1. Accounting for Step-Acquisitions (Achieving Control in Stages)
A step-acquisition occurs when an acquirer increases its equity interest in an investee in stages, shifting from an associate (equity method) or financial asset to a controlling stake (subsidiary).
- The Re-measurement Rule: At the exact date control is achieved, the acquirer must re-measure its previously held equity interest in the acquiree to its acquisition-date fair value. Any resulting gain or loss is recognized immediately in profit or loss.
- The newly re-measured fair value of the old stake is then added to the new consideration paid to calculate the total pool for goodwill estimation.
2. Loss of Control Transactions
When a parent company disposes of a portion of its investment in a subsidiary and loses control, it must derecognize all the subsidiary’s assets, liabilities, and any related NCI from the consolidated balance sheet.
Any remaining non-controlling investment retained in the former subsidiary must be re-measured to its fair value on the date control is lost. The total gain or loss on disposal is recognized in consolidated profit or loss.
Â