Deconsolidation

Why does it matter in a group?

A subsidiary leaves the group accounts from the date the parent loses controlControlPower over a company, exposure to its variable returns, and the ability to use that power to affect those returns. Control makes the company a subsidiary and brings it into the consolidation.Open the glossary entry, whether by a sale, a loss of votes or a change in agreements. The group removes the subsidiary’s assets, liabilities and non-controlling interestNon-controlling interestThe share of a subsidiary's equity and profit that belongs to owners outside the group.Open the glossary entry, records any stake it keeps at fair value, and takes the gain or loss to profit or loss. Amounts held in other comprehensive income for that subsidiary, such as its translation reserveTranslation reserveThe part of group equity that holds exchange differences from translating a foreign subsidiary into the group's currency.Open the glossary entry, move to profit or loss as well.¹

A small example

Zenvara sells all of Quillfern for GBP 6,000,000. Quillfern’s net assets in the group accounts, goodwill included, are GBP 5,200,000, and its translation reserve holds a credit of GBP 300,000. The gain is 6,000,000 less 5,200,000 plus 300,000, which is GBP 1,100,000.