Liquidation of foreign subsidiary

The profit or loss on disposal of subsidiaries is taken to parent’s income statement. The parent accounts only the profit or loss on disposal of entire holdings in this case and the consolidated statements do not capitalise liquidation expenses from disposed assets. Eg, Parent purchased subsidiary for 10,000, sold it for 20,000 and tax obligations are for 3,000, then:

Bank a/c 20,000₹

To Tax a/c 3,000₹

To Cost of investment a/c 10,000₹

To profit on disposal a/c 7,000₹

The liquidation charges will be included in the realisation account before closing the subsidiary’s capital account i.e., debit them to the realisation account. So, this makes it impossible for these charges to be carried into parent books.

Hi, I tried to find help on this issue during my spare time, but reliable guidelines are not available. On top of that, IFRS does not have a particular accounting treatment for Liquidation. So, presumably IndAS also doesn’t have a treatment because IFRS suggested to follow Presentation of financial statements for Discontinued operations. Which is not satisfactory to me because it is like abandoned operations and the treatment is the same (All expenses and liabilities are met before the closure of the operations). The liquidation expenses will not be taken to parent books (IndAS 105). So, I found out that using realisation account, as it is very narrative, I would use it to close off the accounts (without partner’s treatment) under Dissolution accounting rather than liquidation basis of accounting. So the cash received after settling liabilities and expenses is the above 20,000. Hope this helps.

https://www.grantthornton.global/globalassets/1.-member-firms/global/insights/article-pdfs/ifrs/ifrs-viewpoint-7---when-the-going-concern-basis-is-not-appropriate.pdf