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Other Equity 810 810
Replacement award 2.5 2.5
Security premium Reserve
(2,00,000 shares x 70% x Rs.30) 42 42
Capital Reserve 274.12 274.12
810 318.62 1,128.62

*28.93 is the deferred consideration

Q17. (April 19 – 6 Marks)

A parent purchased an 80% interest in a subsidiary for Rs. 1,60,000 on 1 April 20X1 when the fair value of the
subsidiary‖s net assets was Rs. 1,75,000. Goodwill of Rs. 20,000 arose on consolidation under the partial
goodwill method. An impairment of goodwill of Rs. 8,000 was charged in the consolidated financial statements
to 31 March 20X3. No other impairment charges have been recorded. The parent sold its investment in the

subsidiary on 31 March 20X4 for Rs. 2,00,000. The book value of the subsidiary‖s net assets in the
consolidated financial statements on the date of the sale was Rs. 2,25,000 (not including goodwill of Rs.
12,000).
When the subsidiary met the criteria to be classified as held for sale under Ind AS 105, no write down was
required because the expected fair value less cost to sell (of 100% of the subsidiary) was greater than the
carrying value.

The parent carried the investment in the subsidiary at cost, as permitted by Ind AS 27.
Calculate gain or loss on disposal of subsidiary in parent‖s separate and consolidated financial statements as
on 31st March 20X4.
SOLUTION

The parent‖s separate statement of profit and loss for 20X3-20X4 would show a gain on the sale of
investment of Rs. 40,000 calculated as follow:
Rs. ‘000

Sale proceeds 200
Less: Cost of investment in subsidiary (160)
Gain on sale in parent’s account 40

However, the group‖s statement of profit & loss for 20X3-20X4 would show a gain on the sale of subsidiary

of Rs. 8,000 calculated as follows:
Rs.’000 Rs. ’000
Sale proceeds 200
Less: share of net assets at date of disposal (Rs. 2,25,000 X 80%) (180)
Goodwill on consolidation at date of sale (W.N 1) (12)
(192)

Gain on sale in the group’s account 8

Working Note
The goodwill on consolidation (assuming partial goodwill method) is calculated as follows:

Fair value of consideration at the date of acquisition 160
16. 39