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Sale of subsidiary

2 November 2009 2,631 views 3 Comments

Company ABC and Company DEF both own Company XYZ (50%0 each). Company XYZ in turn owns subsidiary GHI (100%) and subsidiary XYZ (100%). Company ABC sells it s share in Company XYZ to Company DEF for a consideration of $1 and in turn buys 100% share of subsidiary GHI for $100,000. How do I account for sale of subsidiary GHI in Company XYZ’s accounts?

 

Please help!

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3 Comments »

  • Wallace Consulting Group said:

    Did the $100,000 go into XYZ or did it go to DEF?

    At the entity level of XYZ, regardless of the related party relationships higher up in the chain, isn’t it a sale giving rise to a gain or loss based on the difference between proceeds and book value?

    # 2 November 2009 at 11:21 pm
  • bchew69 (author) said:

    The $100,00 went to XYZ. I too believe that it is a sale giving rise to a gain. Is there any other way to account for it i.e. not showing the difference as a gain and thus having to pay taxes on it because the group as a whole is loss making?

    # 3 November 2009 at 10:06 am
  • Wallace Consulting Group said:

    Can’t think of anything re the accounting gain…possibly there are tax planning opportunities depending on the facts but that’s a separate issue I think…

    # 3 November 2009 at 11:38 am

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