Case Studiies

2.
The proprietary (parent entity) concept

The proprietary concept emphasizes ownership through a controlling shareholding interest, and regards
the consolidated financial statements as being principally for the information of the shareholders of the
holding entity. Its primary concern is not to present financial statements which are relevant to the minority
shareholders. This is achieved either by treating the minority shareholders as 'outsiders' and reflecting
their interests as quasi-liabilities or by leaving them out of the group financial statements entirely., thereby
consolidating only the parent's percentage interest in the assets and liabilities of the subsidiary (the
'proportionate consolidation' method). The proprietary concept is sometimes referred to as the 'parent
entity' concept, and there is a variant of it known as the 'parent entity extension' concept, which leans
more towards the entity concept described above.
IFRS currently requires the 'parent entity extension' concept, whereby the separable net assets (other
than goodwill) of the group are reported without regard to the underlying ownership (as in the entity
concept), whilst goodwill is recognised only to the extent of the controlling shareholder's interest (as in the
proprietary concept).
Comparisons between the different concepts of a group
Assume that entity A buys 75% of entity B for $1 200 when entity B has total net assets with a fair value of
$1 000 and a carrying amount of $800. Under the various concepts the consolidated balance sheet of
entity A would incorporate the effects of the acquisition calculated as follows:
Entity concept
Net assets of B
Proprietary concept
Parent company
extension concept
1 000
950
1 000
600
450
450
1 600
1 400
1 450
Investor interest
1 200
1 200
1 200
Minority interest
400
200
250
1 600
1 400
1 450
Goodwill
Entity concept
Both the separable net assets and goodwill are reported in the balance sheet at the full amount of their
fair value as determined by the transaction involving the majority shareholder. These amounts are than
apportioned between the majority and minority shareholders.
Proprietary concept
The proprietary concept leaves the minority interest unaffected by the transaction of the majority
shareholder. It is shown simply as their proportionate share of the carrying values of the net assets of the
entity. This means that the goodwill is stated at a figure which represents the difference between the cost
of 75% investment ($ 1 200) and 75% of the fair value of the assets ($ 750). Perhaps more disturbingly,
the assets are carried on a mixed basis which represents 75% of their fair value and 25% of their book
value.
This feature is eliminated if proportionate consolidation is adopted, since the minority interest is
disregarded altogether, being set against the assets and liabilities of the subsidiary on a line by line basis,
so that only the majority investor's share of the subsidiary's assets is consolidated. This would result in
the consolidation of assets of $ 750 and goodwill of $ 450, representing the total of the investment of $1
200. However, IFRS does not allow proportionate consolidation for subsidiaries, although it is one of the
permitted treatments for certain types of joint ventures.
Assume that on January 1, 2013, Alto Ltd acquired 90% of the equity interest in Bass Ltd in exchange for
5,400 shares having a fair value of 120,600 on that day. Management elects the option to measure
noncontrolling interest at fair value and a value of 13,400 is assigned to the 10% noncontrolling interest
[(120,600/.90) .10 = 13,400]. The following shows the financial positions of the companies before
business combination at January 1, 2013.
(before combination)
Alto
Bass
Assets
Cash
30 900
37 400
Accounts receivable (net)
34 200
9 100
Inventories
22 900
16 100
Equipment
200 000
50 000
Less accumulated depreciation
(21 000)
(10 000)
Patents
Total assets
10 000
267 000
112 600
4 000
6 600
Liabilities and shareholders' equity

Accounts payable
Bonds payable, 10%
100 000
Share capital
115 000
65 000
48 000
41 000
267 000
112 600
Retained earnings
Total liabilities and shareholders' equity
Note that in the foregoing, the net assets (equity) of Bass Ltd may be computed by one of two methods.
Method 1: Subtract the book value of the liability from the book value of the assets.
112,600 6,600 = 106,000
Method 2: Add the book value of the components of Bass Ltd.s shareholders equity.
65 000 + 41,000 = 106,000
At the date of the combination, the fair values of the assets and liabilities of Bass were determined by
appraisal, as follows:
Bass Ltd Item
Book value (BV) Fair Value (FV)
Cash
Difference
between BV
and FV
37 400
37 400
9 100
9 100
Inventories
16 100
17 100
1 000
Equipment (net)
40 000
48 000
8 000
Patents
10 000
13 000
3 000
Accounts payable
(6 600)
(6 600)
106 000
118 000
12 000
Totals
The equipment has a book value of 40,000 (50,000 less 20% depreciation of 10,000). An appraisal
concluded that the equipments replacement cost was 60,000 less 20% accumulated depreciation of
12,000, resulting in a net fair value of 48,000.
When a noncontrolling interest is measured at fair value, the concept employed is to record the acquired
business at fair value. All the assets and liabilities of Bass Ltd are recorded at their fair values as of the
date of the acquisition, including the revaluation portion accruing to the noncontrolling interests
ownership share. In addition, full goodwill will be recognized: the parents share of total goodwill is
assigned to the controlling interest and the imputed noncontrolling share of total goodwill is allocated to
the noncontrolling interest.
In our example, goodwill (16,000) is calculated as follows: consideration transferred, at fair value
(120,600) plus noncontrolling interest (13,400) minus the net assets of Bass Ltd, at fair value
(118,000). The amount allocated to the parents interest is 14,400 (90% 16,000) and the amount
allocated to the noncontrolling interest is 1,600 (10% 16,000).
Basss identifiable (i.e., before goodwill) net assets will be reported in the Alto consolidated statement of
financial position at 118,000. These amounts are computed as follows:
Debit
Bass net assets, at FV
118 000
90% thereof (majority interest)
106 200
10% thereof (non-controlling interest)

Total identifiable net assets
Credit
11 800
118 000
118 000
Goodwill is calculated as follow:

