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WorkpaperIAS 28 — Investments in Associates and Joint VenturesL2 · L3 · L4

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

2 missions9 sections to document60 min
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Status
Published

Objective 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.

9 sections · 32 blocks · 5 calculations · 3 entries

  • IAS 28 §28
  • IAS 28 §29
  • IAS 28 §30
  • IAS 28 §31

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Upstream and downstream eliminations, losses evidencing impairment, contribution of assets and interaction with IFRS 11 joint ventures
Case tasks documented here
  • 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.
1

Facts and data

Inputs

  • Transactions with the associate: direction, assets concerned, date, assets still held at period end

    TextRequired

    UPSTREAM_GOODS_DOWNSTREAM_GOODS_AND_A_CONTRIBUTION_OF_LAND

  • Investor’s interest in the associate (%)

    Number

    30 %

  • Unrealised profit of the associate in assets still held by the investor (upstream)

    Number

    200,000

  • Unrealised profit of the investor in assets still held by the associate (downstream)

    Number

    90,000

  • Gain on the contribution of non-monetary assets (fair value − carrying amount)

    Number

    300,000

  • Carrying amount of the investment before eliminations

    Number

    2,000,000

  • Investor’s share of the loss evidencing impairment (upstream)

    Number

    24,000

  • Loss of the associate on the upstream sale evidencing an impairment

    Number

    80,000

  • Loss evidencing impairment recognised in full (downstream)

    Number

    100,000

  • Share of profit recognised after eliminations

    Number

    18,000

  • Share of the adjusted profit of the associate before eliminations

    Number

    195,000

  • Carrying amount of the non-monetary assets contributed

    Number

    600,000

  • Fair value of the non-monetary assets contributed

    Number

    900,000

  • Contribution of assets: nature of the assets, percentage held after the contribution, consideration received

    Text

    LAND_CONTRIBUTED_FOR_EQUITY_INTEREST

  • Losses on transactions: elements indicating a decline in net realisable value or an impairment

    Text

    PRICES_EQUAL_TO_NET_REALISABLE_VALUE_OR_MARKET_VALUE

2

Supporting documents

Evidence

  • Documents obtained and referenced (inter-company invoices, inventory still held, valuation of the contribution, reconciliation with the associate)

    EvidenceRequired

3

Analysis of the eliminations

Analysis

IAS 28 §28IAS 28 §29IAS 28 §30IAS 28 §31IAS 28

  • Points reviewed: eliminations with the associate

    ChecklistRequired

    • Direction of each transaction identified: upstream (associate to investor) or downstream
    • Gains and losses recognised only to the extent of unrelated investors’ interests; investor’s share eliminated
    • Upstream: elimination on the asset bought, inventory still held
    • Downstream: elimination against the carrying amount of the investment
    • Loss evidencing impairment: in full for a downstream transaction, in share for an upstream one
    • Contribution of non-monetary assets in exchange for an equity interest: gain dealt with by reference to downstream transactions
    • 2014 amendments (full gain if a business): effective date deferred indefinitely, not applied
4

Calculations

Calculations

IAS 28 §28

  • Unrealised profit eliminated, upstream (profit × interest)

    Calculation

    60,000

    Unrealised profit of the associate in assets still held by the investor (upstream) ; Investor’s interest in the associate (%)

  • Unrealised profit eliminated, downstream (profit × interest)

    Calculation

    27,000

    Unrealised profit of the investor in assets still held by the associate (downstream) ; Investor’s interest in the associate (%)

  • Gain on the contribution eliminated to the extent of the interest (gain × interest)

    Calculation

    90,000

    Gain on the contribution of non-monetary assets (fair value − carrying amount) ; Investor’s interest in the associate (%)

  • Share of the upstream loss borne (loss × investor percentage), not eliminated

    Calculation

    24,000

    Loss of the associate on the upstream sale evidencing an impairment ; Investor’s interest in the associate (%)

  • Carrying amount of the investment after eliminations (before − downstream profit eliminated − contribution gain eliminated)

    Calculation

    1,883,000

    Carrying amount of the investment before eliminations ; − Unrealised profit eliminated, downstream (profit × interest) ; − Gain on the contribution eliminated to the extent of the interest (gain × interest)

5

Illustrative entries

Entries

  • Entry: elimination of unrealised profit, upstream

    Entry

    AccountDebitCredit
    Share of profit of the associate (elimination)60,000
    Inventory held by the investor60,000

  • Entry: elimination of unrealised profit, downstream

    Entry

    AccountDebitCredit
    Share of profit of the associate (elimination)27,000
    Investment in associate (decrease)27,000

  • Entry: elimination of the gain on the contribution of assets

    Entry

    AccountDebitCredit
    Share of profit of the associate (elimination)90,000
    Investment in associate (decrease)90,000
6

Judgments: 2014 amendments and impairment indicator

Judgment

IAS 28 §29IAS 28 §30IAS 28

  • Are the (deferred) 2014 amendments applied to the contribution?

    JudgmentRequired

    2014 amendments not applied: elimination to the extent of the interest

    2014 amendments not applied: elimination to the extent of the interest / Contribution of a business: 2014 amendments deferred, not applied / Not applicable

    Professional judgment: the 2014 amendments are deferred and are not applied in the case.

  • Rationale: 2014 amendments deferred, not applied in the case

    Text

    AMENDMENTS_2014_DEFERRED_NOT_APPLIED

  • Does a loss on a transaction evidence impairment?

    JudgmentRequired

    The loss evidences a decline in value: recognised in full (downstream) or in share (upstream)

    The loss evidences a decline in value: recognised in full (downstream) or in share (upstream) / The loss evidences no impairment: treated like an unrealised profit / Not applicable

  • Rationale: net realisable value, price against the market, condition of the asset

    Text

    PRICE_EQUAL_TO_NET_REALISABLE_VALUE_OR_MARKET_VALUE

7

Effect on the financial statements

FS impact

  • Effect derived from the entries

    Table

8

Conclusion

Conclusion

  • Elimination supported by direction of the transaction with its effect on the carrying amount of the investment; 2014 amendments flagged as deferred

    ConclusionRequired

9

Normative references

References

  • Normative references cited in this workpaper

    References

10

Checks and financial statement impact

  • Transactions describedPass
  • Impairment indicator judgedPass
  • Contribution judgedPass
  • Upstream entry balancedPass
  • Downstream entry balancedPass
  • Contribution entry balancedPass
  • Share of the upstream loss recalculated = amount retainedPass
  • Share before eliminations = share recognised + upstream, downstream and contribution eliminationsPass
  • Fair value of the contribution = carrying amount + total gain on the contributionPass
Assets
-177,000
Liabilities
0
Profit or loss
-177,000
OCI
0
Equity
-177,000