method of accounting. At the disposal date, the fair value of the retained investment in B Ltd. is determined to be 240 million. The carrying value of the identifiable net assets of the subsidiary is 440 million, excluding goodwill. There is 60 million of goodwill recorded related to the previously acquired interests in the subsidiary. A Ltd. tested the subsidiary's goodwill and long-lived assets prior to disposal and there was no impairment. There is 4 million credit in the available-for-sale reserve and 10 million credit in the revaluation reserve relating to the subsidiary B Ltd. The tax consequences of the gain have been ignored. Required: (i) Pass Journal Entries for sale of 60% stake of B Ltd. on disposal date

Suggested Answer and Working Notes:

The accounting entry on the disposal date for the 60% interest sold, the gain recognised on the 40% retained investment and the de-recognition of the subsidiary is as follows: ₹ in million Cash / Bank A/c Dr. 360 Investment in associate Dr. 240 Available -for-sale reserve Dr. 4 Revaluation reserve Dr. 10 To Net assets (including goodwill) 500 To Retained earnings 10 To Gain on disposal of controlling interest 104

Topics: Ind AS 110

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