Consideration transferred (at fair value)
Non-controlling interest (at fair value)
120 600
13 400
Total FV of Bass
134 000
Fair value of Bass net assets
(118 000)
Goodwill (total)
16 000
Goodwill allocated to controlling interest (90%)
14 400
Goodwill allocated to non-controlling interest (10%)
1 600
Acquisition accounting
90% interest
Adjustements and
eliminations
Statement of financial position,
1/1/13
Alto
Bass
Debit
Credit
Non-controlling
interest
Consolidated
balances
Cash
30 900
37 400
68 300
Accounts receivable
34 200
9 100
43 300
Inventories
22 900
16 100
1 000 b
40 000
Equipment
200 000
50 000
10 000 b
260 000
Accumulated depreciation
-21 000
-10 000
Investment in Bass
120 600
2 000 b
-33 000
120 600 a
12 000 b
Difference between FV and BV

(differential)
12 000 a
Goodwill
16 000 a
16 000
3 000 b
13 000
Patents
Total assets
Accounts payable
10 000
387 600
112 600
407 600
4 000
6 600
10 600
Bonds payable
100 000
Share capital
235 600
65 000
58 500 a
6 500
235 600
48 000
41 000
36 900 a
4 100
48 000
Retained earnings
100 000
Share of revaluation
1 200a
Share of goodwill
1 600a
1 200
Non-controlling interest
Total liabilities and equity
13 400NI
387 600
112 600
137 400
137 400
Based on the foregoing, the consolidated statement of financial position of the date of acquisition will be
as follows:
407 600
(immediately after combination)
Assets
Cash
68 300
Accounts receivable, net
43 300
Inventories
40 000
Equipment
260 000
(33 000)
Goodwill
16 000
Patents
13 000
Total assets
407 600

Accounts payable
10 600
Bonds payable, 10%
100 000
Total liabilities
110 600
Share capital
235 600
Retained earnings
48 000
Owners of parent
283 600
13 400
Total equity
297 000
407 600
1. Investment on Alto Ltd.s books The entry to record the 90% acquisition in Bass Ltd on Alto
Ltd.s books was
Debit
Investment in share of Bass Ltd
Credit
120,600
Share capital
To record the issuance of 5,400 shares of capital to acquire a 90% interest in Bass Ltd
120,600
Although share capital is issued for the consideration in our example, Altocould have transferred cash,
debentures, or any other form of consideration acceptable to Bass Ltd.s shareholders to make the
purchase combination.
2. Allocation of step-up of Basss net assets to fair value is calculated as follows: Adjustment of
asset values to fair values
Book value of Bass Ltd at acquisition date
Share capital
65 000
Retained earnings
41 000
106 000
Parent's share (% stock ownership)
x 90%
Acquired share of book value
(a) 95 400
Allocation step up to fair value of net assets

Fair value of net assets
118 000
Book value of net assets
106 000
Excess fair value over book value (step-up)
12 000
Parent's share (% share ownership)
x 90%
Parent's share of step up

Parent's share of net assets at fair value (a) + (b)
(b) 10 800
106 200 / 106 200
Non-controlling interest's share of net assets at fair value
1 800
3. Elimination entries on preceding workpaper

The workpaper elimination entry (a). The basic reciprocal accounts are the investment in subsidiary
account (Bass Ltd) on the parents books and the subsidiarys shareholders equity accounts. Only the
parents share of the subsidiarys accounts may be eliminated as reciprocal accounts. The remaining 10%
portion is allocated to the noncontrolling interest. The entries below include documentation showing the
company source for the information. The workpaper entry to eliminate the basic reciprocal accounts is as
follows:
Debit
Share capital - Bass
Retained earnings - Bass
Credit
58 500
36 900*
Differential
12 000
Goodwill
16 000
Investment of share of Bass
120 600
Non-controlling interest in valuation
1 200
Non-controlling interest in goodwill
1 600
* 90% x 41 000 = 36 900

