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Financial Reporting · Ind AS 110 Consolidation Procedure for Subsidiaries

Changes in Ownership and Loss of Control under Ind AS 110

Updated 5 October 2026 · Fact-checked

If a parent changes its stake in a subsidiary but keeps control, it records the change in equity, with no profit or loss and no change in goodwill. If control is lost, derecognise the subsidiary's net assets, goodwill and NCI, recognise consideration and the retained stake at fair value, and take the difference to profit or loss.

Understand Changes in Ownership and Loss of Control

Ind AS 110 treats the group as one economic entity. Owners of the parent and non-controlling interests (NCI) are both owners of that entity. So when the parent buys shares from NCI, or sells shares to NCI, and control stays, the transaction is between two groups of owners. It is not a gain or a loss for the group.

That is why a change in ownership without loss of control is an equity transaction (paragraph 23 and B96). You adjust the carrying amount of NCI to reflect its new share of the subsidiary's net assets, including its share of goodwill and accumulated OCI. The difference between the adjustment to NCI and the fair value of the consideration paid or received goes directly to equity attributable to owners of the parent. Goodwill is not remeasured. Nothing goes to profit or loss.

Loss of control is different (B97 to B99). Once control ends, the subsidiary is no longer part of the group. The parent stops consolidating it from that date. It removes the subsidiary's assets (including goodwill) and liabilities, and the NCI, from the consolidated balance sheet at their carrying amounts. Any investment kept is treated as a new investment, recognised at fair value on the date control is lost. This is why the gain or loss includes the remeasurement of the retained stake.

Amounts earlier recognised in OCI for the subsidiary are accounted for as if the parent had directly disposed of the related assets and liabilities (B99). Some are reclassified to profit or loss, for example exchange differences on translation of a foreign operation. Others are transferred directly to retained earnings, for example a revaluation surplus on PPE. Amounts that Ind AS does not allow to be reclassified stay in equity.

The gain or loss is recognised in profit or loss and attributed to owners of the parent. Control can also be lost in several steps. If the arrangements are linked, for example they are made at the same time or are conditional on each other, treat them as one transaction (B97). The retained interest is then accounted for as an associate, a joint venture, or a financial asset under Ind AS 109, depending on what it has become. Read B96 (changes in ownership without loss of control) and B97 to B99 (loss of control, linked arrangements and OCI) of Ind AS 110 once in the Ind AS text so you recognise the wording.

Key rules to remember

Change in ownership without loss of control
Adjustment to equity of owners of parent = Fair value of consideration paid or received − Change in carrying amount of NCI
NCI is adjusted by its proportionate share of the carrying amount of the subsidiary's net assets, including goodwill attributed to NCI. Goodwill is not remeasured. No profit or loss.
NCI adjustment when the parent buys shares from NCI
Reduction in NCI = Carrying amount of NCI × (% of subsidiary's shares bought from NCI ÷ NCI % before the transaction)
Use this only when the parent buys shares from NCI. For a sale to NCI, the increase in NCI = % of the subsidiary sold × carrying amount of the subsidiary's net assets in the consolidated statements. It is based on the amount sold out of the parent's holding, not on NCI's existing carrying amount. Include goodwill in that net assets amount only to the extent it is attributed to NCI under the method used. Under the proportionate share method, NCI carries no goodwill.
Gain or loss on loss of control
Gain or loss = (Fair value of consideration received + Fair value of retained investment + Carrying amount of NCI) − Carrying amount of subsidiary's assets (including goodwill) less liabilities ± amounts reclassified from OCI
Add OCI credits that are reclassified to profit or loss, and deduct OCI debits that are reclassified. Transfers within equity do not affect the gain.
Retained interest
Retained investment is recognised at fair value on the date control is lost
This fair value is the initial carrying amount for later accounting as an associate, joint venture or financial asset.
Treatment of OCI on loss of control
OCI items are treated as if the parent had directly disposed of the related assets or liabilities
Reclassify to profit or loss where the relevant Ind AS requires it. Otherwise transfer directly to retained earnings.

How to solve Changes in Ownership and Loss of Control questions

First decide whether control is lost or kept. Everything else follows from that. Write the working in a fixed order so the examiner can follow the marks.

  1. 1Read the facts and state whether the parent still controls the subsidiary after the transaction. Check shareholding, board rights and any linked transactions.
  2. 2If control is kept, compute the carrying amount of NCI before the transaction, including NCI's share of goodwill if the full goodwill method was used.
  3. 3Work out the share of NCI transferred or created. Adjust NCI in proportion to the shares bought or sold.
  4. 4Find the difference between the NCI adjustment and the fair value of consideration. Take it to equity of the parent (other equity). Do not touch profit or loss or goodwill.
  5. 5If control is lost, list the carrying amounts at the date of loss: the subsidiary's assets, goodwill, liabilities and the NCI. Use values at the date control is lost, not the date of acquisition.
  6. 6Add the fair value of consideration received and the fair value of the retained interest. Add the NCI carrying amount. Deduct the carrying amount of net assets including goodwill.
  7. 7Deal with OCI balances: reclassify to profit or loss, or transfer within equity, as the relevant Ind AS requires. Adjust the gain accordingly.
  8. 8State the gain or loss in consolidated profit or loss, say how the retained interest is now classified (associate, joint venture or Ind AS 109 asset), and give the journal entry.

