Document 1Contract
Acquisition agreement
Acquisition agreement: acquisition date 1 January 20X2; percentage acquired 80%; goodwill recognised on acquisition (IFRS 3 measurement, given) 480,000.
IAS 36 · Case studies (Step 3 of 5)
Case study
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Practical caseIAS 36L4 · Expert
Subsidiary with non-controlling interests: notional goodwill, loss and disclosures
5 documents7 tasks≈ 75 min
- Standards
- IAS 36 — Impairment of Assets
Assistance levelFree workspace · autonomous situation
- Method: withdrawn
- Checklist: withdrawn
- Hints: withdrawn
- Step-by-step work: withdrawn
Case brief
Situation
The Nordal group (a fictitious group) acquired 80% of Solaris Ibérica, which installs and operates solar power plants, on 1 January 20X2. Non-controlling interests were measured at their proportionate share of identifiable net assets (IFRS 3 option, given); the goodwill recognised, measured under IFRS 3, amounts to 480,000 (given). The 20X2 annual test showed no loss. You are preparing the test at 31 December 20X3 and the note to the consolidated financial statements.
Your assignment
Analyse the allocation of goodwill, perform the test of the Solaris unit taking the non-controlling interests into account, record the loss and prepare the disclosures. One document is not useful and one piece of information is missing.
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.
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
Events
Chronology of the file
- January 1 20X2Acquisition date · Dated fact of the file
Document 1
- December 31 20X3Date of the test · Dated fact of the file
Document 3
Documents
File documents
5 documents: open each one to read it.
Data
Key data from the documents
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Acquisition date | January 1 20X2 | |
| Ownership percentage | 80% | |
| Goodwill recognised | €480,000.00 | |
| Date of the test | December 31 20X3 | |
| Plant | €1,500,000.00 | |
| Customer contracts | €1,000,000.00 | |
| Value in use of the unit | €2,700,000.00 | |
| Fair value less costs of disposal of the unit | €2,550,000.00 | |
| Projection horizon | 5 years | |
| Growth rate beyond the horizon | 2% | |
| Current discount rate | 11% | |
| Discount rate of the previous test | 10% | |
| Nordal share price | €42.00 |
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 sort5
Acquisition agreement
Minutes of the executive committee
Carrying amounts of the Solaris unit
Valuation report
Share price
Relevant to the treatment0
No effect0
Workspace
Work programme
Organise your work freely: deal with each point, then argue your conclusion.
Task 1Professional judgement
To which unit is goodwill allocated and at which level is it tested?
1 Part 1 · Calculation
To which unit is goodwill allocated and at which level is it tested?
- €
Checks
- 0 / 1 step entered
- Amounts readable
Task 2Calculation
Calculate the notional goodwill and the carrying amount of the unit to be compared with its recoverable amount.
1 Part 1 · Calculation
Calculate the notional goodwill and the carrying amount of the unit to be compared with its recoverable amount.
- €
- €
- €
Checks
- 0 / 3 steps entered
- Amounts readable
Result: Notional carrying amount of the unit
Task 3Calculation
Calculate the loss of the unit, its allocation and the loss to be recognised.
1 Part 1 · Calculation
Calculate the loss of the unit, its allocation and the loss to be recognised.
- €
- €
- €
- €
- €
- €
Checks
- 0 / 6 steps entered
- Amounts readable
Result: Goodwill recognised after the test
Task 4Journal entries
Which entry do you record at 31 December 20X3?
1 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.
AccountDescriptionDebitCreditLine 1
DebitCreditLine 2
DebitCredit
TotalsDebit0Credit0Task 5Effects on the financial statements
What is the impact on the consolidated financial statements?
1 Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
ItemIncreaseDecreaseNo effectFinancial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Notes
2 Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
- €
- €
- €
Checks
- 0 / 3 steps entered
- Amounts readable
Result: Amount of the effect — Equity
Task 6Analysis
Which disclosures do you provide in the note?
Task 7Conclusion
Write the conclusion.
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 / 10).
Document this file
These working papers use the data and results of this case.
Normative references
- IAS 36 §80
- IAS 36 §81
- IAS 36 §104
- IAS 36 §130
- IAS 36 §134
- IAS 36 §C4
- IAS 36 §C5
- IAS 36 §C6
- IAS 36 §C7
- IAS 36 §C8