a parent sells a 70 interest in a 90 owned subsidiary to a third party the subsidiar 611712

Reclassification of other comprehensive income

A parent sells a 70% interest in a 90%-owned subsidiary to a third party. The subsidiary had recognised, in its own financial statements, the following:

• a revaluation reserve in respect of property, plant and equipment of €2 million;
• a surplus on available-for-sale investments of €3 million;
• a cumulative actuarial loss of €1.5 million; and
• a cumulative translation difference of €4 million.

The parent:

• transfers the entire revaluation surplus of €2 million related to property, plant and equipment within equity, 90% of the balance is attributable to the parent, while the remaining 10% is attributable to the non-controlling interest;
• accounts for the surplus on the available-for-sale investments using one of the following approaches:
• approach (1): the parent reclassifies its €2.7 million interest in the surplus on available-for-sale investments to profit or loss for the period;
• approach (2): the entire €3 million surplus on available-for-sale investments is reclassified to profit or loss for the period. 90% of the balance (i.e. €2.7 million) is attributable to the parent, while the remaining 10% (i.e. €0.3 million) is attributable to the non-controlling interest;
• does not reclassify the actuarial loss of €1.5 million to profit or loss;
• reclassifies cumulative translation differences of €3.6 million (= 90% × €4 million) relating to the parents interest to profit or loss, while the €0.4 million (= 10% × €4 million) relating to the non-controlling interest is derecognised but is not reclassified to profit or loss.