Financial Reporting · Consolidated Financial Statements

Changes in Ownership and Loss of Control (Ind AS 110 and Ind AS 103)

Updated 5 October 2026 · Fact-checked

A change in ownership without loss of control is an equity transaction: no gain or loss in profit or loss, no change in goodwill. Loss of control is a disposal: derecognise assets, liabilities and NCI, recognise any retained stake at fair value, and book the gain or loss in profit or loss. Gaining control in stages is remeasured at fair value.

Understand Changes in Ownership and Loss of Control

Ind AS 110 treats the group as one economic entity. The owners of the parent and the non-controlling interest (NCI) are both owners of that entity. So when the parent buys or sells shares in a subsidiary and still controls it, the group has only dealt with its own owners. That is an equity transaction. Nothing is earned or lost by the entity.

When control is lost, the position changes. The group stops controlling the assets and liabilities of the former subsidiary. It is a real disposal. You remove everything related to the subsidiary from the consolidated balance sheet and book a gain or loss. Any shareholding that remains is not carried at its old value. It is treated as if bought afresh at fair value on the date control is lost.

The reverse also applies. When a parent gains control of an entity it already held a stake in (a step acquisition or business combination achieved in stages), Ind AS 103 treats it as if the old stake was sold and the whole stake bought at once. The earlier stake is remeasured to fair value at the acquisition date, and the difference goes to profit or loss. Goodwill is then worked out on the full position.

So the first question in every problem is simple: does the parent have control before, and after? If yes and yes, it is an equity adjustment. If no then yes, it is a step acquisition. If yes then no, it is loss of control.

The loss of control may happen without any sale too, for example when the subsidiary issues shares to others and the parent's stake falls below the control level, or when a court or regulator takes over. The accounting is the same.

Key rules to remember

Change in ownership without loss of control: Adjustment to parent's equity = Consideration received (or paid) − Change in carrying amount of NCI; Carrying amount of NCI is measured on the date of the transaction, including its share of goodwill if NCI was measured at fair value. The difference goes directly to equity attributable to owners of the parent. No profit or loss and no change in goodwill.
NCI share transferred on partial disposal: NCI increase = (Net assets + goodwill (net of accumulated impairment), if NCI was measured at fair value) at the date of sale × % of interest sold; Take the subsidiary's net assets at the date of sale. Add goodwill attributable to NCI only if NCI was measured at fair value. NCI is increased by the share of these now attributable to NCI.
Step acquisition: gain or loss on previously held interest: Gain or loss = Fair value of previously held interest at acquisition date − Its carrying amount; Recognised in profit or loss. If the earlier stake was an FVOCI equity investment, the amount in OCI is not recycled; it may be moved within equity.
Step acquisition: goodwill: Goodwill = (Consideration transferred + Fair value of previously held interest + NCI) − Net identifiable assets at fair value; NCI is measured at fair value or at proportionate share of net identifiable assets, as the acquirer chooses for each combination.
Gain or loss on loss of control: Gain or loss = (Fair value of consideration received + Fair value of retained interest + Carrying amount of NCI) − (Carrying amount of assets incl. goodwill − Liabilities), plus OCI reclassifications; NCI is a credit balance in the consolidated statements. When it is derecognised, it is added on the proceeds side. Equivalent form: (Proceeds + Fair value of retained stake) − (Net assets incl. goodwill − NCI carrying amount). Add amounts previously in OCI that are reclassified to profit or loss.
Retained interest after loss of control: Initial carrying amount = Fair value at the date control is lost; It becomes an associate, joint venture or a financial asset under Ind AS 109, and this fair value is its cost or initial fair value.
Amounts in OCI on loss of control: Reclassify to profit or loss, or transfer directly to retained earnings, as the relevant Ind AS would require on disposal of the related assets; Examples: foreign currency translation reserve is reclassified to profit or loss. Revaluation surplus on PPE is transferred to retained earnings, not profit or loss.

How to solve Changes in Ownership and Loss of Control questions

Use the same sequence for every question on this topic. It keeps your working clean and shows the examiner the logic.

1Decide the nature of the event: control retained (equity transaction), control gained in stages (Ind AS 103), or control lost (disposal).
2Fix the date. Use the date of the transaction, and work out the subsidiary's net assets, goodwill and NCI at that date, after bringing in profits earned up to that date.
3If control is retained: compute the change in NCI carrying amount. Take the difference between consideration and that change straight to equity (parent's share). Do not touch goodwill or profit or loss.
4If control is gained in stages: remeasure the old stake to fair value, record the gain or loss in profit or loss, then compute goodwill using consideration, old stake at fair value and NCI.
5If control is lost: list what you derecognise (assets, liabilities, goodwill, NCI). Then list what you recognise (proceeds, retained stake at fair value). The balancing figure is the gain or loss.
6Add the reclassification of any related OCI balances, such as foreign currency translation reserve or the transfer of revaluation surplus.
7Check the split of the gain: the part related to remeasuring the retained stake can be disclosed separately. Then state the treatment of the retained stake (associate, joint venture or financial asset).
8Write a one-line conclusion with the figure and where it appears in the financial statements.

Quickest way: Three-question shortcut

When to use it: Use when a question gives many numbers and you have limited time. Decide the category first and ignore irrelevant data.

Ask: control before? control after? That tells you the treatment in ten seconds.
Retained control: answer = consideration − NCI movement, to equity. Goodwill stays unchanged and profit or loss shows nothing.
Gaining control: fair value gain on old stake to profit or loss. New goodwill uses fair values for all parts.
Loss of control: gain = (proceeds + fair value of retained stake) − (net assets + goodwill − NCI). Add OCI reclassification.
Remember the subsidiary's profit up to the date of sale is consolidated, line by line, before deconsolidation.

