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Querist : Anonymous

Querist : Anonymous (Querist)

24 December 2015 A co sells its 100% shares to B co.then by virtue it becomes a holding company.then how will be revalued the shares of A co(unlisted co) what will be the entry of the shares in both companies?which As is applicable in this case in both books of accounts?
please help out.

Querist : Anonymous

Querist : Anonymous (Querist)

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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14 July 2024 When Company A sells its 100% shares to Company B, and Company A becomes a subsidiary of Company B, the accounting treatment and entries in both companies' books would typically be as follows:

### Company B (Acquiring Company):

1. **Initial Recognition**:
- Company B will record the acquisition of Company A's shares at the purchase price paid to acquire the shares. This amount is typically recorded as an investment in the books of Company B.

- For example, if Company B pays Rs. X to acquire Company A, the initial entry in Company B's books would be:
```
Investment in Company A (Asset) Dr
Cash or Bank (or equivalent paid) Cr
```

2. **Subsequent Measurement**:
- The shares of Company A will be initially recorded at cost.
- Subsequently, Company B may need to revalue the investment in accordance with accounting standards applicable to investment valuation (e.g., Ind AS or IFRS).

3. **Accounting Standards (Ind AS or IFRS)**:
- Company B will follow the relevant Accounting Standards (Ind AS in India or IFRS internationally) for the subsequent measurement and reporting of its investment in Company A.

### Company A (Subsidiary Company):

1. **Initial Entry**:
- Company A will no longer consolidate its financial statements as it becomes a subsidiary of Company B.
- Company A will eliminate the shareholders' equity and other accounts affected by the transfer of control to Company B.

2. **Accounting for Transfer**:
- The exact entries in Company A's books will depend on the transaction structure, but generally, there will be adjustments to eliminate the shareholders' equity and other balances that relate to ownership.

3. **Accounting Standards (Ind AS or IFRS)**:
- Company A, depending on its reporting standards (Ind AS or IFRS), will ensure compliance with the standards for the disposal of subsidiaries or transfer of control.

### Consolidated Financial Statements (Company B's Group Accounts):

1. **Consolidation Process**:
- Company B will consolidate the financial statements of Company A into its own financial statements.
- This involves eliminating inter-company transactions and balances to present a consolidated view of the group's financial position, results of operations, and cash flows.

### Conclusion:

The entry and subsequent valuation of shares in both Company A and Company B will depend on the specific terms of the acquisition and the accounting standards applicable to each company. Generally, Company B will record the acquisition of shares in Company A at fair value on the acquisition date and subsequently account for the investment under applicable accounting standards. Company A, now being a subsidiary, will adjust its books accordingly, and its financial statements will be consolidated into Company B's consolidated financial statements. It is essential for both companies to adhere to relevant accounting standards and seek professional advice for complex transactions like these to ensure accurate and compliant financial reporting.

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