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Chapter 24
Chapter 20
Example 1
Disposal of subsidiary
Paul acquired an 80% interest in Simenon for $6 million on 1 April 20X3, at
which date Simenon’s net assets had a fair value of $5 million and the fair
value of the non-controlling interest was $1.2 million.
At 30 June 20X6 Paul sold all of its shares in Simenon for $8 million. At this
date the fair value of Simenon’s net assets was $7 million. Goodwill had
been impaired by $1 million by the date of disposal.
Tax on Paul’s profits is charged at 30%.
Required:
Calculate the profit after tax on disposal of Simenon to be shown in
(i) Paul’s individual statement of profit or loss
(ii) Paul’s consolidated statement of profit or loss
Solution:
statement of profit or loss
$000
Sale proceeds 8,000
Carrying amount of investment (6,000)
———
Profit on disposal 2,000
Tax at 30% (600)
———
Profit after tax 1,400
———
350
