IFRS 10 sets out the adjustments to be made when a parent loses control of a subsidiary:

• Derecognize the carrying amount of assets (including goodwill), liabilities and NCIs 
• Recognize the fair value of consideration received
• Recognize any distribution of shares to owners
• Recognize the fair value of any residual interest
• Reclassify to profit or loss any amounts (the entire amount, not a proportion) relating to the subsidiary’s assets and liabilities previously recognized in other comprehensive income, as if the assets and liabilities had been disposed of directly
• Recognize the fair value of any residual interest.

EXAMPLE 6

Disposal of controlling interest

On 1 January 2008, Rage acquired a 90% interest in Machine, a public limited company, for a cash consideration of $80m. Machine’s identifiable net assets had a fair value of $74m and the NCI had a fair value of $6m. 

Rage uses the full goodwill method

On 31 December 2008, Rage disposed of 65% of the equity of Machine (no other investor obtained control as a result of the disposal) when its identifiable net assets were $83m. Of the increase in net assets, $6m had been reported in profit or loss, and $3m had been reported in comprehensive income. 

The sale proceeds were $65m, and the remaining equity interest was fair valued at $25m. After the disposal, Machine is classified as an associate in accordance with IAS 28, Investments in Associates. The gain recognized in profit or loss would be as follows:

 



After the sale of the interest, the holding in the associate will be fair valued at $25m.