Consolidation and non-controlling interests: intragroup eliminations, unrealised profit in inventory, uniform policies and dates, attribution of profit and deficit balance: Ardoval — eliminations and preference shares

Context

Brelvane Group SA (fictitious entity) closes its consolidated accounts on 31 December 20X6. The preparer draws up the year’s consolidation file, submitted to a reviewer: control of Tolvane and Fonds Marlis, consolidation of Ardoval and Brivet, the purchase of Cavelle points from third parties and the sale of Sevrane with a loss of control and a retained 30 % interest. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Assignment

Consolidation of Ardoval and Brivet: eliminations, harmonisation and attribution to third parties

Purpose of the workpaper

List the intragroup transactions and balances, the policies and the closing date of the subsidiary, then compute the unrealised profit, the attribution of profit or loss to non-controlling interests (after cumulative preference dividends) and their balance. Margins, percentages and dividends are case data; the workpaper shows the full elimination of balances and of the unrealised profit and leaves the judgment on the harmonisations.

Questions of the file covered by this workpaper

• Ardoval: compute the unrealised profit on the remaining inventory to eliminate.
• Ardoval: compute the profit attributable to ordinary shares after the cumulative preference dividend, declared or not.
• Ardoval: compute the third parties’ share of the profit of the ordinary shares, then their total share of profit with the preference shares.
• Ardoval: compute the closing balance of non-controlling interests.
• Brivet: harmonise the inventory policy and compute the loss retained for consolidation.
• Brivet: compute the share of the loss attributed to third parties on the current percentage.
• Brivet: the loss attributed to third parties exceeds their opening balance. What happens to their balance and is the loss capped?
• Record the entry eliminating Ardoval’s payable to Brelvane.
• Record the entry eliminating the unrealised profit in inventory.
• Record the entry attributing Ardoval’s profit to third parties.
• Record the entry attributing Brivet’s loss to third parties.

• MemoGroup profile and file conventionsOpen
• ContractTolvane SA and Fonds Marlis: voting rights, management and remunerationOpen
• ExtractArdoval SA and Brivet SARL: profits, third parties and intragroup transactionsOpen
• ContractCavelle SA: purchase from third partiesOpen
• ContractSevrane SA: sale with loss of controlOpen
• MemoGroup IT budgetOpen
• MemoAttendance record of Tolvane’s meetingsOpen