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I have a doubt in SBR-INT SEPT/DEC 2019 *Investment in Joint venture – Fourdee question*
As such, Digiwire Co is required by IAS 28 to limit the
profit on disposal of its non-monetary assets to 50% because, effectively,
Digiwire has only disposed of 50% of the assets 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 (($6m + $3m carrying amounts
derecognised for property and cryptocurrency) + (($4m – $3m)/2) + (($10m –
$6m)/2)). A gain of $2.5 million will be recorded in profit or loss.I didn’t understand that why do we recognize only 50% of gain? Becuase we should have sold assets for 14$ million and also our joint venture recognized at cost would be 14 $million.
Please can someone explain this.
Thanks.The apparent profit is 5, as you say.
I’m not sure if you watched my debrief. In it I make the point that the prize winner (only) considered that, as the sale was to an entity which is 50% externally owned, then only 50% of profit should be recognised. Similar to PURPs with associates.
I suppose the journal would be:
Dr Inv in JV – balancing figure
Cr P&L 2.5
Cr NCA 7We are not asked to write up the books of the JV.
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