UK GAAP for Business and Practice
Complete with summaries of current standards and key implementation dates, this book provides a concise and easily accessible guide to all the recent changes in UK GAAP, and their likely practical impact.
TABLE OF CONTENTS UK GAAP for Business and Practice
26.7: Changes in Stake
26.7 Changes in Stake
a Situations
FRS 2 deals with the specific cases of:
-
acquiring a subsidiary undertaking in stages (step-by-step or piecemeal acquisition);
-
increasing an interest held in a subsidiary undertaking;
-
reducing an interest held in a subsidiary undertaking.
b Acquiring a Subsidiary Undertaking in Stages
The Companies Act 1985, Sch 4A, para 9 requires that a subsidiary's assets and liabilities should be included in the consolidated accounts at fair value as at the date that it became a subsidiary undertaking. This statutory requirement also applies where the group's interest in the subsidiary undertaking is acquired in stages.
Illustration 5
H Ltd acquired a controlling interest in S Ltd in two stages, as follows:
-
30.6.19X2 20% holding at a cost of 33,000 when the fair value of the net assets amounted to 150,000.
-
31.3.19X3 40% holding at a cost of 92,000 when the fair value of the net assets amounted to 190,000.
The CA 1985 computation of goodwill arising on consolidation is:
|
| |
|---|---|
| Cost of investment (33 + 92) | 125,000 |
| Group share of net assets at acquisition 60% 190,000 | 114,000 |
| ?Goodwill on consolidation | 11,000 |
FRS 2, para 89 refers to special cases, for example:
" in special circumstances, however, not using fair values at the dates of earlier purchases, while using an acquisition cost part of which relates to earlier purchases, may result in accounting that is inconsistent with the way the investment has been treated previously, and for that reason, may fail to give a true...
Copyright Elsevier Ltd. 2006 under license agreement with Books24x7
