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Chapter 24

Disposal of a subsidiary

In the consolidated statement of cash flows the entity must record the actual cash
flow for the sale of the subsidiary net of any cash held by the subsidiary that is no
longer controlled by the group.

Example 4

Sparkling owned 80% of the equity shares of Fizzy. During the period, these
shares were sold for $800,000 in cash. At the disposal date, Fizzy had cash
and cash equivalents of $70,000.

Although Sparkling received $800,000 for the shares, it lost control of Fizzy's
cash of $70,000. In the consolidated statement of cash flows, this would be
presented as follows:

$000

Cash flows from investing activities

Disposal of subsidiary, net of cash disposed 730

($800,000 – $70,000)

The assets and liabilities of the disposed subsidiary must be included in any workings
to calculate the cash movement for an item during the year.

Illustrations and further practice

Now try Illustration 1 from Chapter 24.

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