Step Acquisitions under IFRS 3

Not all business combinations take place in one go. Sometimes a parent can acquire an entity in stages, which we call a step acquisition. This takes place when an acquirer holds an existing equity interest in the acquiree before the date of control. Say, for example, a company may hold 25% of a company, and then buy out another shareholder taking their share to 55% of the acquiree.

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How to translate the financial statements of a foreign subsidiary under IAS 21

Statement of Financial Position At the end of the financial year, the SOFP of the overseas subsidiary will be translated using the closing rate (i.e. the exchange rate at the date of the balance sheet) For opening net assets, these were translated in last year’s financial statements at last year’s closing rate and must be retranslated for …

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Foreign Exchange transactions at an individual company level under IAS 21

When a company enters into transactions in a currency that’s different to its functional currency (i.e. a foreign exchange transaction), the results of these transactions should be translated and recorded in the company’s accounting records in its functional currency. The company can use either: the spot exchange rate on the date the transaction occurred, or Using an …

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Disposal of a foreign subsidiary under IAS 21

When a subsidiary is disposed of, and the results were translated using the closing rate method, the cumulative exchange difference which has been taken to reserves (because they were unrealised) becomes realised. Under IAS 21, this foreign exchange reserve may be transferred to the income statement on the disposal of the subsidiary as part of the gain …

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