Common mistakes in Changes in Ownership and Loss of Control

Recognising a gain in profit or loss when the parent sells some shares but still controls the subsidiary.
Students treat every sale as a disposal, the way it works for a normal investment.
Fix: Check control first. If control continues, the difference goes to equity and profit or loss stays untouched.
Adjusting or writing off goodwill on a partial disposal without loss of control.
Students link goodwill to the percentage held and reduce it proportionately.
Fix: Goodwill is not remeasured when control is retained. Only the NCI carrying amount changes, and the difference goes to equity.
Carrying the retained stake at its old cost or at its share of net assets after loss of control.
Students think the retained shares were not sold, so nothing changes.
Fix: Remeasure the retained stake to fair value at the date control is lost. That fair value is part of the gain computation.
Forgetting to derecognise the NCI and goodwill in the loss of control computation.
Students compare only sale proceeds with the parent's share of net assets.
Fix: Use the full consolidated carrying amounts: all assets including goodwill, all liabilities, and the NCI balance. Then apply the formula.
In a step acquisition, using the old carrying amount of the earlier stake in goodwill.
Students carry over the previous accounting from the associate or investment.
Fix: Use fair value at the acquisition date, and recognise the gain or loss on remeasurement in profit or loss.
Ignoring OCI balances such as foreign currency translation reserve on loss of control.
The OCI balance is often a small line in the data and is skipped.
Fix: Always scan for reserves related to the subsidiary and reclassify them as the relevant Ind AS requires.

Worked examples

Example 1

P Ltd holds 80% of S Ltd and has controlled it since acquisition. On 1 April 2026, the net assets of S Ltd in the consolidated books are ₹5,00,000. Goodwill is nil as the subsidiary was acquired at a price equal to the fair value of its net assets, and NCI is measured at proportionate share. P sells 10% of S Ltd (leaving 70%) for ₹70,000. Show the accounting in the consolidated financial statements.

Show the solution

Control before: yes (80%). Control after: yes (70%). So this is an equity transaction.
NCI before = 20% × ₹5,00,000 = ₹1,00,000.
NCI after = 30% × ₹5,00,000 = ₹1,50,000. Increase in NCI = ₹50,000.
Consideration received = ₹70,000.
Difference = ₹70,000 − ₹50,000 = ₹20,000. This is a credit to equity attributable to owners of the parent.
No gain in profit or loss. Goodwill is unchanged.

Answer: Dr Cash ₹70,000; Cr NCI ₹50,000; Cr Other equity (parent's) ₹20,000. Nothing goes to profit or loss.

Example 2

P Ltd holds 80% of S Ltd. On 31 March 2027 it sells 60% for ₹9,00,000 and loses control. The remaining 20% has a fair value of ₹3,00,000 and will be an associate. At that date, the consolidated carrying amount of S's net assets is ₹10,00,000, goodwill is ₹1,00,000, and NCI is ₹2,00,000 (20% of net assets, proportionate method). There is no OCI balance. Compute the gain on loss of control.

Show the solution

Control before: yes. Control after: no (20%). So this is loss of control.
Proceeds plus retained stake at fair value = ₹9,00,000 + ₹3,00,000 = ₹12,00,000.
NCI is a credit balance that is derecognised, so add its carrying amount of ₹2,00,000 to the proceeds side: ₹12,00,000 + ₹2,00,000 = ₹14,00,000.
Carrying amount of net assets and goodwill derecognised = ₹10,00,000 + ₹1,00,000 = ₹11,00,000.
Gain = ₹14,00,000 − ₹11,00,000 = ₹3,00,000.
Cross-check: (₹12,00,000) − (₹11,00,000 − ₹2,00,000) = ₹12,00,000 − ₹9,00,000 = ₹3,00,000.
The retained 20% is recognised at ₹3,00,000 as an investment in an associate (cost for the equity method).

Answer: Gain on loss of control = ₹3,00,000, recognised in consolidated profit or loss. The retained 20% is carried at fair value ₹3,00,000 as an associate.

Exam tips

Start every answer with the control test. One sentence naming the category earns marks and keeps you on track.
Write the journal entry in the consolidated books. Examiners reward the presentation of the equity credit or the gain.
If the question gives the subsidiary's profit up to the disposal date, include it in the consolidated profit and in the net assets before computing the gain.
In case-scenario MCQs, look for the words 'still controls' or 'loses control'. They decide the answer.
Show the retained stake at fair value as a separate line in your computation so partial marks are safe even if arithmetic slips.

Practice questions from Consolidated Financial Statements

Changes in Ownership and Loss of Control: frequently asked questions

Why is there no profit or loss when the parent sells shares but keeps control?

Ind AS 110 treats the parent and the NCI as owners of the same group. Moving shares between them is a transaction between owners. The difference goes to equity, not profit or loss.

How is a step acquisition different from loss of control?

In a step acquisition, control is gained, so the earlier stake is remeasured to fair value and goodwill is computed on the full position under Ind AS 103. In loss of control, control is given up, the subsidiary is deconsolidated and the retained stake is remeasured to fair value.

What happens to the retained interest after loss of control?

It is recognised at fair value on the date control is lost. It is then accounted for as an associate, a joint venture or a financial asset under Ind AS 109, depending on the influence the parent still has.

Does goodwill change when the parent buys more shares in a subsidiary it already controls?

No. Goodwill stays as it was. NCI decreases by its carrying amount for the shares bought, and the difference with the price paid goes to equity of the parent.