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Summary change in ownership (Part 2)

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this document is a summary of change in ownership part 2, it includes examples and clear guides

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  • January 16, 2022
  • 36
  • 2021/2022
  • Summary

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By: nicolasrikhotso91 • 2 months ago

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Change in
ownership
(PART 2 )




1

, Passive investment = less than 20% shareholding
No significant influence or control

➔ In BOTH group and separate statements it Is accounted for at FAIR VALUE
➔ FV adjustments:
o Can either be accounted for in :
1) PL
2) OCI (closed off to FV reserve/M-t-M reserve) (in SCE)
o ^^ this is an accounting choice



4 SCENARIOS

1) Investment (passive) increases % to become an associate
a. 15% - 40% DEEMED CP of investment:
b. Class example 2 = FV of previously held passive investment +
c. Investment @ FV CP of additional interest acquired
d. NO remeasurement gain/loss
e. Remember associate= measured @ COST PRICE in separate
records
f. Up until date of change in ownership DISPOSAL:
i. Account for IFRS 9 (a simple investment) = a change in ownership from passive
ii. NO analysis
investment to associate is seen as a disposal
g. On the date of change (equity account going forward)
i. Investment is remeasured @ FV And from a group perspective the FV
ii. This adjustment will either be accounted for: reserve is transferred to Retained earnings
1. Profit or loss
2. OCI
h. From date of control = ASSOCIATE
i. Analysis for an associate
ii. We apply equity method
iii. The analysis includes share cap & RE




2

,2) Subsidiary % decreases to become an associate
a. 60%- 40%
b. Class example 3
c. Initially we have a sub which changes to an associate as a result of selling some of the shares
d. Lose control = B98 calculation !!!!
e. 2 analysis:
i. Period before change = subsidiary
ii. After change = analysis for associate
f. On date of change:
i. We derecognize separate gain/loss
ii. Recognize group profit from B98 calc
iii. Calculate remeasurement CA to the FV on the date of change
g. Statements:
i. SFP= @ year end we have an associate
1. So we have one line item called investment in associate
ii. SCI= for part of the year we had a sub 100% S + 100% P (we have to bring in the subsidiary with journals
1. One line item for associate= “share of profit of associate”
iii. SCE
1. We have NCI= in the opening balance
2. But at year end we don’t have a subsidiary, so we do not have a closing balance
3. We have a line item for the disposal
h. If the question says “the FV of the remaining interest is R200 000)
i. This means that the FV has already been multiplied by the associate %( so this is the AT )

in terms of SUB-> ASSOCIATE
^ we need to remeasure the remaining interest to FV, just after the disposal

CA VS FV
CP (initially paid for sub including GW) can be given
PLUS since reserves OR
PLUS GOBP number of shares remaining X market price
MINUS goodwill impairment

TIMES: % interest remaining / % that parent
originally held

the difference between the CA & FV :
the remeasurement gain/loss

the remeasurement PL & B98 the difference
between the 2 is the group PL




3

, Dr Investment (SFP) - recognise remaining investment in associate (FV –
remaining CP)
Dr Profit (P) (P/L) - remove profit on disposal in P
Cr Profit (Group) (P/L) - include group profit on disposal
Cr Remeasurement gain (P/L) or - include remeasurement gain/loss
Dr Remeasurement loss (P/L)
Dr COS (P/L)
Dr Tax (P/L) - include SOCI items for period
Cr Revenue (P/L) while subsidiary
Dr NCI (P/L)
Cr Retained earnings – begin (SCE) - include RE » was subsidiary at
beg. of year

Dr Investment (SFP) - rest of period – equity account for
Cr Share of profit of associate (P/L) associate



JOURNALS for when subsidiary becomes associate :




*A and L derecognised (XX) (total E just before sale)

*Goodwill derecognised (XX)

*NCI derecognised XX (NCI column before sale)

*Recognise consideration XX

*Recognise remaining investment @ FV XX (none in this case)

Gain/loss in group XX (in p/l in SCI)

Less: remeasurement gain/loss (calc.) XX (in P/L in SOCI)

Gain/loss on disposal of shares XX (in P/L in SOCI)




4

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