50% holdings and controlling interest in an entity

50% holdings and controlling interest in an entity, does this form a group structure for both entiti

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Company A had 100% shareholdings in Company B in the prior year (making B a subsidiary), in the current year it transfers 50% to another entity Company C. Company A still has a contolling interest in Company B after the transfer.

In the current year, is Company B still a subsdiary of Company B, please?

Is company A or B be considered a joint venture in C?

What is the accounting treatment for the transfer assuming no cash/sales proceeds/charge occurred, please?

Thanks. 

Replies (11)

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By Anonymous Accountant
11th Nov 2022 16:26

What do you mean by is B still a subsidiary of B?

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Replying to Anonymous Accountant:
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By Fum
12th Nov 2022 09:21

My error, please. Meant is company B still a subsidiary of Company A in the current year?
I guess not, as 50% of the shareholdings were transferred to Company C with no further controlling interest as per further info received. Resulting in Company A just being a shareholder in the current year and cease to be a parent company. I hope my understanding is correct. Thanks.

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By Bobbo
11th Nov 2022 18:08

What connection does Company A have to Company C?

On the face of it, it sounds like the investment in Company B on A's balance sheet needs to reduce by 50%.

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Replying to Bobbo:
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By Fum
12th Nov 2022 09:26

They were not connected but as a result of the transfer, I assume they would now be connected through the joint venture, right?Agreed, thanks.

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Replying to Fum:
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By Bobbo
12th Nov 2022 13:55

If they weren't connected, then why did Company A just give 50% of its holding in Company B to Company C?

Common directors? Common shareholders?

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Replying to Bobbo:
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By Fum
14th Nov 2022 13:48

Good question, but not privy to further info of Company C, its a non-UK entity within a group. However, how would this impact the accounting treatment if they are related and the above questions?

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Replying to Fum:
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By paul.benny
14th Nov 2022 17:21

It's irrational for A to give away* half of B to an unconnected party without getting something in return

Which of the parties are you acting for? If you're acting for B, have you considered whether having a new 50% shareholder creates any new AML obligations? Ditto if the new 50% shareholder is appointing any directors to B

The glossary to FRS102 defines related parties as well as subsidiary and joint ventures. You'll need to understand the relationship with C to determine whether A and C are related parties and any resultant disclosures.

And something I overlooked earlier: does A prepare consolidated accounts (and for that matter are there any other entities in the structure)? If there are consolidated accounts you have to stop consolidating B from the date of the give-away.

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*(presumably this has some value, both actual and book - you've been a bit sparse with facts here)

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By Paul Crowley
11th Nov 2022 19:44

Confused
Which company shares were transferred. Were they sold?

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Replying to Paul Crowley:
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By Fum
12th Nov 2022 09:52

There was no charge for the transfer, 50% of company A investment in B was transferred to Company C.. Can the accounting treatment just be:

Credit investment and
Debit loss on disposal of unlisted fixed asset investment?

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By paul.benny
12th Nov 2022 08:34

This feels like an exam question intended to elicit discussion rather being than a real life scenario.

You might want to look at the glossary section in FRS102, which define both subsidiary and joint venture and giving you answers to your first questions.

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Replying to paul.benny:
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By Fum
12th Nov 2022 09:48

Referenced. Thank you.

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