Partial Disposals 21 / 34

Partial Disposals

A partial disposal means selling but keeping control - so we must keep above 50% ownership afterwards e.g. Selling from 80% to 60%.

As we keep control, then the sale must be to those who do not have control - the NCI.

NCI will therefore increase after a partial disposal.

Therefore, this is just an exchange between the owners of the business (controllers and non-controllers) and so any gain or loss must go to EQUITY (other reserves) not Income statement.

How is the gain or loss calculated?

Proceeds from the disposalx
Increase in NCI(x)
Difference to Equityx

How do you calculate the ‘Increase in NCI’ line?

Goodwillx
Net Assets (from Equity table)x
x % disposedx
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What is the double entry for the disposal?

Dr Investment in S(as this is where it was originally credited to)XProceeds
Cr NCIXIncrease in NCI calculated
Dr / Cr Other ReservesX/(X)Difference

What is the Income Statement Effect?

The subsidiary is still consolidated in full.

NCI % is time apportioned (eg 20% to date of disposal, 40% thereafter).

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