In a restructuring under common control, the investment in subsidiary is usually transferred at its cost of investment by way of new issue of share. This will not be resulted in any accounting gain or loss in the original owner or current account balance. When transferor remained in the group after restructuring, the loss would be reflected in the group result on consolidatio.
In case of transfer of cost of investment at nominal value of $1. There would be a loss of investment due to restructuring in the transferor’s books. When transferor remained within the group.
In such case, it was truth that there was an accounting loss arose from lower than cost of investment being transferred due to inappropriate restructuring. It was fair to present the loss with disclosure. In this case, the reserve will only be the different between investment cost and share capital of subsidiary.
In contrast, it was truth that restructuring under common control should not have accounting gain or loss. It was fair not to present the loss on restructuring arose from inappropriate restructuring with disclosure. In this treatment, the reserve will comprise of two components, 1) loss on restructuring directly adjusted to reserve and 2) different between investment cost and share capital of subsidiary adjusted to reserve.
The reason for loss on restructuring charge to PL because it is transacted loss on restructuring, not a equity elimination entry on consolidation, therefore, no consolidation adjustment to reserve. Loss remains in PL.
The difference between cost of investment and share capital is an elimination of equity on consolidation. The difference is due to restructuring, not acquisition, therefore, adjust to reserve instead of Goodwill or PL for gain.
It also follows the principle that the group results are add up and would not be changed.