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Practical caseIFRS 10L1 · Fundamental

Control of an entity: power, substantive and protective rights, variable returns, link, parent exemption and first consolidation eliminations

5 documents8 tasks≈ 45 min
0 / 11 items completed
Standards
IFRS 10 — Consolidated Financial Statements
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Alvera Group SE (fictitious entity) is preparing its 20X6 consolidated accounts. Its intermediate subsidiary Marvane Holding SA holds 60 % of Ostrel SAS and 25 % of Pentrix SARL. You write the consolidation department’s note: who must consolidate what, and what to do with Marvane’s loan to Ostrel?

Your assignment

Check whether Marvane can be exempted from presenting consolidated statements; conclude on control of Ostrel and Pentrix by analysing power, variable returns and the link; compute the investment eliminated and Ostrel’s non-controlling interests; record the entry eliminating the intragroup loan, present its effect and conclude. One document is not useful.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Fundamental level: the method, help and references are shown.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 5 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 11) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

5 documents: open each one to read it.

Document 1Memo

Group profile and case conventions

Alvera Group SE (fictitious entity) publishes IFRS consolidated financial statements at 31 December 20X6 and owns all of Marvane Holding SA, an unlisted company. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IFRS 10): control is assessed at 31 December 20X6; Marvane’s investment in Ostrel is carried at 60 % of Ostrel’s equity, with no goodwill or fair value difference; Ostrel’s non-controlling interests equal 40 % of its equity; the entry requested is illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Alvera’s share in Marvane100%
Marvane’s voting rights in Ostrel60%
Ostrel’s equity€1,000,000.00
Marvane’s investment in Ostrel€600,000.00
Marvane’s loan to Ostrel€150,000.00
Marvane’s voting rights in Pentrix25%
Marvane training budget€45,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort5

  • Group profile and case conventions

  • Marvane Holding SA: status within the group

  • Ostrel SAS: Marvane’s rights and returns

  • Pentrix SARL: Marvane’s rights

  • Marvane training plan

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      8 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        Must Marvane Holding present consolidated financial statements? Check each condition of the exemption.

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      2. Task 2Analysis

        Ostrel: identify the relevant activities, the existing rights and whether they are substantive, the variable returns and the link, then conclude on control.

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      3. Task 3Analysis

        Pentrix: do Marvane’s veto rights give it power? Conclude on control.

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      4. Task 4Analysis

        Ostrel: compute Marvane’s investment eliminated against Ostrel’s equity and the amount of non-controlling interests to present in consolidated equity.

        Set out the facts, the question raised, then your analysis.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Ostrel: compute Marvane’s investment eliminated against Ostrel’s equity and the amount of non-controlling interests to present in consolidated equity.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Ostrel’s non-controlling interests (40 % of its equity)

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      5. Task 5Analysis

        Which intragroup balance must be eliminated when consolidating Ostrel?

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      6. Task 6Journal entries

        Record the consolidation entry that eliminates the intragroup balance.

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      7. Task 7Effects on the financial statements

        What is the effect of the entry on the consolidated financial statements?

        For each financial statement, state the line affected, the direction and the amount.

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Conclusion

        Write the conclusion.

        Write a conclusion that cites the facts and the treatment chosen.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 11).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 10 §7
      • IFRS 10 §4
      • IFRS 10 §B22