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Subsidiary Accumulated Losses (Negative Equity) reaches more than investment balance and amount in Holding

January 1, 2017 ABC Holding invested USD 100 in XYZ Subsidiary Net Assets which amounted to USD 100 at date of acquisition / Investment enjoying a full control of the Subsidiary that will be consolidated thereafter.
Ending of year 2017 XYZ had occurred losses of USD 150 turning the Equity to show in Negative of USD 50.

Is the accounting entry pertaining to the recognition of 2017 full losses correct or not ?! I need to have IFRS supporting Close which supports forming a liability / Provision account against the losses of Subsidiaries which i am fully entitled with  

Date of Investment
 100         DR.      Investment in Subsidiary XYZ
          100                  CR.      Cash

Year end Entry
150          DR.      Share of Subsidiary XYZ Losses
          100                  CR.      Investment in Subsidiary XYZ
            50                  CR.      Holding Liability to support the Subsidiary XYZ (Accrual / Provision)

asked Dec 17, 2017 in General IFRS Discussion by Fzakaria Level 2 Member (4,040 points)
Entries are ok.

1 Answer

0 votes
As ABC holding has control over XYZ, ABC will CONSOLIDATE the financial statements of XYZ. The investment in XYZ is only shown in individual financial statements of ABC whose treatment depends on IFRS 9 clasaification of financial assets - FVTPL.
answered Dec 26, 2017 by anonymous