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Forensic Accounting

Deconsolidation of a subsidiariy


After investment has become zero, If Parent company does not want to further provide financial & management support to one of its subsidiary but still has more than 50% shareholding, can Parent company deconsolidate this subsidiary?

asked Feb 22, 2016 in IFRS 10 - Consolidated Financial Statements by anonymous
If you still have over 50% shareholding, how can your investment become zero?

1 Answer

0 votes
 
Best answer

If i understood you question right, the Subsidiary is generating losses whereas the Investment turned to be Zero applying the Equity method of accounting with the Accumulated Losses. 

In case the above was your answer, you should continue consolidating the subsidiary and continue applying the Equity method as per the below entry

   Dr.   Company Share in Subsidiaries Losses

      Cr.      Accrual against Losses in Subsidiaries (Instead of Investment) 

And while elimination you need to eliminate the Accrual above (In Holding) as if your eliminating the investment against the equity in Subsidiaries;

Its like you are taking provisions or accruals against the losses of which the holding is responsible about towards it Subsidiaries

 

To de-consolidate, depends on the absence of the "substance over form" concept or in case the subsidiaries is governed or ruled by other parties or commission rather than the Holding in case of bankruptcy 

 

Hope i made my self clear

 

answered Apr 19, 2016 by Fzakaria Level 2 Member (3,840 points)
selected Apr 19, 2016 by Mysio



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