IFRS 11 – NBC Institute

CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

Question

a. LPG Plc. is a publicly traded entity on the Nigerian Stock Exchange involved in the production of and trading in natural gas in Nigeria. LPG Plc. jointly owns a gas storage facility with another entity, Tan Oil Nigeria Limited. Both parties extract gas from onshore gas fields in the Niger Delta, which they own and operate independently from each other. LPG owns 55% of the gas storage facility and Tan Oil Nigeria owns 45%. Services and costs are shared between them according to their percentage holding, however, decisions regarding the storage facility require unanimous agreement of the parties. The gas storage facility is pressurised so that the gas is pushed out when extracted. When the gas pressure is reduced to a certain level, the remaining gas is irrecoverable and remains in the gas storage facility until it is decommissioned. The Nigeria law requires the decommissioning of the storage facility at the end of its useful life. LPG Plc. wishes to know how to treat the agreement with Tan Oil Nigeria Limited, including any obligation or possible obligation arising on the gas storage facility.

NB: Ignore accounting for the irrecoverable gas.

b. LPG purchased a major gas plant on 1 January, 2018 and the Directors estimated that a major overhaul is required every two years. The costs of the overhaul are approximately ₦25 million, which comprises ₦15 million for parts and equipment and ₦10 million for labour. The Directors proposed to accrue the cost of the overhaul over the two years of operations up to that date and create a provision for the expenditure.

Required:
Discuss, with reference to International Financial Reporting Standards (IFRS), how LPG Plc should account for the agreement in (a) above (11 marks) and the transactions in (b) for its year ended 31 August, 2018. (4 marks)

Answer

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Tags: Accounting for Provisions, Decommissioning, IFRS 11, Joint Arrangements, Joint Ventures, Overhaul, Provisions
Level: Level 3

Topic: Joint Arrangements (IFRS 11)

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

Question

An investor entity can enter into a contractual arrangement with another entity in which unanimous consent of both parties is required in order to take decisions relating to operating and financial policies of the investee. Such an arrangement could either be a joint venture or a joint operation.

Required:
Explain the distinction between joint venture and joint operation under IFRS 11: Joint Arrangements.

Answer

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Tags: Financial Reporting, IFRS 11, Joint Arrangements, Joint Operation, Joint Venture
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: DEC 2022

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

Question

Digital Ghana Ltd has agreed to work with Pixel Ghana Ltd in order to develop a new musical platform for the Ghana Musician Association. On 31 December 2021, the companies established a new entity called Flowbeat Ltd with equal shareholdings and share in profit. Digital Ghana Ltd has contributed its own intellectual property in the form of employee expertise, cryptocurrency with a carrying amount of GH¢6 million, which now has a fair value of GH¢8 million, and an office building with a carrying amount of GH¢12 million with a fair value of GH¢20 million. The cryptocurrency has been recorded at cost in Digital Ghana Ltd.’s financial statements.

Pixel Ghana Ltd has contributed the technology and marketing expertise required for the smooth operations of Flowbeat Ltd. The board of Flowbeat Ltd will comprise of directors appointed equally by Digital Ghana Ltd and Pixel Ghana Ltd. Decisions are made by a unanimous vote.

Required:
In accordance with the provisions of relevant International Financial Reporting Standards:

i) Advise on the classification of the investment which Digital Ghana Ltd has in Flowbeat Ltd.
(3 marks)

ii) Advise on the derecognition of the assets exchanged for the investment in Flowbeat Ltd and any resulting gain/loss on disposal in the financial statements of Digital Ghana Ltd at 31 December 2021.
(2 marks)

iii) Advise whether the cryptocurrency should be classified as a financial asset or an intangible asset.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cryptocurrency, Derecognition, Financial Asset, IAS 28, IFRS 11, Intangible Asset, Joint Venture
Level: Level 3

Topic: Associates and joint ventures
Series: JULY 2023

CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

Question

NB: Ignore accounting for the irrecoverable gas.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting for Provisions, Decommissioning, IFRS 11, Joint Arrangements, Joint Ventures, Overhaul, Provisions
Level: Level 3

Topic: Joint Arrangements (IFRS 11)

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

Question

Required:
Explain the distinction between joint venture and joint operation under IFRS 11: Joint Arrangements.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Reporting, IFRS 11, Joint Arrangements, Joint Operation, Joint Venture
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: DEC 2022

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

Question

Required:
In accordance with the provisions of relevant International Financial Reporting Standards:

i) Advise on the classification of the investment which Digital Ghana Ltd has in Flowbeat Ltd.
(3 marks)

iii) Advise whether the cryptocurrency should be classified as a financial asset or an intangible asset.
(2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cryptocurrency, Derecognition, Financial Asset, IAS 28, IFRS 11, Intangible Asset, Joint Venture
Level: Level 3

Topic: Associates and joint ventures
Series: JULY 2023

Question Tag: IFRS 11

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CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

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CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

You're reporting an error for "CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)"

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

You're reporting an error for "FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation"

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

You're reporting an error for "CR – July 2023 – L3 – Q2a – Associates and joint ventures"

CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)

Account for a joint arrangement and decommissioning obligations under IFRS 11 and handle the provision for a major overhaul under IAS 37.

You're reporting an error for "CR – May 2019 – L3 – Q5 – Joint Arrangements (IFRS 11)"

FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation

This question asks candidates to explain the distinction between joint ventures and joint operations under IFRS 11.

You're reporting an error for "FR – Dec 2022 – L2 – Q5d – Distinction Between Joint Venture and Joint Operation"

CR – July 2023 – L3 – Q2a – Associates and joint ventures

Classify the investment, advise on derecognition of assets, and explain the treatment of cryptocurrency under relevant IFRS standards.

You're reporting an error for "CR – July 2023 – L3 – Q2a – Associates and joint ventures"

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