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IAS 28Case studies (Step 3 of 5)

Practical case

Step 3 of 5
File · Progressive casePath L1 → L4L1 · Fundamental

Valmora and Tessaro: from the acquisition of 25% to the loss of influence

Valmora Holding SA, a fictitious company, investor; Tessaro SA, a fictitious company, investee; IFRS consolidated statements, year end 31 December, amounts in euros. The facts and amounts are case data; conclusions come from the standard or from judgement and are flagged as such; no rounding is needed (whole amounts, case convention); the counterparts of the entries are case conventions; Tessaro's profit is spread evenly over the year (pedagogical hypothesis).

2 documents4 tasks
0 / 4 tasks completed
Period
1 January N
Standards
IAS 28 — Investments in Associates and Joint Ventures
Levels
0 / 4 levels validated
Current level
L1 · Guided≈ 90 min
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

L1 · Guided · 1 January N

Level 1: a 25% investment in Tessaro

Progressive case in four levels: (1) on 1 January N, Valmora acquires 25% of Tessaro: classification, goodwill; (2) year N: equity method, additional depreciation, other comprehensive income, dividends; (3) year N+1: downstream transaction, elimination, impairment evidence and test of the investment; (4) year N+2: losses beyond the interest, liability, then loss of significant influence in N+3.

Valmora Holding SA has just acquired shares of Tessaro SA. The relationship must be classified (the standard is announced at this level), the indicators of influence checked and the goodwill on the investment calculated.

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 / 2 consulted) · to do
  • Answer the questions of the level (0 / 4) · to do
  • Validate the level, then read the conclusion · to do

Events

The file, period by period

2 / 6 stages reached

  1. Context · Dated fact of the file

    Valmora and Tessaro: from the acquisition of 25% to the loss of influence

    Valmora Holding SA, a fictitious company, investor; Tessaro SA, a fictitious company, investee; IFRS consolidated statements, year end 31 December, amounts in euros. The facts and amounts are case data; conclusions come from the standard or from judgement and are flagged as such; no rounding is needed (whole amounts, case convention); the counterparts of the entries are case conventions; Tessaro's profit is spread evenly over the year (pedagogical hypothesis).

  2. Initial event · L11 January N · Current stage

    Level 1: a 25% investment in Tessaro

    Valmora Holding SA has just acquired shares of Tessaro SA. The relationship must be classified (the standard is announced at this level), the indicators of influence checked and the goodwill on the investment calculated.

    Pieces added

    • Exhibit 1: the acquisition and governance (case data)
    • Exhibit 2: Tessaro's net assets at 1 January N (case data)

  3. New period · L2Year N · Upcoming: unlocks after the current stage

    Upcoming stage

  4. New period · L3Year N+1 · Upcoming: unlocks after the current stage

    Upcoming stage

  5. New period · L4Years N+2 and N+3 · Upcoming: unlocks after the current stage

    Upcoming stage

  6. Conclusion · Upcoming: unlocks after the current stage

    Upcoming stage

Documents

Case documents

2 documents to work from at this level.

Document 1Supporting document

Exhibit 1: the acquisition and governance (case data)

ItemDatum
Acquisition date1 January N
Voting rights acquired by Valmora25%
Price paid, in cash€1,650,000
Other investorHolds 55% of the voting rights
Tessaro's board of directors7 members, 1 of whom appointed by Valmora
Business relationsValmora supplies Tessaro with essential technical information and material supply contracts

Data

Facts of the file

Entity
Valmora Holding SA, a fictitious company, investor; Tessaro SA, a fictitious company, investee; IFRS consolidated statements, year end 31 December, amounts in euros. The facts and amounts are case data; conclusions come from the standard or from judgement and are flagged as such; no rounding is needed (whole amounts, case convention); the counterparts of the entries are case conventions; Tessaro's profit is spread evenly over the year (pedagogical hypothesis).
Period
1 January N
Current level
L1 · Guided
Standards
IAS 28 — Investments in Associates and Joint Ventures

Pieces carried over from earlier levels

First level: all the data is in the brief and the pieces of this level.

Questions

4 parts to answer, marked when you submit the level.

  • Information to identify2
  • Calculations1
  • Questions1

Information to identify

Find the useful facts in the pieces before concluding.

Part 1 · Multiple choice · Recognition

How should Valmora's investment in Tessaro be classified at acquisition?

3 more questions will appear once the current question is complete.

Complete the question to continue.

Workspace

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

Saved on this device only; never graded.

Conclusion

Answer every part to submit the level and see the conclusion.

Normative references

  • IAS 28 §5
  • IAS 28 §32
  • IAS 28 §28
  • IAS 28 §38
  • IAS 28 §40
  • IAS 28 §41A
  • IAS 28 §42
  • IAS 28 §22
  • IAS 28
  • IAS 28 §6
  • IAS 28 §10
  • IAS 28 §39