The Differential account is a workpaper clearing account used to balance the entry and to simplify the
consolidation procedure. This account can have a debit or credit balance, depending on whether the
subsidiarys net assets in the consolidation workpaper are adjusted upward or downward. The Differential
represents excess of the fair value over book value of the subsidiarys assets and liabilities (net assets)
as of the acquisition date. In this case, the Differential is 12,000, representing the difference between the
fair value (118,000) and book value of Basss net assets (106,000) on January 1, 2013, the acquisition
date. The balance assigned to this account is subsequently cleared from that account with the workpaper
elimination entry (b).
The noncontrolling interest column includes the 10% interest of Bass Ltds net assets owned by outside
third parties 10,600 (noncontrolling interests proportionate share of Basss equity) plus the
noncontrolling interests share in revaluation of net assets to fair values 1,200 (10% 12,000) and plus
imputed goodwill allocated to the noncontrolling interest (10% 16,000).
The workpaper elimination entry (b). The amount of differential is assigned to the appropriate assets
with the workpaper entry (b). This workpaper entry adjusts the various account balances to reflect the fair
values of Basss assets and liabilities at the time the parent (Alto Ltd) acquired the subsidiary (as of the
date of acquisition).
Debit
Inventory
Equipment
Patents
Credit
1 000
10 000
3 000
2 000
Differential
12 000
* Differential represents excess fair value (118,000) over book value of Bass Ltds net assets (106,000).
The two workpaper eliminating entries (a) and (b) could be combined in one entry, without using the
Differential clearing account. The use of the Differential account may simplify the consolidation procedure
when several of the subsidiarys asset and liability accounts need to be restated to fair values. This
example does not include any other intercompany accounts as of the date of combination. If any existed,
they would be eliminated to present the consolidated entity fairly. Several examples of other reciprocal
accounts will be shown later for the preparation of consolidated financial statements subsequent to the
date of acquisition.
Assume that on January 1, 2013, Alto Ltd acquired 90% of the equity interests in Bass Ltd in exchange for
5,400 shares having a fair value of 120,600 on that day. Management elects the option to measure
noncontrolling interest at the noncontrolling interests proportionate share of the Bass Ltd net assets. The
following shows the financial positions of the companies before business combination at January 1, 2013.
(before combination)
Alto
Assets
Bass
Cash
30 900
37 400
34 200
9 100
Inventories
22 900
16 100
Equipment
200 000
50 000
(21 000)
(10 000)
Patents
Total assets
10 000
267 000
112 600
Accounts payable
4 000
6 600
Bonds payable, 10%
100 000
Share capital
115 000
65 000
Retained earnings
48 000
41 000
Total liabilities and shareholders' equity
267 000
112 600
At the date of the combination, the fair values of the assets and liabilities of Bass Ltd were determined by
appraisal, as follows:
Bass Ltd Item
Cash
Book value (BV) Fair Value (FV)
Difference
between BV
and FV
37 400
37 400
9 100
9 100
Inventories
16 100
17 100
1 000
Equipment (net)
40 000
48 000
8 000
Patents
10 000
13 000
3 000
Accounts payable
(6 600)
(6 600)
106 000
118 000
12 000
Totals
The equipment has a book value of 40,000 (50,000 less 20% depreciation of 10,000). An appraisal
concluded that the equipments replacement cost was 60,000 less 20% accumulated depreciation of
12,000, resulting in a net fair value of 48,000.
When a noncontrolling interest is measured at the noncontrolling interests proportionate share of the
acquirees net assets, the concept employed is to record all the assets and liabilities of Bass Ltd at their
fair values as of the date of the acquisition, including the portion represented by the noncontrolling
interests ownership share. There will be no mixture of costs for the net identifiable assets acquired in the
business combination in the consolidated statement of financial position; all items will be presented at fair
values as of the acquisition date. Goodwill, however, will be assigned only to the parent (the controlling
interest); there will not be any imputed goodwill attributable to the noncontrolling interest. This is the major
difference between this approach and the approach to value
noncontrolling interest at fair value, under which the amount of imputed goodwill is allocated to the
noncontrolling interest.In the present example, Basss identifiable (i.e., before goodwill) net assets will be
reported in the Alto consolidated statement of financial position at 118,000.
These amounts are computed as follows:
Debit
Bass net assets, at FV
Credit
118 000
90% thereof (majority interest)
106 200
10% thereof (non-controlling interest)
11 800
Total identifiable net assets
118 000
118 000
Acquisition accounting
90% interest
Adjustements and
eliminations
Statement of financial
position, 1/1/13
Alto
Bass
Debit
Credit
Non-controlling
interest
Consolidated
balances
Cash
30 900
37 400
68 300
Accounts receivable
34 200
9 100
43 300
Inventories
22 900
16 100
1 000 b
40 000
Equipment
200 000
50 000
10 000 b
260 000
-21 000
-10 000
Investment in Bass
120 600
2 000 b
-33 000
120 600 a
Difference between FV and

BV (differential)
12 000 a
Goodwill
14 400 a
14 400
3 000 b
13 000
Patents
Total assets
Accounts payable
10 000
12 000 b
387 600
112 600
406 000
4 000
6 600
10 600
Bonds payable
100 000
Share capital
235 600
65 000
58 500 a
6 500
235 600
48 000
41 000
36 900 a
4 100
48 000
Retained earnings
100 000
Share of revaluation
1 200a
1 200
11 800
387 600
112 600
135 800
135 800
11 800NI
406 000
Based on the foregoing, the consolidated statement of financial position of the date of acquisition will be
as follows:
(immediately after combination)
Assets
Cash
68 300
Accounts receivable, net
43 300
Inventories
40 000
Equipment
260 000
(33 000)
Goodwill
14 400
Patents
13 000
Total assets
406 000

Accounts payable
10 600
Bonds payable, 10%
100 000
Total liabilities
110 600
Share capital
235 600
Retained earnings
48 000
Owners of parent
283 600
11 800
Total equity
295 400
406 000
1. Investment on Alto companys books

The entry to record the 90% acquisition in Bass Ltd on Alto companys books was
Debit
Investment in share of Bass Ltd
Share capital
Credit
120 600
120 600
To record the issuance of 5,400 shares of capital to acquire a 90% equity interest in Bass Ltd
Although share capital is issued for the consideration in our example, Alto could have transferred cash,
debentures, or any other form of consideration acceptable to Bass Ltds shareholders to make the
purchase combination.
2. Difference between consideration transferred (at fair value) and fair value of net assets
acquired. The difference between the acquisition-date fair value of the consideration transferred and the
acquisition-date fair values of the assets acquired and liabilities assumed is computed as follows:
Consideration transferred (fair value of shares)
120 600
Computation of goodwill
Book value of Bass at acquisition date
Share capital
65 000
Retained earnings
41 000
106 000
Parent's share (% stock ownership)
x 90%
Acquired share of book value
(a) 95 400
Allocation step up to fair value of net assets

Fair value of net assets
118 000
Book value of net assets
106 000
Excess fair value over book value (step-up)
12 000
Parent's share (% share ownership)
x 90%
Parent's share of step up
(b) 10 800
Parent's share of net assets at fair value (a) + (b)
106 200 / 106 200
Goodwill to be recognized
14 400
3. Elimination entries on preceding workpaper

The workpaper elimination entry (a). The basic reciprocal accounts are the investment in subsidiary
account on the parents books and the subsidiarys shareholders equity accounts. Only the parents share
of the subsidiarys accounts may be eliminated as reciprocal accounts. The remaining 10% portion is
allocated to the noncontrolling interest. The entries below include documentation showing the company
source for the information. The workpaper entry to eliminate the basic reciprocal accounts is as follows:
Debit
Share capital - Bass
Retained earnings - Bass
Credit
58 500
36 900*
Differential
12 000
Goodwill
14 400
Investment of share of Bass - Alto
120 600
Non-controlling interest in revaluation
1 200
* 41,000 90%= 36,900

