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Professional fileIFRS 11L4 · Expert

Joint arrangement file: joint control, classification, accounting of the joint operator or joint venturer and separate financial statements (IFRS 11)

7 documents20 tasks≈ 300 min
0 / 23 items completed
Standards
IFRS 11 — Joint Arrangements
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Verlance Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. The preparer builds the file of the joint arrangements of the year, submitted to a review check: the Marlaix depot (by contract), the company Hestial, the sale of a machine to Marlaix and the Belcor joint venture. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Your assignment

Build the plan of the file; document the joint control and the classification of Marlaix and Hestial; compute the shares of Verlance in Marlaix; deal with the sale of the machine; apply the equity method to Belcor; decide the treatment in the separate statements; record the five entries, present their effect, deal with the review points and conclude. One document is not useful.

You prepare a complete file: documents, work, entries and conclusion, then compare your work with the solution and the review points of the file.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

7 documents: open each one to read it.

Document 1Memo

Group profile and file conventions

Verlance Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. The preparer builds the file, submitted to a review. File conventions: amounts in EUR; file convention (pedagogical assumption, not attributed to IFRS 11): the machine sold to Marlaix is neither a business nor a subsidiary and no repurchase option exists; the joint liabilities follow the shares of the items they finance; the separate statements apply cost to the interests in joint ventures; the entries are illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Cost of the Marlaix depot€5,000,000.00
Share of Verlance40%
Share of Pelmar30%
Share of Dorine20%
Share of Sarvel (without a right of consent)10%
Joint expenses of the period€750,000.00
Selling price of the machine€700,000.00
Carrying amount of the machine€500,000.00
Total gain on the sale€200,000.00
Share of the other parties in Marlaix60%
Cash corresponding to the other parties' share€420,000.00
Carrying amount corresponding to the other parties' share€300,000.00
Profit of Belcor€500,000.00
Share of Verlance in Belcor30%
Opening carrying amount of the investment€800,000.00
Dividends received from Belcor€45,000.00
Closing carrying amount reported€905,000.00
Training plan€38,000.00

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 sort7

  • Group profile and file conventions

  • Marlaix depot contract

  • Hestial SA: shareholders' agreement and offtake contracts

  • Sale of the machine to Marlaix

  • Belcor SAS: extract of the accounts

  • Group training plan

  • Legal opinion on the purchase commitments of Hestial

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

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

      1. Task 1Analysis

        Marlaix: which parties have joint control, and what is their combined share?

        Calculator

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

        Part 1 · Calculation

        Marlaix: which parties have joint control, and what is their combined share?

        1. %

        Checks

        • 0 / 1 step entered
        • Amounts readable

      2. Task 2Professional judgement

        Marlaix: is there a separate vehicle, and what is the type of arrangement?

      3. Task 3Analysis

        Hestial: what do the legal form and the terms of the agreement suggest?

      4. Task 4Professional judgement

        Hestial: do the other facts and circumstances, in view of the legal opinion, change the classification?

      5. Task 5Calculation

        Marlaix: compute the share of Verlance in the depot.

        Calculator

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

        Part 1 · Calculation

        Marlaix: compute the share of Verlance in the depot.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Marlaix: compute the share of Verlance in the joint expenses.

        Calculator

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

        Part 1 · Calculation

        Marlaix: compute the share of Verlance in the joint expenses.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Calculation

        Sale of the machine: compute the gain recognised.

        Calculator

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

        Part 1 · Calculation

        Sale of the machine: compute the gain recognised.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Sale of the machine: compute the gain not recognised.

        Calculator

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

        Part 1 · Calculation

        Sale of the machine: compute the gain not recognised.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Belcor: compute the share of profit of Verlance.

        Calculator

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

        Part 1 · Calculation

        Belcor: compute the share of profit of Verlance.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Calculation

        Belcor: compute the closing carrying amount of the investment.

        Calculator

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

        Part 1 · Calculation

        Belcor: compute the closing carrying amount of the investment.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Analysis

        Which standard applies to each Marlaix item recognised by Verlance?

      12. Task 12Professional judgement

        Separate statements: how to treat Marlaix and Belcor, and on what basis?

      13. Task 13Journal entries

        Record the share of the Marlaix depot.

        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

      14. Task 14Journal entries

        Record the share of the joint expenses.

        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

      15. Task 15Journal entries

        Record the sale of the machine, limited to the share of the other parties.

        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

        3. Line 3

        TotalsDebit0Credit0

      16. Task 16Journal entries

        Belcor: record the share of profit.

        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

      17. Task 17Journal entries

        Belcor: record the dividend received.

        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

      18. Task 18Effects on the financial statements

        What is the cumulative effect of the five entries on the consolidated financial statements?

        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. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      19. Task 19Analysis

        Which IFRS 12 disclosures are to be prepared on these joint arrangements?

      20. Task 20Conclusion

        Write the conclusion of the file and deal with the review points.

      File review

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

      Review notes

      • BlockingResolvedReview point (blocking): support the enforceability of the purchase commitments of Hestial with a document
      • Non-blockingOpenReview point: specify the basis retained for the interest in Belcor in the separate statements

      Information requests

      • ObtainedRequest to legal counsel: enforceability of the purchase commitments of Hestial
      • Assumption documentedDocumented assumption: no repurchase option on the machine

      Completion checklist

      • Joint control of Marlaix and Hestial documentedDone
      • Classification established on enforceable rights and obligationsDone
      • Marlaix shares computed from the shares of the contractDone
      • Gain on the sale limited to the interests of the other partiesDone
      • Entries balanced and effect on the financial statements establishedDone
      • Basis of the interest in Belcor in the separate statements to be finalisedTo review

      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 / 23).

      Document this file

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

      Normative references

      • IFRS 11
      • IFRS 11 §B30
      • IFRS 11 §20
      • IFRS 11 §24
      • IFRS 11 §22
      • IFRS 11 §B34
      • IFRS 11 §26