Multiple disposal arrangements

Learning objectives

• Assess whether several disposal arrangements should be accounted for as a single loss-of-control transaction.L4

Normative references

• IFRS 10 §B97A parent may lose control of a subsidiary in two or more arrangements; it assesses, in the light of all their terms and conditions and their economic effects, whether they should be accounted for as a single transaction. Indicators include: arrangements entered into at the same time or in contemplation of each other, forming a single transaction designed to achieve an overall commercial effect, one of which is dependent on the occurrence of another, or that are economically justified only when considered together.

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

2 questions

• Orme SA sells 40 points of its holding in Pin SA on 15 December, then a further 25 points on 15 March, under a single agreement signed on 15 December with the same buyer. Case assumption: the two sales are negotiated together, make economic sense only together, and the second depends on the first. What must Orme assess?L4
• 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