Page 281 - FR Integrated Workbook 2018-19

Group disposals

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:
(i) Individual 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

———

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