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Purchase shareholding in joint venture from a joint venture

13 July 2009 1,541 views 3 Comments

Hi all

My company has a 50% shareholding in a joint venture company, A. A has a wholly owned subsidiary (B) and is going to transfer its interest in this subsidiary to its shareholders (i.e. 50% to my company and 50% to the other joint venturer).

How shall my company account for such purchase of 50% shareholding in B? Shall I use purchase accounting (i.e. to fair value the net assets of B)?

Thanks

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3 Comments »

  • Valuable Internet Information » Purchase shareholding in joint venture from a joint venture … said:

    [...] See the original post: Purchase shareholding in joint venture from a joint venture … [...]

    # 13 July 2009 at 12:37 pm
  • Joint Venture Intelligence » Blog Archive » joint venture company said:

    [...] Purchase shareholding in joint venture from a joint venture … Hi all My company has a 50% shareholding in a joint venture company, A. A has a wholly owned subsidiary (B) and is going to transfer its interest in this. [...]

    # 15 July 2009 at 9:17 am
  • riyer said:

    In the given scenario, IFRS 3 (purchase accounting) can be applied since no control is obtained and hence this transaction is not covered under the definition. To obtain control the shareholding should be more than 50%.

    Your company will account for the interest in B (now a Joint Venture of your company), under proportionate consolidation. There will no additional goodwill or capital reserve since the cost of acquistion= consideration (i.e both will be 50% of the carrying cost of investments)

    In addition, A will consolidate B till the date of sale.

    you can write me at hramak@rediffmail.com if you want to discuss this furhter.

    Thanks

    # 16 July 2009 at 10:50 pm

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