Kochin Corporation (KC) owns an 85% stake in Doha Corporation (DC). On 1 January 20XX, KC decided to sell its 50% interest in DC to a third party in exchange for € 600,000 in cash. On the disposal date, DC's fair value amounted to € 1,000,000. Furthermore, in KC's consolidated financial statements, the carrying amount of DC's net assets is € 1,000,000 and the carrying value of non-controlling interests in DC (including non-controlling interests' share of accumulated other comprehensive income) is € 100,000. As a result of this transaction, KC lost control of DC but retained 35% interest in the previous subsidiary, amounting to € 350,000 as of that date. Instructions: 1. Discuss and determine the accounting treatment for recording the transaction in accordance with IFRS 10 2.Calculate how much profit or loss from the transaction (if any) 3. Discuss and determine how the accounting treatment would have been different if it had been assumed that KC had not lost control after the transaction.
Kochin Corporation (KC) owns an 85% stake in Doha Corporation (DC). On 1 January 20XX, KC decided to sell its 50% interest in DC to a third party in exchange for € 600,000 in cash. On the disposal date, DC's fair value amounted to € 1,000,000. Furthermore, in KC's consolidated financial statements, the carrying amount of DC's net assets is € 1,000,000 and the carrying value of non-controlling interests in DC (including non-controlling interests' share of accumulated other comprehensive income) is € 100,000. As a result of this transaction, KC lost control of DC but retained 35% interest in the previous subsidiary, amounting to € 350,000 as of that date.
Instructions:
1. Discuss and determine the accounting treatment for recording the transaction in accordance with IFRS 10
2.Calculate how much profit or loss from the transaction (if any)
3. Discuss and determine how the accounting treatment would have been different if it had been assumed that KC had not lost control after the transaction.
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