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current period (IFRIC 1.5). Thus in the case of W, the accounting for the decommissioning is as follows.
The carrying amount of the asset will be
Carrying amount at December 1, 20X8
(240 – depreciation 60 – 14.1 decrease in decommissioning costs) 165.9
Less depreciation 165.9 ÷ 30 years (5.5)
Carrying amount at November 30, 20X9 160.4
Finance cost ($32.6 million – $14.1 million) at 7% 1.3
Decommissioning liability will be ($32.6m – $14.1m) 18.5
Decommissioning liability at November 30, 20X9 19.8
Jointly controlled assets involve the joint control, and often the joint ownership, of assets dedicated to the joint venture. Each venturer may take a share of
the output from the assets and each bears a share of the expenses incurred (IAS 31 Para 18). IAS 31 requires that the venturer should recognize in its
financial statements its share of the joint assets, any liabilities that it has incurred directly, and its share of any liabilities incurred jointly with other venturers,
income from the sale or use of its share of the output of the joint venture, its share of expenses incurred by the joint venture, and expenses incurred directly
in the respect of its interest in the joint venture (IAS 31 Para 21). The pipeline is a jointly controlled asset. Therefore, B should not show the asset as an
investment but as property, plant, and equipment. Any liabilities or expenses incurred should be shown also.
CASE STUDY 4
Entity A holds a 40% interest in entity B and exercises joint control over B. A uses proportionate consolidation to account for its interest in B. A has
loaned B $10 million and both entities recognize the loan at its amortized cost of $9 million.
Required
How should A account for the loan to B?
Solution
The loan to B should be eliminated from A’s accounts to the extent of A’s interest. This represents the intercompany element, which should be eliminated.
The amount shown in A’s accounts would be 60% of $9 million, which would be $54 million.
CASE STUDY 5
A is an entity jointly controlled by B and C. B owns 60% and C owns 40% of A. Both entities use proportionate consolidation. On December 31, 20X9, B
sells PPE for $2 million to A. The PPE has a carrying value of $1.2 million in B’s books.
Required
What are the accounting entries for this transaction?
Solution
B would recognize a gain equal to the amount of profit attributable to the other venturer. That is $(2 – 1.2) million × 40% which is $0.32 million. Only
40% of the gain is reported in B’s financial statements. The unrealized proportion of the gain is eliminated against B’s share of the asset now carried in the
statement of financial position of A. B’s share of the asset will be 60% × $2 million, that is, $1.2 million less the unrealized gain of $0.48 million. That is
$0.72 million. This actually represents B’s original share of the asset had the gain not been recorded. When the PPE is sold by A, the profit eliminated can
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