** Differential is 12,000, representing the difference between the fair value (118,000) and book value of
Basss net assets (106,000) on the acquisition date.
*** Goodwill represents only the parents share of goodwill (=16,000 .90).
Note that only 90% of Bass Ltd shareholders equity accounts are eliminated. The noncontrolling interest
column includes the 10% interest of Bass Ltds net assets owned by outside third parties (noncontrolling
interests proportionate share of Basss equity) plus the noncontrolling interests share in revaluation of
net assets to fair values. Consequently, 100% of the fair values of Bass Ltds assets and liabilities are
included in the consolidated statements, but no goodwill is allocated to the noncontrolling interest.
The workpaper elimination entry (b). The amount of differential is assigned to the appropriate assets to
adjust the various account balances to reflect the fair values of Basss assets and liabilities as of the date
of acquisition.
Debit
Inventory
Credit
1 000
Equipment
10 000
Patents
3 000
2 000
Differential
12 000
* Differential represents excess fair value (118,000) over book value (106,000) of Bass Ltds net assets.
The two workpaper eliminating entries (a) and (b) could be combined in one entry, without using the
differential clearing account. The use of the differential account may simplify the consolidation procedure
when several various subsidiarys asset and liability accounts need to be restated to fair values.
This example does not include any other intercompany accounts as of the date of combination. If any
existed, they would be eliminated to present the consolidated entity fairly.
Dakar Corporation encounters the following product cost situations as part of its quarterly reporting: It only
conducts inventory counts at the end of the second quarter and end of the fiscal year. It's typical gross
profit is 30%. The actual gross profit at the end of the second quarter is determined to have been 32% for
the first six months of the year. The actual gross profit at the end of the year is determined to have been
29% for the entire year. It determines that, at the end of the second quarter, due to peculiar market
conditions, there is a net realizable value (NRV) adjustment to certain inventory required in the amount of
90,000. Dakar expects that this market anomaly will be corrected by year-end, which indeed does occur
in late December. It suffers a decline of 65,000 in the market value of its inventory during the third
quarter. This inventory value increases by 75,000 in the fourth quarter. It suffers a clearly temporary
decline of 10,000 in the market value of a specific part of its inventory in the first quarter, which it
recovers in the second quarter. Dakar uses the following calculations to record these situations and
determine quarterly cost of goods sold:
Q1
Q2
Q3
Q4
FULL YEAR
SALES
10 000 000
1- Gross profit percentage

Cost of goods, gross profit method
8 500 000
70%
70%
7 000 000
5 040 000
Cost of goods, based on actual

physical count
5 580 000 (1)
Temporary net realizable value

decline in specific inventory
90 000
Decline in inventory value with

subsequent inrease
Temporary decline in inventory
value
Total cost of goods sold
7 200 000
11 800 000
9 005 000 (2)
37 500 000
26 625 000
-90 000
65 000
-65 000
10 000
-10 000
7 010 000
5 660 000
5 105 000
8 850 000
26 625 000
(1) Calculated as 18 500 000 sales x (1 - 32% gross margin) - 7 000 000 (Quarter 1 cost of sales)
(2) Calculated as 37 500 000 sales x (1 - 29% gross margin) - 17 620 000 (Quarters 1-3 cost of sales)
(3) Even though anticipated to recover, the NRV decline must be recognized
(4) Full recognition of market value decline, followed by recognition of market value increase, but only in
the amount needed to offset the amount of initial decline
(5) No deferred recognition to temporary decline in value
Dakar Corporation encounters the following expense situations as part of its quarterly reporting: Its largest
customer, Festive Fabrics, has placed firm orders for the year that will result in sales of 1,500,000 in the
first quarter, 2,000,000 in the second quarter, 750,000 in the third quarter, and 1,650,000 in the fourth
quarter. Dakar gives Festive Fabrics a 5% rebate if Festive Fabrics buys at least 5 million of goods each
year. Festive Fabrics exceeded the 5 million goal in the preceding year and was expected to do so again
in the current year.
It incurs 24,000 of trade show fees in the first quarter for a trade show that will occur in the third
quarter.
It pays 64,000 in advance in the second quarter for a series of advertisements that will run
through the third and fourth quarters.
It receives a 32,000 property tax bill in the second quarter that applies to the following twelve
months.
It incurs annual factory air filter replacement costs of 6,000 in the first quarter.
Its management team is entitled to a year-end bonus of 120,000 if it meets a sales target of 40
million, prior to any sales rebates, with the bonus dropping by 10,000 for every million dollars of
sales not achieved.
Dakar uses the following calculations to record these situations:
Q1
Sales
Q2
10 000 000
Deduction from sales
Q3
8 500 000
-75 000(1)
Q4
7 200 000
-100 000
FULL YEAR
11 800 000
37 500 000
-82 500
-295 000
-37 500
Marketing expense
24 000(2)
24 000
Advertising expense
32 000(3)
32 000
64 000
Property tax expense
8 000
8 000
24 000
Maintanance expense
Bonus expense
8 000(4)
1 500(5)
1 500
1 500
1 500
6 000
30 000(6)
25 500
21 600
17 900
95 000
(1) The sales rebate is based on 5% of the actual sales to the customer in the quarter when is incurred.
The actual payment back to the customer does not occur until the end of the year, when the 5 million
goal is definitively reached. Since the firm orders for the full year exceed the threshold for rebates, the
obligation is deemed probable and must be recorded.
(2) The 24 000 trade show payment is initially recorded as a prepaid expense and then charged to
marketing expense when the trade show occurs.
(3) The 64 000 advertising payment is initially recorded as a prepaid expense and then charged to
advertising expense when the advertisements run.
(4) The 32 000 property tax payment is initially recorded as a prepaid expense and then charged to
property tax expense on a straight-line basis over the next four quarters
(5) The 6 000 air filter replacement payment is initially recorded as a prepaid expense and then charged
to maintenance expense over the one-year life of the air filters.
(6) The management bonus is recognized in proportion to the amount of revenue recognized in each
quarter. Once it becomes apparent that full sales target will not be reached, the bonus accrual should be
adjusted downward. In this case, the downward adjustment is assumed to be in the fourth quarter, since
past history and seasonality factors made non-achievement of the full goal unlikely until fourth quarter
results were known. (Note: with other fact patterns, quarterly accruals may have differed). So:
Q1: (10 000 000 / 40 000 000) x 120 000 = 30 000
Q2: (8 800 000 / 40 000 000) x 120 000 = 25 500
Q3: (7 200 000 / 40 000 000) x 120 000 = 21 600
Q4:
40 000 000 - 37 500 000 = 2 500 000 >>> the bonus decline: 120 000 - 2.5 x 10 000 = 95 000
So far bonus expense allocated (Q1 + Q2 + Q3) = 30 000 + 25 500 + 21 600 = 77 100
Bonus expense allocated to Q4 = 95 000 - 77 100 = 17 900
Dakar Corporation is sued over its alleged violation of a patent in one of its products. Dakar settles the
litigation in the fourth quarter. Under the settlement terms, Dakar must retroactively pay a 3% royalty on
all sales of the product to which the patent applies. Sales of the product were 150,000 in the first quarter,
82,000 in the second quarter, 109,000 in the third quarter, and 57,000 in the fourth quarter. In addition,
the cumulative total of all sales of the product in prior years is 1,280,000. Under provisions of IAS 34,
Dakar cannot restate its previously issued quarterly financial results to include the following royalty
expense, so instead will report the royalties expense, including that for earlier years, in the fourth quarter:
Q1
Q2
Q3
Q4
FULL YEAR
Sales related to lawsuit
150 000
82 000
109 000
57 000
398 000
Royalty expense
11 940
11 940
Royalty expense related to

