The retained interest at fair value

Learning objectives

• Explain that the retained investment is recognised at its fair value at the date control is lost.L3, L4
• Record the retained investment at fair value in the loss-of-control entry.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

• At the date of loss of control, the investment the parent retains in the former subsidiary is recognised at its fair value at that date.L3
• A disposal takes Érable SA's holding in Tilleul SA below the threshold of control: Érable receives {consideration} and keeps an interest whose fair value is {retained_fv}. In the consolidated accounts, Tilleul is represented by assets excluding goodwill of {subsidiary_assets}, goodwill of {goodwill}, liabilities of {subsidiary_liabilities} and non-controlling interests of {nci_carrying}. Case convention: no other accumulated other comprehensive income. Record the entry that reflects the loss of control and the retained investment.L4
• Orme SA held 80% of Pin SA and sells 60 points of it: it loses control and keeps 20%. Orme's share of the carrying amount of Pin's net assets for that 20% is 240,000, and the fair value of the retained interest at the date of loss of control is 300,000 (case data). At what amount is the retained interest recognised?L4
• Orme SA sells part of its holding in Pin SA and loses control; it keeps a 30% interest that gives it significant influence, whose fair value at the date of loss of control is 450,000 (case data). How does it account for the retained interest?L4
• Explain how a parent accounts for the interest it retains in its former subsidiary when it has neither significant influence nor joint control any longer, and how this differs from the treatment of an associate.L4