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Valuation of a 100% subsidary at cost but what to do with a capital contribution?


Suppose that company A obtains 100% of the shares of a subsidary (company B). The valuation of subsidaries is (in accordance with IFRS) at cost.  The situation now is that company A wants to strengthen the capital of the subsidiary by a contribution in capital in the subsidiary withouth issuing new shares. 

So my question now is: is it possible to book this investment on the subsidiary? while we are valuating the subsidiary at cost? if not, what is correctly according to IFRS? 

asked Jun 30, 2016 in IAS 27 - Separate Financial Statements by IFRS beginner

1 Answer

0 votes
Hi,

Yes. You recognise and measure your investment in the subsidiary initially at cost in the parent's separate FS (IAS 27) (alternatively in accordance with IAS 39 or (new!) equity method also permitted).

Any additional capital contribution from the parent is added to the cost of the investment in terms of IAS 27. It doesn't matter if new shares are issued or not; this is only relevant for the subsidiary's equity accounts (share capital, reserves etc).
answered Jul 6, 2016 by Andi


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