Derecognition on loss of control

Learning objectives

• Identify the items derecognised on loss of control (assets, liabilities, non-controlling interests).L3, L4
• Calculate the carrying amount of the net assets derecognised, including goodwill.L3, L4

Normative references

• IFRS 10 §25When a parent loses control of a subsidiary, it derecognises the assets and liabilities of the former subsidiary from the consolidated statement of financial position; it recognises any investment retained and subsequently accounts for it in accordance with the relevant IFRS Standards, its value at the date control is lost (fair value, B98(b)(iii)) being regarded as the fair value on initial recognition of a financial asset under IFRS 9 or as the cost on initial recognition of an investment in an associate or joint venture; it recognises the gain or loss associated with the loss of control attributable to the former controlling interest, determined under B98 to B99A. The derecognition of non-controlling interests and the treatment of other comprehensive income are specified in B98 and B99.
• IFRS 10 §B98On loss of control, the parent derecognises the subsidiary's assets (including goodwill) and liabilities at their carrying amounts, together with the carrying amount of any non-controlling interests, including any components of other comprehensive income attributable to them; it recognises the fair value of the consideration received, any distribution of shares of the subsidiary to owners in their capacity as owners, and any investment retained at its fair value at the date control is lost; it reclassifies to profit or loss, or transfers directly to retained earnings if required by other IFRS Standards, the amounts of other comprehensive income relating to the subsidiary (under B99); the resulting difference is a gain or loss in profit or loss attributable to the parent.

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

5 questions

• Orme SA loses control of Pin SA. At the date control is lost, Pin's assets are carried in the consolidated accounts at {assets_incl_goodwill}, goodwill included, and its liabilities at {liabilities}. Calculate the carrying amount of Pin's net assets to be derecognised, before taking the non-controlling interests into account.L3
• Orme SA sells 70% of Pin SA and loses control; it keeps an interest. It receives {consideration} in cash, and the fair value of the retained interest is {retained_fv}. In the consolidated accounts, Pin's assets (excluding goodwill) stand at {subsidiary_assets}, its goodwill at {goodwill}, its liabilities at {subsidiary_liabilities} and the non-controlling interests at {nci_carrying}. Case convention: no other accumulated other comprehensive income. Record the loss-of-control entry.L4
• What does a parent derecognise when it loses control of a subsidiary?L3
• On 1 December, Orme SA sells 30 points of Brume SA to Alpha SA and signs the same day a put option over a further 30 points with Alpha, exercisable in June at a price agreed in advance; Alpha would not have bought the first tranche without the second (case data). Write a short note concluding on the treatment of these arrangements, distinguishing case facts, rule and professional judgement.L4
• Orme SA sells to its associate Brume SA a subsidiary that constitutes a business, with loss of control. A colleague applies the 2014 amendments on the sale or contribution of assets to an associate to this transaction straight away. Write a short note stating the scope of those amendments, their status and the treatment of the loss of control, distinguishing case facts, rule and professional judgement.L4