prior year sales
38 400
38 400
An entity, a real estate developer, enters into a contract with a customer for the sale of a building for 1
000 000 EUR. The customer intends to open a restaurant in the building. The building is located in an
area where new restaurants face high levels of competition and the customer has little experience in the
restaurant industry.
The customer pays a non-refundable deposit of 50 000 EUR at inception of the contract and enters into a
long-term financing agreement with the entity for the remaining 95 per cent of the promised consideration.
The financing arrangement is provided on a non-recourse basis, which means that if the customer
defaults, the entity can repossess the building, but cannot seek further compensation from the customer,
even if the collateral does not cover the full value of the amount owed. The entitys cost of the building is
600 000 EUR. The customer obtains control of the building at contract inception.
In assessing whether the contract meets the recognition criteria (see 9 of IFRS 15), the entity
concludes that the recognition criterion of IFRS 15 is not met because it is not probable that the entity will
collect the consideration to which it is entitled in exchange for the transfer of the building. In reaching this
conclusion, the entity observes that the customers ability and intention to pay may be in doubt because
of the following factors:
the customer intends to repay the loan (which has a significant balance) primarily from income
derived from its restaurant business (which is a business facing significant risks because of high
competition in the industry and the customers limited experience)
the customer lacks other income or assets that could be used to repay the loan; and
the customers liability under the loan is limited because the loan is non-recourse.
Because the recognition criteria of IFRS 15 are not met, the entity applies paragraphs 1516 of IFRS 15
to determine the accounting for the non-refundable deposit of 50 000 EUR.
14- 15-16 of IFRS 15

