Answer to Question #170848 in Accounting for Pble

Question

Is it possible for a parent to sell its subsidiary without losing its control?

Answer 1

Yes

There may be circumstances when the disposal of a subsidiary should not be recognised as a sale. These circumstances typically relate to when the parent sells the subsidiary but retains a degree of continuing involvement such that risks and rewards of ownership and control have not been transferred. Examples of circumstances include

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the seller has effective veto power over major contracts or customers;

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the buyer or any successor has the ability to put (sell) the subsidiary back to the seller at other than fair value;

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the seller can require the buyer or any successor owner to sell the subsidiary back to it at other than fair value;

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the seller has significant voting power on the subsidiary’s board;