ACCA SBR ^UK Syllabus D. Financial Statements of Groups entities - IAS 27 - Notes ^{2 / 4}

With reorganisations where a new parent is inserted above an existing parent, the ‘cost’ of investment in the sub can now be its carrying amount rather than its FV

This relief is limited to where

1. The new parent obtains control of the original parent (or entity) by issuing shares

2. The assets and liabilities of the new group and the original group are the same immediately before and after the reorganisation; and

3. The owners of the original parent before the reorganisation have the same absolute and relative interests after the reorganisation.

If any of the above is not met then the reorganisation must be accounted for as normal at FV (rather than CV)

IAS 27 will require all dividends received to be shown in the income statement

However, if the dividend exceeds the total comprehensive income of the subsidiary in the period the dividend is declared; or the carrying amount of the investment exceeds the amount of net assets (including associated goodwill) recognised - then impairment should be checked for

The distinction between pre- and post-acquisition profits is no longer required.

Recognising dividends received from subsidiaries as income will give rise to greater income being recognised. Care will need to be taken as to what constitutes a dividend (defined as a distribution of profits).