Example: IFRS 10 Disposal of Subsidiary
The parent company has a controlling interest of 50 to less than 100 percent in the subsidiary and reports financial results of the if consolidated with its own financial statements. For example, suppose that Company A acquires a controlling interest of 75 percent in Company B. The latter retains the remaining 25 percent of the company. The exact relationship and the accounting methods they use directly affect how the parent treats subsidiary dividends. The three applicable methods are the equity method, the fair-value reporting option of the equity method, and the consolidation method. Dividends Receivable For individuals or companies with relatively small investments in other companies, the dividend payout is treated as income. The company receiving the payment books a debit to the dividends receivable account, and a credit to the dividend income account for the payout. The recipient records this transaction when it gains the rights to the payout.
disposal of wholly owned subsidiary
When a group of two or more businesses is required to report financial results on a consolidated basis, generally accepted accounting principles, or GAAP, require the elimination of intercompany sales during the consolidation process. Eliminating the intercompany sale of land has an immediate effect on the amount of consolidated net income reported on the profit and loss statement. The necessary elimination entries can affect future consolidated net income if the land is ever sold to an unrelated party.
accounting for sale of investment in subsidiary
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