14
If a contract with a customer does not meet the criteria in 9, an entity shall continue to assess the
contract to determine whether the criteria in 9 are subsequently met.
15
When a contract with a customer does not meet the recognition criteria in 9 and an entity receives
consideration from the customer, the entity shall recognise the consideration received as revenue only
when either of the following events has occurred:
the entity has no remaining obligations to transfer goods or services to the customer and all, or
substantially all, of the consideration promised by the customer has been received by the entity and is
non-refundable; or
the contract has been terminated and the consideration received from the customer is nonrefundable.
16
An entity shall recognise the consideration received from a customer as a liability until one of the events
in 15 occurs or until the criteria in 9 are subsequently met (see 14). Depending on the facts and
circumstances relating to the contract, the liability recognised represents the entitys obligation to either
transfer goods or services in the future or refund the consideration received. In either case, the liability
shall be measured at the amount of consideration received from the customer.
The entity observes that none of the events described in 15 have occurred that is, the entity has not
received substantially all of the consideration and it has not terminated the contract. Consequently, in
accordance with paragraph 16, the entity accounts for the non-refundable 50 000 EUR payment as a
deposit liability. The entity continues to account for the initial deposit, as well as any future payments of
principal and interest, as a deposit liability, until such time that the entity concludes that the criteria in 9
are met (ie the entity is able to conclude that it is probable that the entity will collect the consideration) or
one of the events in 15 has occurred. The entity continues to assess the contract in accordance with
14 to determine whether the criteria in 9 are subsequently met or whether the events in 15 of IFRS 15
have occurred.
An entity sells 1,000 units of a prescription drug to a customer for promised consideration of 1 000 000
EUR. This is the entitys first sale to a customer in a new region, which is experiencing significant
economic difficulty. Thus, the entity expects that it will not be able to collect from the customer the full
amount of the promised consideration. Despite the possibility of not collecting the full amount, the entity
expects the regions economy to recover over the next two to three years and determines that a
relationship with the customer could help it to forge relationships with other potential customers in the
region.
When assessing whether the recognition criterion in 9 (e) of IFRS 15 is met, the entity also considers
47 and 52(b) of IFRS 15.
47 of IFRS 15
Determining the transaction price
An entity shall consider the terms of the contract and its customary business practices to determine the
transaction price. The transaction price is the amount of consideration to which an entity expects to be
entitled in exchange for transferring promised goods or services to a customer, excluding amounts
collected on behalf of third parties (for example, some sales taxes). The consideration promised in a
contract with a customer may include fixed amounts, variable amounts, or both.
52
The variability relating to the consideration promised by a customer may be explicitly stated in the
contract. In addition to the terms of the contract, the promised consideration is variable if either of the
following circumstances exists:
the customer has a valid expectation arising from an entitys customary business practices,
published policies or specific statements that the entity will accept an amount of consideration that is
less than the price stated in the contract. That is, it is expected that the entity will offer a price
concession. Depending on the jurisdiction, industry or customer this offer may be referred to as a
discount, rebate, refund or credit.
other facts and circumstances indicate that the entitys intention, when entering into the contract
with the customer, is to offer a price concession to the customer
Based on the assessment of the facts and circumstances, the entity determines that it expects to provide
a price concession and accept a lower amount of consideration from the customer. Accordingly, the entity
concludes that the transaction price is not 1 000 000 EUR and, therefore, the promised consideration is
variable. The entity estimates the variable consideration and determines that it expects to be entitled to
400 000 EUR.
The entity considers the customers ability and intention to pay the consideration and concludes that
though the region is experiencing economic difficulty, it is probable that it will collect 400 000 EUR from
the customer. Consequently, the entity concludes that the criterion in 9 (e) of IFRS 15 is met based on
an estimate of variable consideration of 400 000 EUR. In addition, on the basis of an evaluation of the
contract terms and other facts and circumstances, the entity concludes that the other criteria in 9 of
IFRS 15 are also met. Consequently, the entity accounts for the contract with the customer in accordance
with the requirements in IFRS 15.
An entity, a hospital, provides medical services to an uninsured patient in the emergency room. The entity
has not previously provided medical services to this patient but is required by law to provide medical
services to all emergency room patients. Because of the patients condition upon arrival at the hospital,
the entity provides the services immediately and, therefore, before the entity can determine whether the
patient is committed to perform its obligations under the contract in exchange for the medical services
provided. Consequently, the contract does not meet the criteria in 9 of IFRS 15 and, in accordance with
14 of IFRS 15, the entity will continue to assess its conclusion based on updated facts and
circumstances.
14 of IFRS 15
If a contract with a customer does not meet the criteria in 9, an entity shall continue to assess the
contract to determine whether the criteria in 9 are subsequently met.
After providing services, the entity obtains additional information about the patient including a review of
the services provided, standard rates for such services and the patients ability and intention to pay the
entity for the services provided. During the review, the entity notes its standard rate for the services
provided in the emergency room is 10 000 EUR. The entity also reviews the patients information and to
be consistent with its policies designates the patient to a customer class based on the entitys
assessment of the patients ability and intention to pay.
Before reassessing whether the criteria in 9 of IFRS 15 have been met, the entity considers 47 and
52(b) of IFRS 15. Although the standard rate for the services is 10 000 EUR (which may be the amount
invoiced to the patient), the entity expects to accept a lower amount of consideration in exchange for the
services. Accordingly, the entity concludes that the transaction price is not 10 000 EUR and, therefore, the
promised consideration is variable. The entity reviews its historical cash collections from this customer
class and other relevant information about the patient. The entity estimates the variable consideration and
determines that it expects to be entitled to 1 000 EUR.
In accordance with 9(e) of IFRS 15, the entity evaluates the patients ability and intention to pay (ie the
credit risk of the patient). On the basis of its collection history from patients in this customer class, the
entity concludes it is probable that the entity will collect 1 000 EUR (which is the estimate of variable
consideration). In addition, on the basis of an assessment of the contract terms and other facts and
circumstances, the entity concludes that the other criteria in 9 of IFRS 15 are also met. Consequently,
the entity accounts for the contract with the patient in accordance with the requirements in IFRS 15.
Example IV
An entity licences a patent to a customer in exchange for a usage-based royalty. At contract inception, the
contract meets all the criteria in 9 of IFRS 15 and the entity accounts for the contract with the customer
in accordance with the requirements in IFRS 15. The entity recognises revenue when the customers
subsequent usage occurs in accordance with B63 of IFRS 15.
B63 of IFRS 15
Sales-based or usage-based royalties
Notwithstanding the requirements in 5659, an entity shall recognise revenue for a salesbased or usage-based royalty promised in exchange for a licence of intellectual property only when (or
as) the later of the following events occurs:
the subsequent sale or usage occurs; and
the performance obligation to which some or all of the sales-based or usage-based royalty has
been allocated has been satisfied (or partially satisfied)
Throughout the first year of the contract, the customer provides quarterly reports of usage and pays within
the agreed- upon period.
During the second year of the contract, the customer continues to use the entitys patent, but the
customers financial condition declines. The customers current access to credit and available cash on
hand are limited. The entity continues to recognise revenue on the basis of the customers usage
throughout the second year. The customer pays the first quarters royalties but makes nominal payments
for the usage of the patent in Quarters 24. The entity accounts for any impairment of the existing
receivable in accordance with IFRS 9 Financial Instruments.
13 of IFRS 15
If a contract with a customer meets the criteria in 9 at contract inception, an entity shall not reassess
those criteria unless there is an indication of a significant change in facts and circumstances. For
example, if a customers ability to pay the consideration deteriorates significantly, an entity would
reassess whether it is probable that the entity will collect the consideration to which the entity will be
