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IAS 28Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IAS 28L3 · Advanced

Documents

Group profile and case conventions

Memo

Group profile and case conventions

Merdane SA (fictitious entity) closes its accounts on 31 December 20X6 and accounts for Tavlin SA under the equity method. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IAS 28): margins, lives and policy adjustments are case data; the associate’s adjusted profit is computed by hand; the 2014 amendments on the contribution of land are not applied; the loss evidencing impairment is not eliminated; the entries are illustrative.

Eliminations with the associate: upstream and downstream transactions, losses evidencing impairment, contributions of non-monetary assets and deferred 2014 amendments

Upstream and downstream eliminations, losses evidencing impairment, contribution of assets and interaction with IFRS 11 joint ventures

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
Advanced
Estimated time
≈ 60 min
Progress
0 / 5 steps done (review excluded)

Context

Merdane SA (fictitious entity) accounts for Tavlin SA (30 %) under the equity method and trades with it in both directions, contributed land to it and holds 50 % of Joint Alpha. You prepare the 20X6 year-end eliminations and the note on their effect.

Assignment

Eliminations with Tavlin: upstream and downstream transactions, contribution and losses

Purpose of the workpaper

For each transaction with the associate, list the direction (upstream or downstream), the assets still held and the margin, eliminate the unrealised profit to the extent of the investor’s interest, and examine whether a loss evidences impairment and whether the contribution concerns a business. The interest, margins and amounts are case data; the 2014 amendments are not applied.

Questions of the file covered by this workpaper

  • Identify the direction of each transaction (upstream, downstream, contribution) and compute the unrealised profits in the assets still held.
  • Upstream transaction: compute the unrealised profit eliminated to the extent of Merdane’s interest.
  • Downstream transaction: compute the unrealised profit eliminated to the extent of Merdane’s interest.
  • Contribution of land: how is its gain treated? Compute the gain eliminated and place the 2014 amendments.
  • Do the losses on the sales of batches and equipment evidence impairment? What share is recognised for the upstream transaction?
  • Compute the carrying amount of the investment after eliminations and the share of profit recognised.
  • Record the elimination of unrealised profit on the upstream transaction.
  • Record the elimination of unrealised profit on the downstream transaction.
  • Record the elimination of the gain on the contribution of land.

Documents in the file

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