Brief Definition
Disposal of subsidiaries refers to the process in which a parent company sells or divests its interest in one of its subsidiary companies. This can involve selling the subsidiary’s shares, its assets, or through other means of transferring ownership.
Further Explanation
Disposal of subsidiaries refers to the process in which a parent company sells or divests its interest in one of its subsidiary companies. This can involve selling the subsidiary’s shares, its assets, or through other means of transferring ownership. The disposal can be done for various strategic, financial, or operational reasons.
Example:
A multinational corporation decides to sell its subsidiary that operates in the retail sector to concentrate on its primary business in technology. The sale is completed for $100 million. On the date of the sale, the subsidiary has assets valued at $80 million and liabilities of $20 million. The parent company will recognize a gain of $40 million ($100 million sale price – $60 million net assets) in its income statement from the disposal of the subsidiary.