Loss of control of a subsidiary: derecognition, fair value of the retained interest, gain or loss, other comprehensive income reclassified, multiple arrangements and the retained interest

Context

Brelvane Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. The preparer draws up the year’s consolidation file, submitted to a reviewer: control of Tolvane and Fonds Marlis, consolidation of Ardoval and Brivet, the purchase of Cavelle points from third parties and the sale of Sevrane with a loss of control and a retained 30 % interest. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Assignment

Loss of control of Sevrane and retained interest in an associate

Purpose of the workpaper

List the assets (goodwill included), liabilities and non-controlling interests derecognised, the consideration received and the fair value of the retained interest, then compute the gain or loss, the reclassification of other comprehensive income and the part of the gain relating to the remeasurement of the retained interest. Fair values are case data; the assessment of multiple arrangements remains a judgment.

Questions of the file covered by this workpaper

• Sevrane: does the sale under a single contract cause a loss of control, and on which date?
• Sevrane: compute the carrying amount of the net assets derecognised (goodwill included).
• Sevrane: compute the gain on loss of control before reclassification of other comprehensive income.
• Sevrane: identify the part of the gain relating to the remeasurement of the retained interest to fair value.
• Sevrane: compute the amount of other comprehensive income reclassified to profit or loss and state what happens to the non-reclassifiable reserve.
• Sevrane: how is the retained 30 % interest treated after the loss of control, and which value is the starting point for its later accounting as an associate?
• Record the derecognition of Sevrane with a gain and the retained interest at fair value.
• Record the reclassification to profit or loss of Sevrane’s other comprehensive income.

• MemoGroup profile and file conventionsOpen
• ContractTolvane SA and Fonds Marlis: voting rights, management and remunerationOpen
• ExtractArdoval SA and Brivet SARL: profits, third parties and intragroup transactionsOpen
• ContractCavelle SA: purchase from third partiesOpen
• ContractSevrane SA: sale with loss of controlOpen
• MemoGroup IT budgetOpen
• MemoAttendance record of Tolvane’s meetingsOpen