E Ltd. owns 90% of a subsidiary X Ltd., and the balance is NCI. It disposes of 60% of its interest in the subsidiary X Ltd. for ₹ 6,120 and loses…

(i) Determine the gain/loss on disposal of controlling interest If a parent loses control of a subsidiary, the parent shall account for all amounts previously recognised in other comprehensive income (OCI) 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 OCI 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. Accordingly, a revaluation surplus previously recognised in other comprehensive income would be transferred directly to retained earnings on the disposal of the asset. Hence, the parent shall transfer the revaluation surplus directly to retained earnings when it loses control of the subsidiary. The revaluation reserve relating to the fixed assets, ₹ 170 is transferred to retained earnings in accordance with Ind AS 16 ‘Property, Plant and Equipment'. The FVTOCI reserve arising from debt instrument under Ind AS 109 is recycled to P&L on disposal and is therefore included in the gain on disposal of controlling interest and on retained investment. The gain or loss on the interest sold, and on the retained investment recognised in the income statement, is calculated as follows: Particulars ₹ Fair value of the consideration (60%) 6,120 Fair value of retained investment (30%) 4,080 Carrying value of the NCI (10%) 850 Total 11,050 Less: Carrying value of former subsidiary's net assets (8,500)* 2,550 Add: FVTOCI reserve transferred to P/L as income 68 Gain on interest sold and on retained investment 2,618 * 7,480 + 1,020 = 8,500 (ii) Determine the gain/loss on retained investment Ind AS 112 requires a parent entity to separately disclose both the total gain or loss on the subsidiary's loss of control and the portion of the gain or loss related to the retained non-controlling investment. To obtain the information necessary for disclosure, a calculation of the portion related to the gain or loss on the retained non-controlling investment is, therefore, necessary. The ₹ 2,618 gain on the interest sold and the retained investment is recognised in the P&L and is disclosed in the consolidated financial statements. Additionally, Ind AS 112 requires the disclosure of the portion of the gain or loss related to the remeasurement of the retained non-controlling investment to fair value. This is calculated as follows: Particulars ₹ Fair value of retained investment 4,080 Less: Percentage retained of carrying value of subsidiary [(7,480 + 1,020) × 30%] (2,550) Gain on retained investment 1,530 (iii) Pass the journal entry on the disposal for 60% stake in X Ltd. Journal entry on the disposal date Particulars Dr. ₹ Cr. ₹ Cash Dr. 6,120 Investment in associate Dr. 4,080 FVTOCI reserve Dr. 68 Revaluation reserve Dr. 170 NCI Dr. 850 To Net assets (including goodwill) 8,500 To Retained earnings 170 To Gain on disposal of controlling interest 2,618 (The accounting entry on the disposal date for the 60% interest sold, the gain recognised on the 30% retained investment and the de-recognition of the subsidiary)