Question

Case 2
In early 2019, PT X acquired share ownership of 2 entities, namely PT Y and PT Z with
the following information:
• PT X acquired a 30% stake in PT Y, where previously PT X owned 40% of PT Y. Based on the analysis conducted by PT X, the additional 30% share ownership resulted PT X has control over PT Y.
• PT X acquired a 20% stake in PT Z, previously PT X owned 60% of PT Z. Based on the analysis conducted by PT X, on the initial ownership of 60% of PT Z's shares, PT X owns control of PT Z. With the additional 20% ownership of the shares, PT X has permanent ownership
has control over PT Z.
Towards the end of 2020, PT X sold part of its ownership to the two companies, with the following information:
• PT X sold 15% of its ownership in PT Y's shares. Based on the analysis conducted by PT X, the sale did not cause PT X to lose control of PT Y.
• PT X sold 40% of its ownership in PT Z's shares. Based on the analysis conducted by PT X, the sale caused PT X to lose control of PT Z.
Describe the accounting treatment for PT X for its ownership of PT Y and PT Z when:
1. Acquisition of additional shares in early 2019.
2. Sale of partial ownership towards the end of 2020.

Answer 1

1. Accounting for acquisition of additional shares-

(a) Acquisition of PT Y shares-

IFRS 10 provides that an entity acquiring control over an investee shall perform business combination accounting as per IFRS 3 and consolidate the investee on line by line item basis. Further, IFRS provides that existing investment shal be revalued at fair value on date of acquisition of control.

In standalone books, PT X shall record the investment at cost as per IFRS 9. IFRS 3 provides that an investor shall perform allocation of fair value to the assets acquired and identified during the Purchase Price Allocation. Any excess consideration over fair value of assets shall be recorded as Goodwill.

(b) Acquisition of shares of PT Z-

The PT X has acquired shares from non-controlling interest. IFRS provides that acquisition of shares from NCI is a transaction between shareholders and any amount paid to NCI over & above fair value of NCI shall be deducted from equity of the parent. Accordingly, PT X shall record investment in standalone at cost of acquisition and in consol financials, any amount paid over & above, fair value shall be recorded as deduction from equity.

2. Disposal of shares partially-

(a) Disposal of PT Y shares-

The sell of shares by Parent not resulting in loss of control has not effect on consolidation and in standalone books, the PT X shall record the gain on sale of shares where sales value is over & above cost of acquisition. Remaining investment shall be carried at original cost in standalone books.

(b) Disposal of PT Z shares-

The disposal of shares results in loss of control leads to accounting of remaining shares in standalone books at Fair value as cost method is allowed only for subsidiary as per IFRS. PT X shall revalue the remaining investment either at FVTPL or FVOCI and any gain or loss on revaluation shall be recorded accordingly. Gain/ loss on sale of shares shall be recorded in PL.

IFRS 10 provides that for loss of control, a parent shall de-consolidate the subsidiary and shall record the resulting gain/loss on de-consolidation in its books.

PT X shall also assess whether investment in PT Z qualifies for associate. If it meets assessment of associate, PT X shall record the PL proportionate share in its consolidated books under equity method of accounting based on guidance given in IAS 27.