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Dear Sir,
Could you please explain the limit to 50% on disposal? And Where is it mentioned in IAS 28?
When a joint venturer contributes a non-monetary asset to a joint venture in exchange for an equity interest
in the joint venture, the joint venturer recognises a portion of the gain or loss on disposal which is attributable to the other
parties to the joint venture (except when the contribution lacks commercial substance). Essentially, Digiwire Co is required
by IAS 28 to limit the profit on disposal of its non-monetary assets to 50%. Effectively, Digiwire has only disposed of 50%
of the asset contributed to the joint venture. Thus the carrying amount of the joint venture in Digwire’s financial statements
at 31 December 20X6 will be $11·5 million (($6 + $3 carrying amounts derecognised for property and cryptocurrency)
+ ((4 – 3)/2) + ((10 – 6)/2)). A gain of $2·5 million will be recorded in profit or loss.Thank you a lot.
That’s a difficult question
I think the logic is supposed to be similar to the logic for eliminating our share of unrealised profits on inventory transfers to associates
So I can confirm that what the examiner has done is correct and that you are only supposed to recognise your share of the profit within the carrying value of the joint-venture
The rule in the standard is:
“If a venturer contributes or sells an asset to a jointly controlled entity, while the assets are retained by the joint venture, provided that the venturer has transferred the risks and rewards of ownership, it should recognise only the proportion of the gain attributable to the other venturers”
https://www.iasplus.com/en/standards/ias/ias31
I’ll give this some more thought and may post again on this issue
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