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IAS 28Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 28L1 · Fundamental

Significant influence: rebuttable 20 % presumption, indicators, definitions and basic equity method (cost, share, dividends)

4 documents12 tasks≈ 60 min
0 / 16 items completed
Standards
IAS 28 — Investments in Associates and Joint Ventures
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Calvane Group SA (fictitious entity) holds interests in Brissan (30 % counting its subsidiary), Tolbec (15 %) and Mirel (18 %). You prepare the consolidation department’s note: which are associates, and how to account for Brissan in 20X6?

Your assignment

For each entity, conclude on significant influence by comparing direct and indirect voting rights with the 20 % presumption and examining the indicators; recall the definitions; for Brissan, record the cost, compute the share of profit and the closing carrying amount, record the entries for cost, share and dividend, present their 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 / 4 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 16) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

4 documents: open each one to read it.

Document 1Memo

Group profile and case conventions

Calvane Group SA (fictitious entity) closes its accounts on 31 December 20X6. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IAS 28): the cost of Brissan equals the investor’s share of the net fair values at acquisition, so there is neither goodwill nor bargain income; Brissan applies Calvane’s policies, has no other comprehensive income in 20X6 and its fair values are those of independent valuations; the entries are illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Voting rights held directly in Brissan22%
Voting rights held by Calvane Services8%
Cost of the investment in Brissan€900,000.00
Fair value of Brissan’s identifiable net assets€3,000,000.00
Brissan’s profit for 20X6€400,000.00
Dividends distributed by Brissan€100,000.00
Calvane’s share of Brissan30%
Calvane’s voting rights in Tolbec15%
Calvane’s voting rights in Mirel18%

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 sort4

  • Group profile and case conventions

  • Brissan SA: acquisition of the interest

  • Tolbec SAS: 15 % interest

  • Mirel SA: 18 % interest

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      12 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

        Brissan: add up the direct and indirect voting rights, apply the 20 % presumption and conclude on significant influence.

        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

        Brissan: add up the direct and indirect voting rights, apply the 20 % presumption and conclude on significant influence.

        1. %

        Checks

        • 0 / 1 step entered
        • Amounts readable

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

      2. Task 2Analysis

        Tolbec: at 15 %, does significant influence exist? Examine the indicators.

        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

        Mirel: at 18 %, is the presumption of no influence rebutted? Examine the indicators.

        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

        What are an associate, significant influence and the equity method, and which of the three entities is accounted for under the equity method?

        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.

      5. Task 5Journal entries

        Brissan: record the initial investment at cost.

        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

      6. Task 6Calculation

        Brissan: compute Calvane’s share of profit.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

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

        Part 1 · Calculation

        Brissan: compute Calvane’s share of profit.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Journal entries

        Brissan: record the share of profit.

        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

      8. Task 8Analysis

        Brissan: what is Calvane’s share of the dividends and how to account for it?

        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

        Brissan: what is Calvane’s share of the dividends and how to account for it?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

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

      9. Task 9Journal entries

        Brissan: record the dividend received.

        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

      10. Task 10Calculation

        Brissan: compute the closing carrying amount of the investment.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

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

        Part 1 · Calculation

        Brissan: compute the closing carrying amount of the investment.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Effects on the financial statements

        What is the cumulative effect of the three entries on the 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. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      12. Task 12Conclusion

        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 / 16).

      Document this file

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

      Normative references

      • IAS 28 §5
      • IAS 28 §32