A change in ownership is an equity transaction

Learning objectives

• Explain that a change in ownership interest without loss of control is an equity transaction: no gain or loss and no additional goodwill.L3
• Calculate the adjustment to non-controlling interests and the difference recognised in equity on a purchase or a partial disposal.L3

Normative references

• IFRS 10 §23Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control are equity transactions, i.e. transactions with owners in their capacity as owners.
• IFRS 10 §B96When the proportion of equity held by non-controlling interests changes, the entity adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests; any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent. The paragraph does not specify the reallocation of goodwill; for transaction costs, the Committee's agenda decision of July 2009 refers to the existing requirements on transactions with owners (recognition in equity).

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

3 questions

• Orme SA controls Pin SA; the carrying amount of the non-controlling interests in Pin is {nci_carrying}. Orme acquires from third parties a fraction of {proportion_acquired} of those interests for {consideration} in cash and keeps control (case assumption). Calculate the difference recognised directly in equity, that is, the decrease in equity attributable to the owners of the parent.L3
• Saule SA, a subsidiary of Orme SA, has non-controlling interests with a carrying amount of {nci_carrying}. Orme acquires {proportion_acquired} of those interests from third parties for {consideration} in cash, without losing control. Case convention: the entry is made at the consolidated level. Record the entry for this acquisition.L3
• Orme SA holds 80% of Pin SA. It sells 10 percentage points to third parties (70% afterwards) for 90,000 in cash and keeps control. The amount by which the non-controlling interests increase is 70,000 (case data). How is the difference between 90,000 and 70,000 accounted for?L3