To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).
Day 58 (13 May)
My final post on section 15, and a brief one at that.
The remaining issue of note in section 15 is in paras 16-17 which read as follows:
15.16 When a venturer contributes or sells assets to a joint venture, recognition of any portion of a gain or loss from the transaction shall reflect the substance of the transaction. While the assets are retained by the joint venture, and provided the venturer has transferred the significant risks and rewards of ownership, the venturer shall recognise only that portion of the gain or loss that is attributable to the interests of the other venturers. The venturer shall recognise the full amount of any loss when the contribution or sale provides evidence of an impairment loss.
15.17 When a venturer purchases assets from a joint venture, the venturer shall not recognise its share of the profits of the joint venture from the transaction until it resells the assets to an independent party. A venturer shall recognise its share of the losses resulting from these transactions in the same way as profits except that losses shall be recognised immediately when they represent an impairment loss.
These paragraphs can be a little mind-boggling on first sight but in fact make good sense. If a parent sold assets to a subsidiary for a gain, this would be entirely eliminated on consolidation. In this case, you should eliminate the portion of the gain that relates to the 'non-group' element, i.e. the amount attributable to the other shareholders. On the other hand, if a loss on transfer indicates that the item had already suffered impairment while still held by the investor prior to transfer, then the investor should take all of the hit.
That's it for this section. Tomorrow I'm helping to man the Mercia stand at Accountex, so if you're at ExCel London for the exhibition, please come and say hi on stand A620. Back on Friday with section 16...
P.S. If you missed the last instalment click here