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Step acquisitions and disposals

Step acquisitions
Investment (10%)
At fair value as an available-for-sale financial asset (or at fair value through profit or loss).

+ 15% = 25% Investment (10%) to associate (25%) [IAS 28 para 20]


Remeasure investment to fair value. Recognise gain/loss in profit or loss and recycle AFS reserve. Determine goodwill as follows: FV consideration + FV previously held investment - FV of total share of net assets.

+ 70% = 80% Investment (10%) to subsidiary (80%) [IFRS 3 (revised) paras 41-42]
Remeasure investment to fair value. Recognise gain/loss in profit or loss and recycle AFS reserve. Determine goodwill as follows: FV consideration + amount of NCI (fair value or share in net assets) + FV previously held investment - FV net assets.

Associate (25%) to associate (35%) [IMoA 27.176, 25.313]


Determine goodwill at each stage (FV consideration FV of share of net assets). No step up of investment to fair value for previously owned 25%.

+ 10% = 35%

+ 10% = 90% + 45% = 80% Subsidiary (80%) to subsidiary (90%) [IAS 27 (revised) paras 30-31]
No FV exercise. Adjust controlling interest and NCI. Difference between FV of consideration and amount of NCI adjustment goes to equity (attributed to owners of parent).

Associate (35%) to subsidiary (80%) [IFRS 3 (revised) paras 41-42]


Remeasure associates to fair value. Recognise gain/loss in profit or loss and recycle items of other comprehensive income (if any). Determine goodwill as follows: FV consideration + amount of NCI (fair value or share in net assets) + FV previously held investment - FV net assets.

- 30% = 60% Subsidiary (90%) to subsidiary 60%) [IAS 27 (revised) paras 30-31]
Adjust controlling interest and NCI. Difference between FV of consideration and amount of NCI adjustment goes to equity (attributed to owners of parent).

Step disposals
Subsidiary (60%) to investment (10%) [IAS 27R paras 34/37]
Derecognise goodwill, assets and liabilities. Derecognise NCI including other comprehensive income items attributable to them. Initially recognise investment at its fair value at the date control is lost. Recycle entire AFS reserve and CTA as part of gain/loss on sale. Transfer entire IAS 16 revaluation reserve within equity to retained earnings. Recognise gain/loss on sale in profit or loss attributable to the parent.

- 50% = 10%

- 20% = 40%

Subsidiary (60%) to associate (40%) [IAS 27 (revised) paras 34-37]


Derecognise goodwill, assets, and liabilities. Derecognise NCI including other comprehensive income items attributable to them. Initially recognise investment in associate at its fair value at the date control is lost. Recycle entire AFS reserve and CTA as part of gain/loss on sale. Transfer entire IAS 16 revaluation reserve within equity to retained earnings. Recognise gain/loss on sale in profit or loss attributable to the parent.

Associate (40%) to associate (30%) [IAS 28 para 19A]


Derecognise proportion (25%) of carrying amount of investment. Recycle proportion (25%) of associate AFS reserve and CTA as part of gain/loss on sale. Transfer share (25%) of IAS 16 revaluation reserve within equity to retained earnings.

- 10% = 30%

Associate (40%) to investment (10%) [IAS 28 paras 18/19A]


Derecognise investment in associate. Initially recognise investment at its fair value at the date significant influence is lost. Recycle entire CTA and AFS reserve of associate as part of gain/loss on sale. Transfer entire IAS 16 revaluation reserve within equity to retained earnings. Recognise gain/loss on sale in profit or loss.

- 30% = 10%
Note: IMoA = PwCs IFRS Manual of Accounting

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