Disposal of an associate

In this lesson

1. 0:00 Disposal of an associate overview
2. 0:13 Equity method accounting up to disposal
3. 0:38 Calculating profit or loss on disposal
4. 1:12 Worked example: Miley and Hana Company
5. 2:16 Determining carrying amount at disposal date
6. 3:41 Remeasuring retained investment to fair value

About this lesson

exams. The session walks through a practical example where a parent company sells part of its associate holding, loses significant influence, and must derecognise the investment while measuring the retained shares at fair value. When you dispose of an associate, you account for it using the equity method up to the disposal date, then calculate your profit or loss by comparing the fair value of consideration received plus any retained investment against the carrying amount of the associate at the point you lose significant influence. The carrying amount includes the original cost plus your share of post-acquisition reserves, less any impairment. If you retain shares after losing significant influence, those remaining shares are reclassified as financial assets and measured at fair value, with any gains or losses recognised in profit or loss. This technique is essential for consolidation questions in SBR and AFM, where you'll often encounter scenarios involving partial disposals or changes in group structure. Understanding the mechanics here—particularly how to split the calculation between disposed and retained shares—will help you handle complex group accounting confidently under IFRS standards.

Duration: 4m