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IFRS 10Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 10L3 · Advanced

Consolidation procedures: harmonisation of policies and dates, intragroup eliminations, unrealised profit, attribution and deficit balance of non-controlling interests

4 documents14 tasks≈ 90 min
0 / 18 items completed
Standards
IFRS 10 — Consolidated Financial Statements
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Tarvane Group SA (fictitious entity) consolidates two subsidiaries with minority third parties: Corvane SA, profitable, with cumulative preference shares held by third parties, and Dentra SARL, loss-making, which closes three months earlier and applies another inventory method. You prepare the 20X6 consolidation file.

Your assignment

Deal with Dentra’s date gap and harmonise its policies; compute the unrealised profit, the profit attributable to Corvane’s ordinary shares, the third parties’ share, the closing balance of their interests, the share of Dentra’s loss attributed to third parties and their deficit balance; record the four consolidation entries, present their cumulative 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.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

4 documents: open each one to read it.

Document 1Memo

Group profile and case conventions

Tarvane Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6 and consolidates Corvane SA and Dentra SARL. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IFRS 10): the sale of inventory to Corvane is a sale from the parent to its subsidiary, the elimination of unrealised profit being borne by the owners of the parent with no effect on third parties; the preference shares are classified in equity; tax effects are set aside; the entries are illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Corvane’s profit€300,000.00
Annual cumulative dividend of the preference shares€25,000.00
Third parties’ share of Corvane’s ordinary shares20%
Corvane’s non-controlling interests at the start€700,000.00
Ordinary dividends paid to third parties€12,000.00
Inventory bought from Tarvane still held, at transfer price€150,000.00
Tarvane’s profit margin30%
Corvane’s payable to Tarvane€120,000.00
Dentra’s loss before harmonisation€435,000.00
Policy adjustment on Dentra’s inventory€15,000.00
Third parties’ share of Dentra40%
Dentra’s non-controlling interests at the start€100,000.00
Vehicle replacement plan€90,000.00

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 sort4

  • Group profile and case conventions

  • Corvane SA: profit, preference shares, third parties and intragroup transactions

  • Dentra SARL: loss, policies, closing date and third parties

  • Vehicle replacement plan

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      14 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

        Dentra: how to deal with the three-month gap between its closing date and the group’s?

      2. Task 2Analysis

        Dentra: what harmonisation of policies is needed on consolidation? Compute the loss retained for consolidation.

        Calculator

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

        Part 1 · Calculation

        Dentra: what harmonisation of policies is needed on consolidation? Compute the loss retained for consolidation.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Compute the unrealised profit on the remaining inventory to eliminate.

        Calculator

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

        Part 1 · Calculation

        Compute the unrealised profit on the remaining inventory to eliminate.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Corvane: compute the profit attributable to ordinary shares after the cumulative preference dividends, declared or not.

        Calculator

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

        Part 1 · Calculation

        Corvane: compute the profit attributable to ordinary shares after the cumulative preference dividends, declared or not.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Corvane: compute the third parties’ share of the profit of the ordinary shares, then their total share of profit with the preference shares.

        Calculator

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

        Part 1 · Calculation

        Corvane: compute the third parties’ share of the profit of the ordinary shares, then their total share of profit with the preference shares.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Total share of Corvane’s profit attributed to third parties (55,000 + 25,000)

      6. Task 6Calculation

        Corvane: compute the closing balance of non-controlling interests.

        Calculator

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

        Part 1 · Calculation

        Corvane: compute the closing balance of non-controlling interests.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Calculation

        Dentra: compute the share of the loss attributed to third parties on the current percentage.

        Calculator

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

        Part 1 · Calculation

        Dentra: compute the share of the loss attributed to third parties on the current percentage.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Analysis

        Dentra: the loss attributed to third parties exceeds their opening balance. What happens to their balance and is the loss capped?

        Calculator

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

        Part 1 · Calculation

        Dentra: the loss attributed to third parties exceeds their opening balance. What happens to their balance and is the loss capped?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Journal entries

        Record the entry eliminating the intragroup balance between Corvane and Tarvane.

        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 10Journal entries

        Record the entry eliminating the unrealised profit in inventory.

        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

      11. Task 11Journal entries

        Record the entry attributing Corvane’s profit to third parties.

        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

      12. Task 12Journal entries

        Record the entry attributing Dentra’s loss to third parties.

        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

      13. Task 13Effects on the financial statements

        What is the cumulative effect of the four entries on the consolidated financial statements?

        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

      14. Task 14Conclusion

        Write the conclusion.

      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 / 18).

      Document this file

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

      Normative references

      • IFRS 10 §B94