Accounting for call put option over NCI


Joined
Jul 24, 2018
Messages
3
Reaction score
0
Country
United Kingdom
Hello - my query is - Parent A owns 60% interest in subsidiary B, there is an option to acquire the remaining 40% of subsidiary B in a couple years time. I know in the consolided FS of the parent, a liability is recognised and the other side going to equity. my question is how do you account for this in the parent only balance sheet i.e non consolidated balance sheet of the parent?
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
1,744
Reaction score
231
Country
United States
Parent only balance sheet will show the amount paid for the 60% as "Investment in Sub".
 
Joined
Jul 24, 2018
Messages
3
Reaction score
0
Country
United Kingdom
What about the put option, does it have to be accounted for as a derivative at fair value?
 

kirby

VIP Member
Joined
May 12, 2011
Messages
1,744
Reaction score
231
Country
United States
It needs to be disclosed in the footnotes.
Does not hit balance sheet unless you specifically paid something to acquire the right to purchase and terms are fixed, such as "you pay a fee of $X and you will get the other 40% of the company for a price of Y." But if there is just a vague " you could buy the other 40%. then just disclose that.
 
Joined
Jul 24, 2018
Messages
3
Reaction score
0
Country
United Kingdom
It needs to be disclosed in the footnotes.
Does not hit balance sheet unless you specifically paid something to acquire the right to purchase and terms are fixed, such as "you pay a fee of $X and you will get the other 40% of the company for a price of Y." But if there is just a vague " you could buy the other 40%. then just disclose that.
There is an agreement to buy the shares in 2 years time at the current value of the shares today x an escalation factor (which I think is around 3%)
This is under ifrs
 
Ad

Advertisements

kirby

VIP Member
Joined
May 12, 2011
Messages
1,744
Reaction score
231
Country
United States
Hi
In the first post this was described as an "option". In the latest post it is described as an "agreement" = contract. Please, which one is correct?
 
Ad

Advertisements


Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top