Special-Purpose Entities & Joint Arrangements

A venturer contributes a non-monetary asset worth more than its carrying amount to a joint venture in exchange for an interest. Which portion of the gain is recognized in profit or loss, and which is not?

A sponsor owns no voting shares of an SPE but directs its activities and absorbs its variable returns. Under IFRS 10, does the sponsor consolidate it, and what is the giveaway that voting share count is the wrong test?

Why were SPEs historically kept off the sponsor's consolidated balance sheet, and what changed?

A party has rights to the assets and obligations for the liabilities of an arrangement. How does it account for its interest, and how does the balance sheet differ from the equity method?

Under IFRS 11, what single feature separates a joint operation from a joint venture, and why can a separate legal vehicle still be a joint operation?

A party has rights to the net assets of a joint venture. Which method does IFRS require, and which once-permitted method is now prohibited?

Before consolidation rules tightened, how did setting up an SPE let a company keep its borrowing off its own balance sheet, and what specifically brings that debt on now?

To conclude that a reporting entity controls a structured entity, which elements must ALL be present, and which one is most often left out?

Your firm sets up a trust whose charter permits it to do only one thing: buy a single manufacturing plant and lease it back to you. What kind of entity is this, and what defines it?

An SPE holding just one asset can usually borrow at a lower interest rate than its sponsor could directly. Why does the financing get cheaper?

In a typical SPE the nominal equity shareholders bear little risk and earn only a small, near-guaranteed return. Why is their role so minor?

An outside investor owns 100% of an SPE's shares, but the sponsor guarantees the SPE's debt and collects most of its returns. What is the sponsor called, and why does that label fit?

In an SPE, risks and rewards are usually NOT shared in proportion to equity ownership. By what are they shared instead, and what are common examples?

Two parties are both exposed to a structured entity's variable returns. What tips the balance toward one of them being the party that controls it?

A structured entity's only assets are receivables. Which single activity determines who controls it, and why does voting share count not matter?

Beyond running day-to-day operations, name ways a reporting entity can hold power over a structured entity through 'related arrangements.'

When a primary beneficiary gains control of an existing SPE by buying it from prior owners, how is the SPE's total implied value determined for consolidation?

A primary beneficiary contributes its own asset to an SPE it controls. Why is that asset carried at book value rather than fair value on consolidation, and what happens to any profit it recognized on the transfer?

On consolidating an SPE, the implied consideration differs from the identifiable net assets received. How does the treatment of the difference depend on whether the SPE is a business?

How does the presence or absence of a separate legal vehicle affect whether a joint arrangement is a joint operation or a joint venture?

Why is a joint operation almost never run through an incorporated company, yet fits naturally inside a partnership?

A joint operator sells an asset to its joint operation at a gain. How much of the gain does it recognize now, how is the rest treated, and what exception overrides this?

Can forming a joint operation create an acquisition differential? What about buying an interest in an existing one?

When consolidating a subsidiary you eliminate 100% of intercompany profit, but for a joint operation you eliminate only your own percentage. Why the difference?

A joint operation is structured as a partnership. Who pays income tax on its earnings, and what must each partner accrue?

Contrast the income taxation of a joint venture that is an incorporated company with a joint operation run as a partnership.

A venturer contributes equipment worth more than its book value to a joint venture in exchange for an interest. At what amount is the investment initially recorded?

Recognizing any gain on a nonmonetary contribution to a joint venture hinges on 'commercial substance.' When does a transaction have commercial substance under IAS 16?

A venturer's contribution to a joint venture lacks commercial substance. What happens to the gain, and how does receiving cash or other assets change the answer?

The portion of a joint-venture contribution gain tied to the venturer's own interest is deferred. Where is it parked on the balance sheet, and how is it eventually recognized?

Contributing an asset to a joint venture produces a loss instead of a gain. How much of the loss is recognized immediately?

A party holds an interest in a joint arrangement but does NOT have joint control over it. How does it account for that interest?

Under IFRS 12, what should disclosures about a company's joint arrangements enable users to evaluate?

Switching a joint interest from equity-method presentation to proportionate presentation leaves net income unchanged. So what actually changes, and how does perceived solvency shift?

How does ASPE let a company report an interest in a jointly controlled enterprise differently from IFRS?

A reporting entity has the contractual right to direct a structured entity's key activity but has never actually used it. Does it still have 'power' under IFRS 10?

Under IFRS 12, what must an entity disclose about a consolidated structured entity beyond the usual consolidated figures?

Can a joint operation still exist when the parties set up a separate legal entity to hold the assets? Give the condition that keeps it a joint operation.

Two parties each hold 50% and every decision on relevant activities needs both to agree; in another deal no single party has a majority but no consent rule exists. Which has joint control under IFRS 11?

In a joint operation, one operator produces components and ships them to another operator for assembly. When does the producing operator recognize revenue, and on what amount?

A sponsor consolidates an SPE it controls without owning a voting majority. What can look counterintuitive about the noncontrolling interest?