Quickest way: Two-line check: control kept or lost

When to use it: Use this when you have limited time and the question gives most values directly.

  1. If control is kept, calculate only two numbers: the NCI adjustment and the consideration. The difference is equity. Write the journal and stop.
  2. If control is lost, use one line: consideration + fair value of retained stake + NCI − net assets including goodwill. Then adjust for OCI reclassification.
  3. Check that you used the carrying amount of net assets at the date of disposal, not the original cost of the investment.
  4. Write a single line on the classification of the retained interest.

Common mistakes in Changes in Ownership and Loss of Control

  • Recognising a gain or loss in profit or loss when the parent sells or buys shares and still controls the subsidiary.

    Students apply the separate-financial-statements idea that a sale of an investment gives a profit.

    Fix: In consolidated statements it is an equity transaction. Show the difference in other equity attributable to owners of the parent.

  • Changing goodwill when the parent buys more shares from NCI.

    It looks like a new acquisition, so students compute fresh goodwill.

    Fix: Goodwill was fixed on gaining control. A later purchase from NCI only moves amounts between NCI and parent equity.

  • Leaving out goodwill when computing the carrying amount of net assets on loss of control.

    Students use only identifiable net assets of the subsidiary.

    Fix: The subsidiary's goodwill in the consolidated balance sheet is derecognised too. Include it in the amount deducted.

  • Recording the retained investment at its old carrying amount or cost.

    Students treat the retained shares as if nothing happened to them.

    Fix: Remeasure the retained interest to fair value at the date control is lost. The remeasurement gain or loss is part of the profit or loss.

  • Ignoring OCI balances such as the foreign currency translation reserve or revaluation surplus.

    Students stop after the cash and net assets working.

    Fix: Check the equity section. Reclassify what the relevant Ind AS allows to profit or loss. Transfer other balances directly to retained earnings. Do not include transfers within equity in the gain.

  • Subtracting NCI instead of adding it in the gain formula.

    NCI is a credit in the balance sheet, so students deduct it with the liabilities.

    Fix: NCI is derecognised, so its carrying amount is added with the consideration and the fair value of the retained stake. Remember the formula as 'what you get plus what you keep plus NCI, minus what leaves'.

Worked examples

Example 1

P Ltd holds 80% of S Ltd and controls it. In the consolidated balance sheet, NCI (20%) is carried at ₹2,40,000. P Ltd buys a further 5% of S Ltd's shares from NCI holders for ₹1,00,000 in cash. Give the consolidated accounting.

Show the solution
  1. Control is kept: P Ltd's holding rises from 80% to 85%. This is an equity transaction.
  2. NCI held 20% before. The shares acquired are 5% of S Ltd, which is 5 ÷ 20 = one-fourth of NCI's interest.
  3. The NCI carrying amount of ₹2,40,000 used here is the full amount in the consolidated balance sheet. It includes NCI's share of net assets, its share of goodwill (if the full goodwill method was used) and its share of accumulated OCI. So the amount transferred out of NCI carries a proportionate share of all of these.
  4. Reduce NCI by one-fourth of ₹2,40,000 = ₹60,000. NCI after the transaction = ₹1,80,000, which is 15%.
  5. Consideration paid = ₹1,00,000. Excess over the NCI reduction = ₹1,00,000 − ₹60,000 = ₹40,000.
  6. The ₹40,000 is charged directly to equity attributable to owners of the parent (other equity). No profit or loss. Goodwill is unchanged.
  7. Journal: Non-controlling interest A/c Dr ₹60,000; Other equity (owners of parent) A/c Dr ₹40,000; To Bank A/c ₹1,00,000.

Answer: NCI (including its share of goodwill and accumulated OCI) is reduced by ₹60,000 to ₹1,80,000. Other equity of the parent is reduced by ₹40,000. There is no gain or loss in profit or loss and no change in goodwill.

