From UK GAAP for Business and Practice

26.8 Accounting for Disposals of Shares in Subsidiary Undertakings

a Date of Change

Under FRS 2, the date for determining when a subsidiary ceases to be a subsidiary is when its former parent relinquishes control.

The explanation section of FRS 2 gives guidance on how to determine this date, as this is an area which can give rise to difficulties in practice.

In the more straightforward cases the date is determined as follows:

  1. control transferred by a public offer the date the offer becomes unconditional (usually because a sufficient number of acceptances have been received);

  2. control transferred by a private transaction the date an unconditional offer is accepted.

b Accounting Implications

The consolidated profit and loss account should include:

  1. the results of the subsidiary up to the date that it ceases to be a subsidiary;

  2. any gain or loss arising on cessation (i.e. gain or loss on disposal of shares).

c Computation of Gain or Loss on Disposal

The gain or loss is calculated as follows:

Proceeds of sale


Carrying amount of net assets before cessation


Less carrying amount of net assets after cessation



Goodwill not written off through profit and loss account (see section (e) below)


Gain (or loss)


d Henry Group

Illustration 9

Until fairly recently, Henry Ltd owned two wholly-owned subsidiaries Percy Ltd and Thomas Ltd.

Both subsidiaries had been acquired several years ago prior to the...

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