Contribution of subsidiary to form a joint venture or an associate applying IFRS 10 A and B are two major pharmaceutical companies, which agree to form a joint venture (JV Co). A will own 40% of the joint venture, and B 60%. The parties agree that the total value of the new business of JV Co is £250 million. A”s contribution to the venture is […]

More than one activity affects returns of an arrangement Two parties enter into an agreement for the production and sale of a pharmaceutical product. Three activities significantly affect the returns of the arrangement: production of the pharmaceutical product one party is responsible for this activity; marketing and selling activities the other party is responsible for these activities; and both parties must approve all financial policies […]

Equity-settled share based payment transactions of associate or joint venture Entity A holds a 30% interest in Entity B and accounts for its interest in B as an associate using the equity method. This interest arose on incorporation of B. Accordingly, there are no fair value adjustments required related to the assets of B in A”s consolidated financial statements and its equity-accounted amount represents an […]

Accounting for the effect of transactions with non-controlling interests recognised through equity by an associate or joint venture Entity A holds a 20% interest in entity B (an associate) that in turn has a 100% ownership interest in subsidiary C. The net assets of C included in B”s consolidated financial statements are €1,000. For the purposes of the example all other assets and liabilities in […]

Entity A has a 40% interest in Entity B. Entity A has significant influence over Entity B and accounts for its investment under the equity method. At 31 December 2013, Entity B, which prepares its financial statements under IFRS, has carried out impairment tests under IAS 36 and recognised an impairment loss of $140,000 calculated as follows:   Carrying amount S”000 Recoverable amount S”000 Impairment […]

Consolidation principles [extract] For investments accounted for using the equity method, goodwill is not reported separately, but rather included in the value recognised for the investment. In other respects, the consolidation principles described above apply. Goodwill is not amortised. If impairment losses on the equity value become necessary, we report such under income from investments accounted for using the equity method. The financial statements of […]

An entity had an interest in a jointly controlled entity for which it applied proportionate consolidation. In 2010, the entity lost joint control of the jointly controlled entity, but retained significant influence over its retained interest. That is, the jointly controlled entity became an associate in 2010. In accordance with the requirements of IAS 31, the entity re-measured the retained interest in the associate at […]

An entity had an interest in an associate. In 2010, the entity gained joint control of the associate (i.e. the associate became a jointly controlled entity). In accordance with IAS 28 (2012), the entity re-measured the retained interest to fair value. The entity subsequently accounted for its investment in the jointly controlled entity using proportionate consolidation. The entity adopts IFRS 11 in 2013 and still […]

Is it a joint venture? Protected cell entity Some jurisdictions permit the formation of so called ‘protected cell’ entities. Essentially these are entities which have a number of ‘cells’, with the assets and liabilities of each cell being completely ring-fenced in other words the creditors of a particular cell have recourse only to the assets of that cell. In addition to the cells, each one […]

Acquisition method cash consideration less than the fair value of business acquired Assume the same facts as in above, except that Entity C, rather than acquiring Entity B from Entity A for cash at its fair value of £1,000, only pays cash of £700. How should this be reflected by Entity C when applying the acquisition method for its acquisition of Entity B? In our […]