Example 2

P Ltd holds 80% of S Ltd. At the date of the transaction, the consolidated carrying amounts relating to S Ltd are: identifiable net assets ₹20,00,000, goodwill ₹2,00,000 (full goodwill method, so it includes NCI's share), and NCI (20%) ₹4,40,000. Assume NCI's carrying amount equals 20% of ₹22,00,000, that is, goodwill is attributed to NCI in proportion to its 20% holding. The foreign currency translation reserve on S Ltd is a credit of ₹60,000, and all of it is attributable to owners of P Ltd (none sits in NCI). P Ltd sells 40% of S Ltd's shares for ₹10,00,000 in cash, and loses control. The remaining 40% has a fair value of ₹10,00,000 and is an associate. Compute the gain on loss of control, ignoring tax.

Show the solution
  1. Control is lost: P Ltd holds 40% after the sale and no longer controls S Ltd. Deconsolidate from that date.
  2. Carrying amount derecognised: net assets ₹20,00,000 + goodwill ₹2,00,000 = ₹22,00,000. NCI of ₹4,40,000 is also derecognised.
  3. Amounts received or recognised: consideration ₹10,00,000 + fair value of retained 40% ₹10,00,000 + NCI carrying amount ₹4,40,000 = ₹24,40,000.
  4. Before OCI: gain = ₹24,40,000 − ₹22,00,000 = ₹2,40,000.
  5. OCI: the foreign currency translation reserve credit of ₹60,000 is wholly attributable to owners of the parent, so the full amount is reclassified to profit or loss, as if P Ltd had disposed of the foreign operation directly. This increases the gain by ₹60,000. If part of the reserve sat in NCI, that part would be derecognised with the NCI instead.
  6. Total gain in consolidated profit or loss = ₹2,40,000 + ₹60,000 = ₹3,00,000. The NCI is derecognised at its carrying amount and added in full, so the whole gain is attributable to owners of the parent.
  7. Cross-check only (this split is not a separate method): on the stated assumption, the parent's share of net assets including goodwill is ₹22,00,000 − ₹4,40,000 = ₹17,60,000 for its 80%. The 40% sold is 40 ÷ 80 of this = ₹8,80,000, and the retained 40% is also ₹8,80,000.
  8. Gain on the 40% sold = ₹10,00,000 − ₹8,80,000 = ₹1,20,000. Remeasurement gain on the retained 40% = ₹10,00,000 − ₹8,80,000 = ₹1,20,000. Total ₹2,40,000 agrees with the line above. Both parts are within the profit or loss on loss of control.
  9. The retained 40% is carried at ₹10,00,000 as the initial amount of the investment in an associate, and accounted for under Ind AS 28 from then on.

Answer: Gain on loss of control = ₹3,00,000 (consideration ₹10,00,000 + retained interest at fair value ₹10,00,000 + NCI ₹4,40,000 − net assets including goodwill ₹22,00,000 + ₹60,000 reclassified from the foreign currency translation reserve). It is recognised in consolidated profit or loss and attributed to owners of the parent. As a cross-check, ₹1,20,000 relates to the 40% sold and ₹1,20,000 to the remeasurement of the retained 40%, plus the ₹60,000 reclassification. The retained 40% is recognised at ₹10,00,000 as an investment in an associate.

Exam tips

  • Start every answer with one line: 'Control is kept, so equity transaction' or 'Control is lost, so deconsolidate and recognise gain or loss'. It earns marks and keeps you on track.
  • Show the gain computation as a clear list: consideration, fair value of retained interest, NCI, less net assets including goodwill, OCI adjustment. Marks are often given per item.
  • In theory questions, link the treatment to the principle: the group is a single entity, so deals with NCI are with owners, and a loss of control is a real disposal and remeasurement event.
  • Read the question for linked transactions and for OCI reserves. A hidden foreign currency translation reserve or revaluation surplus is a common trap.
  • For MCQs, test the key phrases: no profit or loss, no goodwill change, retained stake at fair value. Case MCQs have no negative marking, so attempt all.

Practice questions from Ind AS 110 Consolidation Procedure for Subsidiaries

Changes in Ownership and Loss of Control: frequently asked questions

Is a partial disposal of a subsidiary always a profit or loss item?

No. If the parent still controls the subsidiary after the sale, it is an equity transaction in consolidated financial statements, and no gain or loss goes to profit or loss. Profit or loss arises only when control is lost.

Why is the retained investment recorded at fair value on loss of control?

Once control is lost, the parent is treated as having disposed of the subsidiary and bought a new investment in the shares it kept. A new investment starts at fair value on that date. The remeasurement gain or loss is included in the profit or loss on loss of control.

What happens to OCI balances when control is lost?

They are accounted for as if the parent had directly disposed of the related assets and liabilities. So items such as foreign currency translation reserve are reclassified to profit or loss, while items such as a PPE revaluation surplus are transferred directly to retained earnings. Items that Ind AS does not allow to be reclassified stay in equity.

Does goodwill change when the parent buys more shares from NCI?

No. Goodwill was measured when control was obtained. Later purchases from NCI, while control is kept, only move amounts between NCI and the equity of the parent.