1.3 Common-Control Transactions

In a common-control transaction, the net assets are derecognized by the transferring entity and recognized by the receiving entity at the historical cost of the ultimate parent of the entities under common control. Any difference between the proceeds transferred or received and the carrying amounts of the net assets is recognized in equity in the transferring and receiving entities’ separate financial statements and eliminated in consolidation. ASC 805-50 also provides guidance addressing whether the receiving entity should report the net assets received prospectively from the date of the transfer or retrospectively for all periods presented. ASC 805-50 does not specifically address the reporting by the transferring entity; however, the transferring entity usually presents the transfer as a disposal on the date of the transfer in its separate financial statements. Appendix B of this publication addresses common-control transactions.