Reclassification on disposal

Learning objectives

• Calculate the reclassification to profit or loss of the cumulative translation differences on the disposal of a foreign operation.L2, L3, L4
• Calculate, from the case data, the translated amount or the exchange difference relating to the concept “Reclassification of cumulative translation difference on disposal (48)”.L2, L3, L4

Normative references

• IAS 21 §48On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to it, recognised in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is recognised. The reference to IFRS 18 in the 2025 edition results from a consequential amendment (para. 60N) that applies when IFRS 18 is applied (future requirement).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• On disposal of a foreign operation, the cumulative translation differences relating to it are reclassified from equity to profit or loss when the gain or loss on disposal is recognised.L2
• The Vauclair group disposes of the whole of its foreign subsidiary, owned at 100%. The translation reserve stood at {opening_reserve} at the opening date and increased by {period_difference} up to the date of disposal. The gain on disposal before reclassification is {gain_before_reclassification} (case datum). Calculate the amount reclassified to profit or loss and the total gain on disposal.L3
• Ardoise disposes of its foreign subsidiary, owned at 100%. The cumulative translation reserve, a credit balance, amounts to {cumulative_reserve}. Post the reclassification entry when the gain on disposal is recognised.L4