Cases

Practical case

Professional fileIFRS 10L4 · Expert

Group file: control, consolidation and non-controlling interests, change in ownership without loss of control and loss of control with a retained interest (IFRS 10)

7 documents31 tasks≈ 300 min

0 / 38 items completed

Standards: IFRS 10 — Consolidated Financial Statements

Assistance levelFree workspace · autonomous situation

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File documents

7 documents: open each one to read it.

Document 1 of 7

0 / 7 analysed · no point to review

Document 1Memo

Group profile and file conventions

Brelvane Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. File conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IFRS 10): non-controlling interests are measured at their share of identifiable net assets, with no goodwill; the sale of goods to Ardoval is a sale from the parent to its subsidiary, the elimination of unrealised profit being borne by the owners of the parent; the preference shares are classified in equity; goodwill and other comprehensive income are split pro rata to the interest changed; no tax; no transaction costs; the entries are illustrative. Control is a matter of judgement, with no threshold imposed by the standard.

Key data from the documents

The figures of the documents, gathered for your work.

Item	Value	Found in
Brelvane’s voting rights in Tolvane	41%
Assets of Fonds Marlis	€200,000,000.00
Management fee rate	0.8%
Ardoval’s profit	€400,000.00
Annual cumulative dividend of the preference shares	€30,000.00
Third parties’ share of Ardoval’s ordinary shares	25%
Ardoval’s non-controlling interests at the start	€900,000.00
Ordinary dividends paid to third parties	€20,000.00
Inventory bought from Brelvane still held, at transfer price	€200,000.00
Brelvane’s profit margin	25%
Ardoval’s payable to Brelvane	€90,000.00
Brivet’s loss before harmonisation	€300,000.00
Policy adjustment on Brivet’s inventory	€20,000.00
Third parties’ share of Brivet	35%
Brivet’s non-controlling interests at the start	€40,000.00
Price paid for the Cavelle interest	€260,000.00
Carrying amount of Cavelle’s non-controlling interests	€800,000.00
Proportion of the non-controlling interests acquired (10 points out of 40)	25%
Consideration received for the 50 points sold	€2,100,000.00
Fair value of the retained 30 % interest	€1,500,000.00
Carrying amount of the retained 30 % share	€1,290,000.00
Sevrane’s assets excluding goodwill	€6,000,000.00
Sevrane’s goodwill	€500,000.00
Sevrane’s liabilities	€2,200,000.00
Sevrane’s non-controlling interests	€900,000.00
Accumulated translation difference (reclassifiable)	€90,000.00
Accumulated revaluation reserve (not reclassifiable)	€30,000.00
Group IT budget	€150,000.00
Average attendance at Tolvane’s meetings	50%

Sorting the information

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

Part 1 · Classification · Analysis

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Group profile and file conventions
Tolvane SA and Fonds Marlis: voting rights, management and remuneration
Ardoval SA and Brivet SARL: profits, third parties and intragroup transactions
Cavelle SA: purchase from third parties
Sevrane SA: sale with loss of control
Group IT budget
Attendance record of Tolvane’s meetings

Relevant to the treatment0

No effect0

Work programme

Organise your work freely: deal with each point, then argue your conclusion.

