Consolidating a thirteen-entity group through a mid-year sale of a majority stake

The situation

A group of thirteen entities sold a majority stake in one part of its business during the year. That investee stopped being a subsidiary and became an associate, and ownership in other entities shifted as a result. The consolidated statements had to reflect each change from the date it took effect.

The challenge

• Consolidating the former subsidiary only up to the date control was lost
• Derecognising its assets, liabilities, and non-controlling interest, and remeasuring the retained stake at fair value
• Equity accounting for the retained interest from the date control was lost
• Reconciling changes in equity, non-controlling interests, and consolidated cash flows across the group

What we did

We mapped each entity’s ownership and control before and after the transaction, including the date every change took effect and the accounting it triggered.

The loss of control was accounted for on the IFRS 10 model, as adopted in Ind AS 110. The subsidiary’s results were consolidated to the transaction date. Its net assets and non-controlling interest were derecognised, the consideration and the fair value of the retained interest were recognised, and amounts in other comprehensive income were reclassified as the standards require. The resulting gain was calculated and supported in a single schedule.

Non-controlling interests and consolidated equity were reconciled from opening to closing balances, and the consolidated cash flow statement showed the net cash effect of losing control within investing activities.

The impact

• Consolidated statements reflecting each ownership change from its effective date
• A gain on loss of control backed by a traceable calculation
• Equity, non-controlling interest, and cash flow reconciliations with no unexplained differences

Client details are anonymised, and some facts are generalised to protect confidentiality.