Classify the transaction by the change in control
In consolidated statements, a parent's cash purchase of additional shares from non-controlling shareholders, or cash sale of shares while retaining control, is classified as a financing cash flow under Ind AS 7 paragraphs 42A–42B, subject to the investment-entity exception in paragraph 42A. Where control is obtained or lost, paragraphs 39–42 generally classify the separate aggregate cash flows as investing and report the cash consideration net of cash and cash equivalents acquired or disposed of. Assess control under Ind AS 110: the investor must have power over the investee, exposure or rights to variable returns, and the ability to use its power to affect those returns.
Read the applicable text: MCA Ind AS 7, paragraphs 39–43 MCA Ind AS 110, control and changes in ownership interests.
Document what actually changed
Prepare a before-and-after control memo with substantive voting and other rights. Then reconcile share counts, ownership percentages, cash paid or received, unpaid consideration and amounts posted directly in equity. A change in ownership without loss of control is an equity transaction under Ind AS 110 paragraph 23. Under B96, adjust the controlling and non-controlling interests for their changed relative interests and recognise the difference between the non-controlling interest adjustment and the fair value of consideration directly in equity attributable to the parent’s owners. The cash flow statement records only the actual movement of cash and cash equivalents. Assess directly related items with their own facts rather than silently netting them against sale proceeds.
Distinguish group and separate cash records
A transfer between consolidated group entities is eliminated in the group statement. Cash exchanged with external non-controlling holders remains a group flow. The parent's separate cash flow statement is a separate reporting question; do not copy a consolidation classification without reviewing the applicable requirements.
Check the exception and disclosures
Paragraph 42A excepts a subsidiary held by an investment entity and required to be measured at fair value through profit or loss. Assess that case separately. For transactions obtaining or losing control, apply paragraphs 40–40A to the disclosure analysis, including the investment-entity exception to specified disclosures. Exclude non-cash investing and financing transactions from cash flows and disclose relevant information elsewhere under paragraph 43.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Purchase of further equity
The parent increases ownership from 70% to 85% by paying external holders ₹48 lakh and retains control. The increase is 15 percentage points and financing outflow is ₹48 lakh.
Illustrative example 2: Partial sale, control retained
The parent sells 12 percentage points of its 80% holding for ₹36 lakh and keeps control. Its holding is 68% and the cash is a ₹36 lakh financing inflow.
Illustrative example 3: Non-cash consideration
An increase from 60% to 75% is paid with ₹25 lakh cash and instruments worth ₹15 lakh. The ₹40 lakh total consideration produces ₹25 lakh financing cash outflow and ₹15 lakh non-cash consideration for separate review.
Illustrative example 4: Loss of control
A sale with loss of control yields ₹90 lakh cash and removes a subsidiary with ₹14 lakh cash and cash equivalents. The investing cash inflow is ₹76 lakh on the stated facts.
Illustrative example 5: Obtaining control
Cash paid is ₹125 lakh and acquired cash and cash equivalents are ₹20 lakh. The investing cash outflow on obtaining control is ₹105 lakh.
Illustrative example 6: Internal and external legs
A consolidated entity pays another group entity ₹30 lakh on an internal transfer and later buys additional shares from external holders for ₹12 lakh while control continues. Eliminate the ₹30 lakh group leg and report ₹12 lakh financing outflow.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | List all changes in stakes | Share movement register |
| 2 | Identify the reporting scope | Group and separate accounts |
| 3 | Establish control before the deal | Governance and voting rights |
| 4 | Establish control after the deal | Updated agreement and control memo |
| 5 | Identify external counterparties | Transaction schedule |
| 6 | Verify the cash amount and date | Bank and settlement records |
| 7 | Separate non-cash consideration | Equity and consideration bridge |
| 8 | Identify subsidiary cash if control changed | Cash and cash equivalent ledger |
| 9 | Apply exceptions and disclosures | Ind AS 7 and investment-entity memo |
| 10 | Reconcile to the statement | Cash flow, journals and sign-off |
Sixteen practitioner FAQs
1. Does crossing an ownership percentage always determine control?
No. Apply the Ind AS 110 control assessment.
2. What is a purchase from non-controlling holders with control retained?
A financing cash outflow in the consolidated statement when paragraph 42A applies.
3. What about a disposal with control retained?
A financing inflow for cash received externally when paragraph 42A applies.
4. Do I deduct the subsidiary's cash for these retained-control flows?
No; the net-cash presentation cited in paragraph 42 relates to obtaining or losing control.
5. What if a sale actually causes loss of control?
Apply the investing presentation and the appropriate net-of-cash calculation.
6. Do I use sale profit as the cash amount?
No. Reconcile actual consideration and cash flows.
7. What if consideration is unpaid at close?
Exclude the unpaid amount from current cash flows.
8. Can issuing shares be a cash outflow?
A non-cash issuance does not itself enter cash flows.
9. Are group transfers reported?
Eliminate cash movements within the consolidated reporting group.
10. Is there an investment-entity exception?
Yes. Check paragraph 42A for a qualifying fair-value subsidiary.
11. Can control change without cash consideration?
Yes; separate the control event from the actual cash movement.
12. Should acquired balances include restricted deposits?
First determine whether amounts qualify as cash and cash equivalents.
13. Do investing acquisitions and disposals cancel in presentation?
Present the effects of obtaining and losing control separately under paragraph 41.
14. Can the equity movement equal the cash amount by coincidence?
Yes, but independently reconcile both measures.
15. Should the separate parent statement copy the same line?
Review the separate statement on its own facts.
16. What supports the final classification?
Control conclusions, settlement proof, ownership bridge and disclosure review.
Official sources
MCA Ind AS 7, paragraphs 39–43 MCA Ind AS 110, control and changes in ownership interests