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Why loosing part of Revenue when contributing undervalued Assets to JV?

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › Why loosing part of Revenue when contributing undervalued Assets to JV?

  • This topic has 1 reply, 1 voice, and was last updated 10 months ago by mykolah.
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  • March 21, 2020 at 1:50 pm #565512
    mykolah
    • Topics: 1
    • Replies: 7
    • ☆

    Here below is question from Dec 2020 ACCA exam.

    Answer to this question is that FC of Investment should be calculated as [3 + 0.5*(4-3)] + [6 + 0.5*(10-6)] = 11.5mm. As well, 2.5mm is recognized in P&L. So it means that instead of selling the Assets for theit FV on the market (10+4 =14), recognizing Sale gain as 5mm and investing those 14 in JV, we invest 11.5 mm and “loose” 2.5mm in Revenue on this operation.

    Yes, it is in line with the p.30 of IAS 28. But where is the logic here?

    Investment in FourDee Co

    Digiwire Co has agreed to work with TechGame Co to develop a new music platform. On 31 December 20X6, the companies created a new entity, FourDee Co, with equal
    hareholdings and shares in profit. Digiwire Co has contributed its own intellectual property in the form of employee expertise, cryptocurrency with a carrying amount of $3 million (fair value of $4 million) and an office building with a carrying amount of $6 million (fair value of $10 million). The cryptocurrency has been recorded at cost in Digiwire Co’s financial statements. TechGame Co has contributed the technology and marketing expertise. The board of FourDee Co will comprise directors appointed equally by Digiwire Co and TechGame Co. Decisions are made by a unanimous vote

    March 21, 2020 at 1:52 pm #565513
    mykolah
    • Topics: 1
    • Replies: 7
    • ☆

    *Dec 2019 ACCA SBR to be correct

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