entitled in exchange for the remaining goods or services that will be transferred to the customer
During the third year of the contract, the customer continues to use the entitys patent. However, the
entity learns that the customer has lost access to credit and its major customers and thus the customers
ability to pay significantly deteriorates. The entity therefore concludes that it is unlikely that the customer
will be able to make any further royalty payments for ongoing usage of the entitys patent. As a result of
this significant change in facts and circumstances, in accordance with 13 of IFRS 15, the entity
reassesses the criteria in 9 of IFRS 15 and determines that they are not met because it is no longer
probable that the entity will collect the consideration to which it will be entitled. Accordingly, the entity does
not recognise any further revenue associated with the customers future usage of its patent. The entity
accounts for any impairment of the existing receivable in accordance with IFRS 9 Financial Instruments.
Example V
An entity promises to sell 120 products to a customer for 12 000 EUR (100 EUR per product). The
products are transferred to the customer over a six-month period. The entity transfers control of each
product at a point in time. After the entity has transferred control of 60 products to the customer, the
contract is modified to require the delivery of an additional 30 products (a total of 150 identical products)
to the customer for 95 euro each. The additional 30 products were not included in the initial contract.
27 of IFRS 15
A good or service that is promised to a customer is distinct if both of the following criteria are met:
the customer can benefit from the good or service either on its own or together with other
resources that are readily available to the customer (ie the good or service is capable of being
distinct); and
the entitys promise to transfer the good or service to the customer is separately identifiable from
other promises in the contract (ie the good or service is distinct within the context of the contract).
Case A Additional products for a price that reflects the stand -alone selling price
When the contract is modified, the price of the contract modification for the additional 30 products is an
additional 2 850 EUR or 95 EUR per product. The pricing for the additional products reflects the standalone selling price of the products at the time of the contract modification and the additional products are
distinct (in accordance with 27 of IFRS 15) from the original products.
In accordance with 20 of IFRS 15, the contract modification for the additional 30 products is, in effect, a
new and separate contract for future products that does not affect the accounting for the existing contract.
The entity recognises revenue of 100 EUR per product for the 120 products in the original contract and 95
EUR per product for the 30 products in the new contract.
Case B Additional products for a price that does not reflect the stand-alone selling price
During the process of negotiating the purchase of an additional 30 products, the parties initially agree on
a price of 80 EUR per product. However, the customer discovers that the initial 60 products transferred to
the customer contained minor defects that were unique to those delivered products. The entity promises a
partial credit of 15 EUR per product to compensate the customer for the poor quality of those products.
The entity and the customer agree to incorporate the credit of 900 EUR (15 EUR credit 60 products)
into the price that the entity charges for the additional 30 products. Consequently, the contract
modification specifies that the price of the additional 30 products is 1 500 EUR or 50 EUR per product.
That price comprises the agreed-upon price for the additional 30 products of 2 400 EUR, or 80 EUR per
product, less the credit of 900 EUR.
20 of IFRS 15
An entity shall account for a contract modification as a separate contract if both of the following conditions
are present:
the scope of the contract increases because of the addition of promised goods or services that
are distinct; and
the price of the contract increases by an amount of consideration that reflects the entitys stand
-alone selling prices of the additional promised goods or services and any appropriate adjustments to
that price to reflect the circumstances of the particular contract. For example, an entity may adjust the
stand-alone selling price of an additional good or service for a discount that the customer receives,
because it is not necessary for the entity to incur the selling-related costs that it would incur when
selling a similar good or service to a new customer.
21(b) of IFRS 15
If a contract modification is not accounted for as a separate contract in accordance with 20, an entity
shall account for the promised goods or services not yet transferred at the date of the contract
modification (ie the remaining promised goods or services) in whichever of the following ways is
applicable:
()
An entity shall account for the contract modification as if it were a part of the existing contract if
the remaining goods or services are not distinct and, therefore, form part of a single performance
obligation that is partially satisfied at the date of the contract modification. The effect that the contract
modification has on the transaction price, and on the entitys measure of progress towards complete
satisfaction of the performance obligation, is recognised as an adjustment to revenue (either as an
increase in or a reduction of revenue) at the date of the contract modification (ie the adjustment to
revenue is made on a cumulative catch-up basis).
()
At the time of modification, the entity recognises the 900 EUR as a reduction of the transaction price and,
therefore, as a reduction of revenue for the initial 60 products transferred. In accounting for the sale of the
additional 30 products, the entity determines that the negotiated price of 80 EUR per product does not
reflect the stand-alone selling price of the additional products. Consequently, the contract modification
does not meet the conditions in paragraph 20 of IFRS 15 to be accounted for as a separate contract.
Because the remaining products to be delivered are distinct from those already transferred, the entity
applies the requirements in 21(a) of IFRS 15 and accounts for the modification as a termination of the
original contract and the creation of a new contract.
Consequently, the amount recognized as revenue for each of the remaining products is a blended price of
93.33 EUR {[(100 EUR 60 products not yet transferred under the original contract) + (80 EUR 30
products to be transferred under the contract modification)] 90 remaining products}.
Modification of a services contract
An entity enters into a three -year contract to clean a customers offices on a weekly basis. The customer
promises to pay 100 000 EUR per year. The stand-alone selling price of the services at contract inception
is 100 000 EUR per year. The entity recognises revenue of 100 000 EUR per year during the first two
years of providing services. At the end of the second year, the contract is modified and the fee for the third
year is reduced to 80 000 EUR. In addition, the customer agrees to extend the contract for three
additional years for consideration of 200 000 EUR payable in three equal annual instalments of 66 667
EUR at the beginning of years 4, 5 and 6. After the modification, the contract has four years remaining in
exchange for total consideration of 280 000 EUR. The stand-alone selling price of the services at the
beginning of the third year is 80 000 EUR per year. The entitys stand-alone selling price at the beginning
of the third year, multiplied by the remaining number of years to provide services, is deemed to be an
appropriate estimate of the stand-alone selling price of the multi-year contract (ie the stand-alone selling
price is 4 years 80 000 EUR per year = 320 000 EUR).
27 of IFRS 15
distinct); and
At contract inception, the entity assesses that each week of cleaning service is distinct in accordance with
27 of IFRS 15. Notwithstanding that each week of cleaning service is distinct, the entity accounts for the
cleaning contract as a single performance obligation in accordance with 22(b) of IFRS 15. This is
because the weekly cleaning services are a series of distinct services that are substantially the same and
have the same pattern of transfer to the customer (the services transfer to the customer over time and
use the same method to measure progressthat is, a time-based measure of progress).
27 of IFRS 15
distinct); and
At the date of the modification, the entity assesses the remaining services to be provided and concludes
that they are distinct. However, the amount of remaining consideration to be paid 280 000 EUR does not
reflect the stand-alone selling price of the services to be provided 320 000 EUR.
Consequently, the entity accounts for the modification in accordance with 21(a) of IFRS 15 as a
termination of the original contract and the creation of a new contract with consideration of 280 000 EUR
for four years of cleaning service. The entity recognises revenue of 70 000 EUR per year (280 000 EUR
4 years) as the services are provided over the remaining four years.
21(a) of IFRS 15
applicable:
an entity shall account for the contract modification as if it were a termination of the existing
contract and the creation of a new contract, if the remaining goods or services are distinct from the
goods or services transferred on or before the date of the contract modification. The amount of
consideration to be allocated to the remaining performance obligations is the sum of:
the consideration promised by the customer (including amounts already received from
the customer) that was included in the estimate of the transaction price and that had not been
recognised as revenue; and
the consideration promised as part of the contract modification.