Task 1Analysis
Draw up the file plan: entities, consolidation questions, standards and judgements to document.
Your written answer
Task 2Analysis
Tolvane: compute the weight of Brelvane’s voting rights in the votes cast (average attendance of 50 %).
Calculator
Calculation
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Part 1 · Calculation
Tolvane: compute the weight of Brelvane’s voting rights in the votes cast (average attendance of 50 %).
Weight of Brelvane’s votes in the votes cast (41 % ÷ 50 %)
%
Checks
0 / 1 step entered
Amounts readable
Your written answer
Task 3Professional judgement
Tolvane: does Brelvane have power without holding a majority, and does it control Tolvane?
Your written answer
Task 4Analysis
Fonds Marlis: compute the annual management fee of Brelvane Gestion.
Calculator
Calculation
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Part 1 · Calculation
Fonds Marlis: compute the annual management fee of Brelvane Gestion.
Annual management fee of Brelvane Gestion (0.8 % of the fund’s assets)
€
Checks
0 / 1 step entered
Amounts readable
Your written answer
Task 5Professional judgement
Fonds Marlis: does Brelvane Gestion act as principal or agent, and does Brelvane control the fund?
Your written answer
Task 6Calculation
Ardoval: compute the unrealised profit on the remaining inventory to eliminate.
Calculator
Calculation
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Part 1 · Calculation
Ardoval: compute the unrealised profit on the remaining inventory to eliminate.
Unrealised profit eliminated (200,000 × 25 %)
€
Checks
0 / 1 step entered
Amounts readable
Task 7Calculation
Ardoval: compute the profit attributable to ordinary shares after the cumulative preference dividend, declared or not.
Calculator
Calculation
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Part 1 · Calculation
Ardoval: compute the profit attributable to ordinary shares after the cumulative preference dividend, declared or not.
Profit attributable to Ardoval’s ordinary shares (400,000 − 30,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 8Calculation
Ardoval: compute the third parties’ share of the profit of the ordinary shares, then their total share of profit with the preference shares.
Calculator
Calculation
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Part 1 · Calculation
Ardoval: compute the third parties’ share of the profit of the ordinary shares, then their total share of profit with the preference shares.
Third parties’ share of the profit of the ordinary shares (25 % × 370,000)
€
Total share of Ardoval’s profit attributed to third parties (92,500 + 30,000)
€
Checks
0 / 2 steps entered
Amounts readable
Result: Total share of Ardoval’s profit attributed to third parties (92,500 + 30,000)
Task 9Calculation
Ardoval: compute the closing balance of non-controlling interests.
Calculator
Calculation
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Part 1 · Calculation
Ardoval: compute the closing balance of non-controlling interests.
Closing balance of Ardoval’s non-controlling interests (900,000 + 92,500 + 30,000 − 20,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 10Analysis
Brivet: harmonise the inventory policy and compute the loss retained for consolidation.
Calculator
Calculation
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Part 1 · Calculation
Brivet: harmonise the inventory policy and compute the loss retained for consolidation.
Brivet’s loss retained on consolidation (300,000 + 20,000)
€
Checks
0 / 1 step entered
Amounts readable
Your written answer
Task 11Calculation
Brivet: compute the share of the loss attributed to third parties on the current percentage.
Calculator
Calculation
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Part 1 · Calculation
Brivet: compute the share of the loss attributed to third parties on the current percentage.
Share of the loss attributed to Brivet’s third parties (35 % × 320,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 12Analysis
Brivet: the loss attributed to third parties exceeds their opening balance. What happens to their balance and is the loss capped?
Calculator
Calculation
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Part 1 · Calculation
Brivet: the loss attributed to third parties exceeds their opening balance. What happens to their balance and is the loss capped?
Deficit balance of Brivet’s third parties (112,000 − 40,000)
€
Checks
0 / 1 step entered
Amounts readable
Your written answer
Task 13Calculation
Cavelle: compute the carrying amount of the non-controlling interests acquired.
Calculator
Calculation
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Part 1 · Calculation
Cavelle: compute the carrying amount of the non-controlling interests acquired.
Carrying amount of the non-controlling interests acquired (25 % × 800,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 14Calculation
Cavelle: compute the difference to charge to the equity of the owners of the parent.
Calculator
Calculation
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Part 1 · Calculation
Cavelle: compute the difference to charge to the equity of the owners of the parent.
Difference charged to the owners’ equity (260,000 − 200,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 15Professional judgement
Does the standard say how to split goodwill, accumulated other comprehensive income and transaction costs on the purchase of Cavelle? Which policy does the group adopt?
Your written answer
Task 16Professional judgement
Sevrane: does the sale under a single contract cause a loss of control, and on which date?
Your written answer
Task 17Calculation
Sevrane: compute the carrying amount of the net assets derecognised (goodwill included).
Calculator
Calculation
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Part 1 · Calculation
Sevrane: compute the carrying amount of the net assets derecognised (goodwill included).
Sevrane’s net assets derecognised (6,000,000 + 500,000 − 2,200,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 18Calculation
Sevrane: compute the gain on loss of control before reclassification of other comprehensive income.
Calculator
Calculation
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Part 1 · Calculation
Sevrane: compute the gain on loss of control before reclassification of other comprehensive income.
Gain on loss of control of Sevrane before reclassification (2,100,000 + 1,500,000 + 900,000 − 4,300,000)
€
Checks
0 / 1 step entered
Amounts readable
Task 19Analysis
Sevrane: identify the part of the gain relating to the remeasurement of the retained interest to fair value.
Calculator
Calculation
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Part 1 · Calculation
Sevrane: identify the part of the gain relating to the remeasurement of the retained interest to fair value.
Part of the gain relating to the remeasurement of the retained interest (1,500,000 − 1,290,000)
€
Checks
0 / 1 step entered
Amounts readable
Your written answer
Task 20Calculation
Sevrane: compute the amount of other comprehensive income reclassified to profit or loss and state what happens to the non-reclassifiable reserve.
Calculator
Calculation
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Part 1 · Calculation
Sevrane: compute the amount of other comprehensive income reclassified to profit or loss and state what happens to the non-reclassifiable reserve.
Other comprehensive income reclassified to profit or loss (translation difference)
€
Non-reclassifiable reserve transferred within equity, with no effect on profit or loss
€
Checks
0 / 2 steps entered
Amounts readable
Result: Non-reclassifiable reserve transferred within equity, with no effect on profit or loss
Task 21Analysis
Sevrane: how is the retained 30 % interest treated after the loss of control, and which value is the starting point for its later accounting as an associate?
Your written answer
Task 22Journal entries
Record the entry eliminating Ardoval’s payable to Brelvane.
Calculator
Calculation
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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.
Line 1
Line 2
TotalsDebit0Credit0
Task 23Journal entries
Record the entry eliminating the unrealised profit in inventory.
Calculator
Calculation
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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.
Line 1
Line 2
TotalsDebit0Credit0
Task 24Journal entries
Record the entry attributing Ardoval’s profit to third parties.
Calculator
Calculation
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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.
Line 1
Line 2
TotalsDebit0Credit0
Task 25Journal entries
Record the entry attributing Brivet’s loss to third parties.
Calculator
Calculation
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.
Line 1
Line 2
TotalsDebit0Credit0
Task 26Journal entries
Record the purchase of the Cavelle points from third parties.
Calculator
Calculation
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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.
Line 1
Line 2
Line 3
TotalsDebit0Credit0
Task 27Journal entries
Record the derecognition of Sevrane with a gain and the retained interest at fair value.
Calculator
Calculation
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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.
Line 1
Line 2
Line 3
Line 4
Line 5
Line 6
Line 7
TotalsDebit0Credit0
Task 28Journal entries
Record the reclassification to profit or loss of Sevrane’s other comprehensive income.
Calculator
Calculation
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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.
Line 1
Line 2
TotalsDebit0Credit0
Task 29Effects on the financial statements
What is the cumulative effect of the seven entries on the consolidated financial statements?
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
IncreaseDecreaseNo effect
Profit or loss
IncreaseDecreaseNo effect
Other comprehensive income
IncreaseDecreaseNo effect
Equity
IncreaseDecreaseNo effect
Calculator
Calculation
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Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Amount of the effect — Financial position (balance sheet)
€
Amount of the effect — Profit or loss
€
Amount of the effect — Other comprehensive income
€
Amount of the effect — Equity
€
Checks
0 / 4 steps entered
Amounts readable
Result: Amount of the effect — Equity
Task 30Analysis
Which points remain to be dealt with by the reviewer?
Your written answer
Task 31Conclusion
Write the conclusion of the file.
Your written answer

