Question 1 - Part a

In this lesson

1. 0:00 Explaining subsidiary disposal treatment
2. 1:04 What happens when control is lost
3. 2:23 Accounting for the investment after disposal
4. 4:03 Calculating profit or loss on disposal
5. 6:01 Adding fair value of retained shareholding
6. 7:20 Removing net assets and goodwill
7. 8:18 Computing NCI at disposal date
8. 11:17 Valuing the associate at year end

About this lesson

You'll discover what happens when a parent company no longer controls a subsidiary: goodwill, non-controlling interest, and net assets are removed from the consolidated statements, and a group profit or loss on disposal is calculated. The video then walks you through the practical application using a worked example, showing how to transition the investment from subsidiary to associate status using equity accounting, complete with all necessary calculations including fair value adjustments and post-acquisition profit allocations. This is essential knowledge for consolidation questions where shareholdings change mid-year. The lesson demonstrates the step-by-step approach: first explain the accounting treatment clearly, then work through the numbers methodically using a spreadsheet to capture method marks. You'll see how to calculate the profit or loss on disposal by combining cash proceeds with the fair value of retained shares, then removing net assets, goodwill, and adjusting for non-controlling interest. Finally, you'll learn how to value the remaining investment as an associate at year end using the equity method, ensuring you pick up all available marks by showing your working clearly.

Duration: 15m