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Chapter 21

Control-to-control scenarios

3.1 Share purchases

Some share purchases simply increase the parent’s holding in a subsidiary.

80% of 85% of
shares shares

In such instances, there is no change in control status. This means that:

 Goodwill is not recalculated

 A profit or loss does not arise on the transaction.

Instead the transaction is accounted for in equity, as a decrease in the non-
controlling interest. The entry in the consolidated financial statements is:

Dr Non-controlling interest X

Cr Cash X

Cr/Dr Other components of equity X (bal. fig.)

The decrease in NCI is calculated as the proportionate reduction in its carrying
amount at the date of the group's additional purchase of shares

Illustrations and further practice

Now try TYU question 5 from Chapter 21.

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