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: (ii) Compute gain on 40% retained investment
Suggested Answer and Working Notes:
The 104million gain on the interest sold and the retained investment is recognised in the income statement and is disclosed in the consolidated financial statements. (ii) Computation of remeasurement of the retained non-controlling investment to fair value: ₹ in million Fair value of retained investment 240 Percentage retained of carrying value of subsidiary [(440+ 60) x 40%] (200) Gain on retained investment 40 The gain or loss on the interest sold and on the retained investment recognised in the income statement, is calculated as follows: ₹ in million Fair value of the consideration 360 Fair value of retained investment 240 600 Less: Carrying value of former subsidiary's net assets (440 + 60) (500) Available for sale reserve transferred to income 4 Gain on interest sold and on retained investment 104
Topics: Ind AS 110
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