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SBR Dec 2019 Invt in Joint venture

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › SBR Dec 2019 Invt in Joint venture

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.
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    Posts
  • June 4, 2021 at 7:23 pm #623207
    therockky
    • Topics: 7
    • Replies: 10
    • ☆

    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.

    June 5, 2021 at 9:02 am #623233
    Stephen Widberg
    Moderator
    • Topics: 10
    • Replies: 2523
    • ☆☆☆☆☆

    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 7

    We are not asked to write up the books of the JV.

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