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IFRS 10Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 10L3 · Advanced

Change in ownership without loss of control: purchase from third parties and partial sale, difference in equity, silences of the standard on goodwill and other comprehensive income

4 documents12 tasks≈ 75 min
0 / 16 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  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn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

Brannel Group SA (fictitious entity) bought 15 points of Sorvet SA from third parties and sold 10 points of Delcour SA to third parties in 20X6, without losing control of either. You prepare the accounting note: difference in equity, adjustment of third parties, group policy and attribution of later results.

Your assignment

Confirm that the two transactions give neither profit or loss nor additional goodwill; compute for each the adjustment of third parties and the difference attributed to the owners of the parent; state the group policy where the standard is silent; attribute later results on the new percentages; record the two 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

Brannel Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to IFRS 10): the group’s policy splits goodwill and accumulated other comprehensive income in proportion to the interest changed; no transaction costs are incurred; the carrying amounts of the non-controlling interests and of the net assets are case data; the entries are illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Price paid for the Sorvet interest€380,000.00
Carrying amount of Sorvet’s non-controlling interests€600,000.00
Proportion of the non-controlling interests acquired (15 points out of 30)50%
Third parties’ share of Sorvet after the purchase15%
Sorvet’s profit for the second half€200,000.00
Price received for the Delcour interest sold€260,000.00
Delcour’s net assets in the consolidated accounts€2,500,000.00
Share of net assets corresponding to the interest sold10%
Delcour’s loss for the fourth quarter€60,000.00
Third parties’ share of Delcour after the sale30%
Brand audit€35,000.00

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

  • Sorvet SA: purchase from third parties

  • Delcour SA: partial sale without loss of control

  • Brannel brand audit

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

        Do the two transactions cause a loss of control? How are they accounted for and what profit or loss do they give?

      2. Task 2Calculation

        Sorvet: compute the carrying amount of the non-controlling interests acquired.

        Calculator

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

        Part 1 · Calculation

        Sorvet: compute the carrying amount of the non-controlling interests acquired.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Sorvet: compute the difference to charge to the equity of the owners of the parent.

        Calculator

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

        Part 1 · Calculation

        Sorvet: compute the difference to charge to the equity of the owners of the parent.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Delcour: compute the part of the carrying amount of net assets passed to third parties by the sale.

        Calculator

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

        Part 1 · Calculation

        Delcour: compute the part of the carrying amount of net assets passed to third parties by the sale.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Delcour: compute the difference to credit to the equity of the owners of the parent.

        Calculator

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

        Part 1 · Calculation

        Delcour: compute the difference to credit to the equity of the owners of the parent.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Professional judgement

        Does the standard say how to split goodwill, accumulated other comprehensive income and transaction costs? Which policy does the group adopt?

      7. Task 7Analysis

        Sorvet: what share of the second-half profit goes to third parties after the purchase?

        Calculator

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

        Part 1 · Calculation

        Sorvet: what share of the second-half profit goes to third parties after the purchase?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Analysis

        Delcour: what share of the fourth-quarter loss is attributed to third parties and what would happen if their balance became a deficit?

        Calculator

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

        Part 1 · Calculation

        Delcour: what share of the fourth-quarter loss is attributed to third parties and what would happen if their balance became a deficit?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Journal entries

        Record the purchase from 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

        3. Line 3

        TotalsDebit0Credit0

      10. Task 10Journal entries

        Record the partial sale without loss of control.

        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

        3. Line 3

        TotalsDebit0Credit0

      11. Task 11Effects on the financial statements

        What is the cumulative effect of the two 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. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      12. Task 12Conclusion

        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 / 16).

      Document this file

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

      Normative references

      • IFRS 10 §23
      • IFRS 10 §B96
      • IFRS 10 §B94