Page 40 - MCS August Day 1 Suggested Solutions

CIMA AUGUST 2018 – MANAGEMENT CASE STUDY

How were any acquisitions financed or purchased? There was no increase in the combined total
of share capital and share premium in 2018. Similarly, there was no significant increase in loan
liabilities to finance any acquisition.

Montel should ensure that all intra‐group transactions and balances have been removed from the
consolidated financial statements. Similarly, any unrealised profit arising upon transactions
between group members should also be removed from the consolidated financial statements.

Group accounting issues ‐ IFRS 11 Joint Arrangements

A joint arrangement is a contractual arrangement by which two or more parties jointly exercise
control. There are two forms of joint arrangement as follows:
 joint operation – each party in the joint operation record transactions entered into on
behalf of the operation, and periodically settle amounts due to/from each other
 joint venture – this is a separate entity established by the joint venture parties, with each
party having a shareholding in that entity. This arrangement is equity‐accounted in the
same way as accounting for an associate per IAS 28.

Application to Montel ‐ IFRS 11 Joint Arrangements
Currently, Montel does not appear to have any joint arrangements. Montel could enter into a
joint arrangement with another entity where there was a project of mutual benefit that did not
justify a more long‐term or formalised arrangement. This could, perhaps, relate to development
of new technology that could then be used in new products. This would have the benefit of
reducing the finance commitment required, but would also enable another party to benefit from
any benefits arising.

84 KAPLAN PUBLISHING