File review

Points raised during the review of this file: read them as the preparer would.

Review notes

BlockingResolvedReviewer note (blocking): support the weight of Tolvane’s votes with the attendance record
Non-blockingOpenReviewer note: specify the effect of the final valuation of the retained interest on the gain

Information requests

ObtainedRequest to Tolvane’s secretariat: average attendance at meetings
Assumption documentedDocumented assumption: provisional valuation of the retained interest in Sevrane

Completion checklist

Control of Tolvane and Fonds Marlis documentedDone
Eliminations and attribution to third parties reconciled to the dataDone
Purchase from third parties treated in equityDone
Loss of control, gain and reclassification computedDone
Balanced entries and effect on the financial statements establishedDone
Final valuation of the retained interest to be obtained from the independent valuerTo review

Working notes

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

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Submission and solution

Complete every item of the file to submit it (0 / 38).

Document this file

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

Normative references

IFRS 10 §7
IFRS 10 §B22
IFRS 10 §B41
IFRS 10 §B58
IFRS 10 §B94
IFRS 10 §23
IFRS 10 §B96
IFRS 10 §25
IFRS 10 §B98

Case brief

Situation

Documents

File documents

Data

Key data from the documents

Sorting the information

To sort7

Relevant to the treatment0

No effect0

Workspace

Work programme

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File review

Review notes

Information requests

Completion checklist

Conclusion

Submission and solution