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IAS 28Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IAS 28L2 · Intermediate

Documents

Group profile and case conventions

Memo

Group profile and case conventions

Merlane Group SA (fictitious entity), a listed company, closes its accounts on 31 December 20X6 and accounts for its associates under the equity method. Case conventions: amounts in EUR; fair values are those of independent valuations (case data); case convention (pedagogical assumption, not attributed to IAS 28): additional depreciation, policy and event adjustments are case data; the associate’s adjusted profit is computed by hand, no multi-line schedule being modelled; lives are case data; the annual additional depreciation is taken over 12 months for simplicity, even where the statements used end before the year-end; the entries are illustrative.

Equity method: cost, goodwill or bargain income, fair value adjustment, uniform policies, share of profit and of other comprehensive income, dividends and closing carrying amount: Dolvane — equity method

Equity method with goodwill, fair value adjustment, uniform policies, potential voting rights and capped losses

6 documents9 sections to document
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Guided mode

Section 1 of 9

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IAS 28 workpaper
Level
Intermediate
Estimated time
≈ 75 min
Progress
0 / 5 steps done (review excluded)

Context

Merlane Group SA (fictitious entity), a listed company, acquired 25 % of Dolvane with goodwill and a fair value excess, 40 % of Pertrel on favourable terms, and bears the loss of Wexler (30 %); it also holds convertible bonds of Yaltek, and its venture capital subsidiary holds 30 % of Zorlan. You prepare the 20X6 equity method file.

Assignment

Equity method for Dolvane, acquisition of Pertrel and Wexler losses

Purpose of the workpaper

List the cost, the share of the fair value of net assets at acquisition, the adjusted profit (uniform policies, extra depreciation of the fair value excess), other comprehensive income and dividends, then reconcile the opening carrying amount with the closing one. Percentages, fair values and lives are case data; the adjusted profit of the associate is computed by hand (no multi-line schedule is modelled).

Questions of the file covered by this workpaper

  • Dolvane: compute Merlane’s share of the fair value of the identifiable net assets.
  • Dolvane: compute the difference between the cost and that share and state its treatment.
  • Dolvane: compute the extra annual depreciation relating to the fair value excess.
  • Dolvane: deal with the closing-date gap and the inventory policy difference, then compute the adjusted profit used for the share.
  • Dolvane: compute the share of the adjusted profit.
  • Dolvane: compute the share of other comprehensive income.
  • Dolvane: what dividend does Merlane receive and how is it accounted for?
  • Dolvane: compute the closing carrying amount of the investment.
  • Pertrel: compute Merlane’s share of the fair value of the identifiable net assets.
  • Pertrel: compute the difference between the cost and the share and state its treatment.
  • Wexler: compute the share of losses to recognise and the unrecognised part.
  • Pertrel: record the acquisition with the bargain income.
  • Dolvane: record the share of profit.
  • Dolvane: record the share of other comprehensive income.
  • Dolvane: record the dividend received.
  • Wexler: record the share of losses within the investor’s interest.

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