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How partial disposals and loss of control are accounted for under IFRS 10 and ASC 810

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Groups routinely trim or restructure holdings—selling down a portion of a subsidiary, spinning off a line of business, or bringing in a strategic investor. IFRS 10 and US GAAP (ASC 810) distinguish sharply between transactions that retain control (equity transactions in owners’ equity) and transactions that lose control (gain/loss recognized in profit or loss with remeasurement of any retained interest). Getting the boundary right drives whether goodwill changes, whether OCI is recycled, and how gains are portrayed in the income statement.

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What changes when control is retained versus lost

When a parent retains control after selling a stake, the transaction is treated as a movement within equity: no gain or loss in profit or loss and no remeasurement of assets. When the parent loses control, the subsidiary is deconsolidated, a gain or loss is recognized in P&L, and any retained interest is measured at fair value on day one—becoming an associate, joint venture, or financial asset.

Rules of thumb:

  • Control retained: equity transaction; NCI adjusts, no P&L gain/loss.

  • Control lost: deconsolidate; recognize P&L gain/loss; remeasure retained interest to fair value; recycle OCI where required.

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IFRS 10 mechanics for partial disposals

1) Parent retains control (equity transaction)

  • No gain/loss in P&L.

  • NCI is adjusted to reflect the change in ownership.

  • Any difference between consideration received and the carrying amount of NCI is recognized directly in equity (attributable to owners of the parent).

  • Goodwill is unchanged.

Illustrative entry (IFRS): Parent sells 10% of Sub but stays above 50%.

  • Dr Cash (proceeds) xx

  • Cr Equity attributable to owners of the parent xx

  • Cr / Dr NCI xx (to reflect new percentage)

2) Parent loses control

  • Derecognize all assets, liabilities, and NCI of the former subsidiary.

  • Recognize consideration received at fair value.

  • Remeasure any retained interest to fair value and include in gain/loss.

  • Recycle or transfer related OCI (e.g., FX translation) per IAS 21/IFRS 9.

  • Resulting difference → gain or loss in P&L.

Gain/loss formula (IFRS):Gain/Loss = Consideration at FV + FV(Retained Interest) + Carrying amount of NCI − Carrying amount of net assets disposed (including goodwill).

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ASC 810 mechanics for partial disposals

1) Control retained

  • Treat as an equity transaction; no gain/loss in earnings.

  • Adjust noncontrolling interests and APIC/parent equity for the difference between consideration and carrying amount of the NCI adjusted.

  • Goodwill remains unchanged.

Illustrative entry (US GAAP):

  • Dr Cash (proceeds) xx

  • Cr APIC (or parent equity) xx

  • Cr / Dr NCI xx

2) Loss of control

  • Deconsolidate the subsidiary.

  • Recognize gain/loss in earnings.

  • Measure retained interest at fair value (becomes equity method or financial asset).

  • Reclassify AOCI elements related to the subsidiary consistent with ASC guidance (e.g., ASC 830 for FX).

Gain/loss formula (GAAP): mirrors IFRS.

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Comparative framework — IFRS 10 vs ASC 810

Topic

IFRS 10

ASC 810

Partial sale with control retained

Equity transaction; no P&L

Equity transaction; no earnings impact

Loss of control

Deconsolidate; P&L gain/loss; FV retained interest

Deconsolidate; earnings gain/loss; FV retained interest

Goodwill

No change if control retained

No change if control retained

OCI handling on loss of control

Recycle/transfer per IAS 21/IFRS 9

Reclassify AOCI per ASC topics

Measurement period

Not applicable (not a business combination)

Not applicable

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Worked example A — sell-down while retaining control

Facts (currency: €):

  • Parent owns 80% of Sub; NCI 20%.

  • Parent sells 10% to an external investor for €12,000,000; new ownership 70%/30% (control retained).

  • Carrying amount of NCI before sale = €10,000,000; proportional carrying for 10% slice = €5,000,000.

IFRS/GAAP accounting (equity transaction):

  • Dr Cash 12,000,000

  • Cr NCI 5,000,000

  • Cr Equity attributable to owners of the parent (APIC under GAAP) 7,000,000

Notes:

  • No P&L gain.

  • NCI increases to reflect 30%.

  • Goodwill unchanged.

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Worked example B — loss of control with retained associate

Facts:

  • Parent owns 60%; sells 30% for €25,000,000, dropping to 30% (associate).

  • Carrying amounts at disposal: Net assets (incl. goodwill) €70,000,000; NCI €28,000,000.

  • Fair value of retained 30% = €22,000,000.

  • Cumulative translation reserve (CTR) related to Sub = €3,000,000 (credit).

Gain/loss (IFRS/GAAP):= Consideration (25,000,000) + FV(retained 30%) (22,000,000) + Carrying NCI removed (28,000,000) − Carrying net assets disposed (70,000,000)= €5,000,000 gain.

Entries:

  • Dr Cash 25,000,000

  • Dr Investment in Associate (FV) 22,000,000

  • Dr NCI 28,000,000

  • Cr Net Assets of Subsidiary 70,000,000

  • Cr Gain on Loss of Control 5,000,000

CTR recycling:

  • Dr OCI – CTR 3,000,000

  • Cr Gain on Disposal (or separate FX reclassification) 3,000,000

Result: subsidiary deconsolidated; retained interest picked up at fair value and equity-method going forward.

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Special cases and edge conditions you must separate

  • Spin-offs / distributions in kind: May result in loss of control without consideration; evaluate fair value of distributed shares for gain/loss.

  • Contingent arrangements: If call/put options create continuing control or substantive rights, a sale may not be a loss of control.

  • Step disposals with multiple tranches: Determine the exact date control is lost; gains before that date (while control retained) are equity; the moment control is lost, recognize P&L gain including remeasurement of retained stake.

  • Previously classified as held for sale (IFRS 5 / ASC 205-20): If criteria met before disposal, consider presentation and measurement implications.

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Journal entries summary

Control retained (IFRS & GAAP):

  • Dr Cash xx

  • Cr NCI xx

  • Cr Equity attributable to owners / APIC xx

Loss of control:

  • Dr Cash xx

  • Dr FV of Retained Interest xx

  • Dr NCI xx

  • Cr Net Assets of Subsidiary (including goodwill) xx

  • Cr Gain on Disposal (P&L) xx

  • Separate: Recycle AOCI/CTR per standard.

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Disclosure package investors expect

  • Nature of the transaction and whether control was retained or lost.

  • Percentage changes in ownership and resulting control conclusion.

  • Gain/loss recognized (if any) and where presented.

  • Fair value basis for retained interest and key valuation inputs.

  • Amounts recycled from OCI/AOCI (e.g., FX).

  • Pro forma effects on revenue and profit where material.

Clear disclosures help readers distinguish capital structure actions from operating performance, improving period-to-period comparability.

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Impact on financial performance and ratios

  • EBITDA: unaffected by equity transactions; loss of control gains can inflate earnings in the period.

  • Leverage & equity: equity transactions change NCI and parent equity; deconsolidation removes subsidiary debt and assets, reshaping leverage.

  • EPS: loss-of-control gains affect EPS; analysts often adjust them.

  • Return metrics: deconsolidation changes the asset base; ROA/ROE may shift purely from scope change.

Operationally, finance teams should tie ownership analytics to consolidation logic to avoid misclassifying sell-downs and misreporting nonrecurring gains.

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