Disposal of a subsidiary

In this lesson

1. 0:00 Disposal of subsidiaries overview
2. 0:11 Three disposal scenarios explained
3. 0:44 Full disposal accounting treatment
4. 1:07 Partial disposal to associate
5. 1:46 Partial disposal to investment
6. 2:20 Calculating group profit or loss
7. 3:04 Full disposal worked example
8. 6:02 Partial disposal worked example
9. 8:18 Presentation in consolidated statements
10. 9:23 Parent company accounting treatment

About this lesson

You'll explore three disposal scenarios: full disposal (losing control entirely), partial disposal to an associate (retaining 20–50% ownership), and partial disposal to an investment (retaining less than 20%). Understanding which accounting treatment applies is essential for exam success and real-world consolidation work. The core technique involves calculating the group profit or loss on disposal by combining the proceeds from shares sold with the fair value of any retained investment, then deducting the carrying amount of the subsidiary at the date control is lost. This carrying amount includes net assets, goodwill, and excludes the non-controlling interest. You'll work through the mechanics of goodwill calculation, NCI valuation at disposal, and how post-acquisition movements in net assets affect both figures. The lesson uses two worked examples to show how these principles apply differently depending on whether you're disposing fully or partially, and whether goodwill has been impaired. You'll also learn how to present disposals in the consolidated statement of profit or loss—consolidating up to the disposal date, time-apportioning results, and recognising the gain or loss as an exceptional item. If the disposal qualifies as discontinued operations, you can present it as a single aggregated line. The lesson closes by showing how the parent company accounts for the same disposal in its own financial statements, where the calculation is simpler but the principle remains: proceeds less carrying amount equals profit or loss.

Duration: 10m