Complex Transactions in Group Accounting
75 min read • Last updated January 2026
Once you master the basics of consolidation and the AOE, the next challenge is handling complex transactions. These are the scenarios that separate the average students from those who achieve distinctions. We'll cover goodwill impairment, asset transfers, and changes in ownership.
1Goodwill Impairment (IAS 36)
Goodwill is not amortised. Instead, it must be tested for impairment annually (or more frequently if there are indicators). The accounting depends on whether you chose the Fair Value Method or the Proportionate Share Method for NCI.
Full Goodwill Method
NCI is measured at fair value. Both the parent AND NCI share the impairment loss.
Dr Impairment Loss (P/L)
Cr Goodwill (SOFP)
*Loss split in AOE between Parent/NCI
Partial Goodwill Method
NCI is measured at proportionate share. Only the PARENT shares the impairment loss.
Dr Impairment Loss (P/L)
Cr Goodwill (SOFP)
*Loss fully allocated to Parent in AOE
2Intra-Group Transfers of PPE
When one group entity sells an item of PPE to another at a profit, two things happen that must be eliminated:
1. Unrealised Profit
The profit on the sale is unrealised from the group's perspective until the asset is depreciated or sold outside the group.
2. Excess Depreciation
The buyer depreciates the asset at its new (higher) cost. This "excess" depreciation must be reversed to bring the asset back to its original group carrying amount.
The Elimination Journal (Year of Sale):
Dr Other Income / Gain on sale (Seller)
Cr PPE (Buyer) // Eliminate profit
Dr Accumulated Depr (Buyer)
Cr Depreciation Expense (Buyer) // Reverse excess depr
3Changes in Ownership (IFRS 10)
This is a major exam topic. The accounting depends entirely on whether control is maintained or lost.
Control Maintained (e.g., 60% → 80%)
This is viewed as an equity transaction. No gain or loss is recognized in Profit or Loss.
- • Adjust carrying amount of NCI
- • Any difference between consideration paid/received and NCI adjustment goes directly to Equity (Retained Earnings/Common Control Reserve).
Loss of Control (e.g., 60% → 40%)
The subsidiary is deemed "sold." You must:
- Derecognize all assets (including goodwill) and liabilities of the sub.
- Derecognize NCI.
- Recognize consideration received.
- Remeasure any retained interest (the 40%) to Fair Value.
- Recognize the gain or loss in Profit or Loss.
4Foreign Currency Translation (IAS 21)
When you have a foreign subsidiary, you must translate its financial statements into the group's presentation currency. This gives rise to the Foreign Currency Translation Reserve (FCTR).
Translation Rates Quick Guide:
| Item | Rate Used |
|---|---|
| Assets & Liabilities | Closing Rate (Spot at year-end) |
| Income & Expenses | Average Rate (or Transaction Rate) |
| Equity Items | Historical Rate (at date of transaction) |
Pro-Tip: The difference resulting from these different rates is recognized in Other Comprehensive Income (OCI) and accumulated in the FCTR in equity. On disposal of the sub, this reserve is "recycled" to Profit or Loss.
Mastering the Complexity
To master these complex topics, always focus on:
- Does the NCI measurement method affect the calc? (Goodwill impairment)
- Did control change? (Ownership changes)
- Am I using the correct FX rates for the period? (IAS 21)
Coming in Part 6...
We'll look at Associates and Joint Ventures. You'll learn when to use the equity method instead of consolidation and how to work through the investment in associate working paper.