Modification resulting in a cumulative catch -up adjustment to revenue
An entity, a construction company, enters into a contract to construct a commercial building for a
customer on customer-owned land for promised consideration of 1 000 000 EUR and a bonus of 200 000
EUR if the building is completed within 24 months. The entity accounts for the promised bundle of goods
and services as a single performance obligation satisfied over time in accordance with 35(b) of IFRS 15
because the customer controls the building during construction.
35 of IFRS 15
Performance obligations satisfied over time
An entity transfers control of a good or service over time and, therefore, satisfies a performance obligation
and recognises revenue over time, if one of the following criteria is met:
the customer simultaneously receives and consumes the benefits provided by the entitys
performance as the entity performs
the entitys performance creates or enhances an asset (for example, work in progress) that the
customer controls as the asset is created or enhanced or
the entitys performance does not create an asset with an alternative use to the entity and the
entity has an enforceable right to payment for performance completed to date
At the inception of the contract, the entity expects the following:

EUR
Transaction price
1 000 000
Expected costs
700 000
Expected profit (30%)
300 000
At contract inception, the entity excludes the 200 000 EUR bonus from the transaction price because it
cannot conclude that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. Completion of the building is highly susceptible to factors outside the entitys
influence, including weather and regulatory approvals. In addition, the entity has limited experience with
similar types of contracts.
The entity determines that the input measure, on the basis of costs incurred, provides an appropriate
measure of progress towards complete satisfaction of the performance obligation. By the end of the first
year, the entity has satisfied 60% of its performance obligation on the basis of costs incurred to date
(420 000 EUR) relative to total expected costs (700 000 EUR). The entity reassesses the variable
consideration and concludes that the amount is still constrained in accordance with 5658 of IFRS 15.
Constraining estimates of variable consideration

56 of IFRS 15
An entity shall include in the transaction price some or all of an amount of variable consideration only to
the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur when the uncertainty associated with the variable consideration is subsequently
resolved.
57 of IFRS 15
In assessing whether it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur once the uncertainty related to the variable consideration is subsequently
resolved, an entity shall consider both the likelihood and the magnitude of the revenue reversal. Factors
that could increase the likelihood or the magnitude of a revenue reversal include, but are not limited to,
any of the following:
the amount of consideration is highly susceptible to factors outside the entitys influence. Those
factors may include volatility in a market, the judgement or actions of third parties, weather conditions
and a high risk of obsolescence of the promised good or service.
the uncertainty about the amount of consideration is not expected to be resolved for a long period
of time.
the entitys experience (or other evidence) with similar types of contracts is limited, or that
experience (or other evidence) has limited predictive value.
the entity has a practice of either offering a broad range of price concessions or changing the
payment terms and conditions of similar contracts in similar circumstances.
the contract has a large number and broad range of possible consideration amounts.
58
An entity shall apply paragraph B63 to account for consideration in the form of a sales-based or usage
based royalty that is promised in exchange for a licence of intellectual property.
Consequently, the cumulative revenue and costs recognised for the first year are as follows:
EUR
Revenue
600 000
Costs
420 000
Gross profit
180 000
In the first quarter of the second year, the parties to the contract agree to modify the contract by changing
the floor plan of the building. As a result, the fixed consideration and expected costs increase by 150 000
EUR and 120 000 EUR, respectively. Total potential consideration after the modification is 1 350 000 EUR
(1 150 000 EUR fixed consideration + 200 000 EUR completion bonus). In addition, the allowable time for
achieving the 200 000 EUR bonus is extended by 6 months to 30 months from the original contract
inception date.
At the date of the modification, on the basis of its experience and the remaining work to be performed,
which is primarily inside the building and not subject to weather conditions, the entity concludes that it is
highly probable that including the bonus in the transaction price will not result in a significant reversal in
the amount of cumulative revenue recognised in accordance with 56 of IFRS 15 and includes the 200
000 EUR in the transaction price.
27 of IFRS 15
distinct); and
29 of IFRS 15
Factors that indicate that an entitys promise to transfer a good or service to a customer is separately
identifiable (in accordance with paragraph 27(b)) include, but are not limited to, the following:
the entity does not provide a significant service of integrating the good or service with other goods
or services promised in the contract into a bundle of goods or services that represent the combined
output for which the customer has contracted. In other words, the entity is not using the good or
service as an input to produce or deliver the combined output specified by the customer.
the good or service does not significantly modify or customise another good or service promised
in the contract.
the good or service is not highly dependent on, or highly interrelated with, other goods or services
promised in the contract. For example, the fact that a customer could decide to not purchase the
good or service without significantly affecting the other promised goods or services in the contract
might indicate that the good or service is not highly dependent on, or highly interrelated with, those
other promised goods or services.
In assessing the contract modification, the entity evaluates 27(b) of IFRS 15 and concludes (on the
basis of the factors in 29 of IFRS 15) that the remaining goods and services to be provided using the
modified contract are not distinct from the goods and services transferred on or before the date of
contract modification; that is, the contract remains a single performance obligation.
21 of IFRS 15
applicable:
an entity shall account for the contract modification as if it were a termination of the existing
contract and the creation of a new contract, if the remaining goods or services are distinct from the
goods or services transferred on or before the date of the contract modification. The amount of
consideration to be allocated to the remaining performance obligations is the sum of:
o
the consideration promised by the customer (including amounts already received from
the customer) that was included in the estimate of the transaction price and that had not been
recognised as revenue; and
the consideration promised as part of the contract modification.

An entity shall account for the contract modification as if it were a part of the existing contract if
the remaining goods or services are not distinct and, therefore, form part of a single performance
obligation that is partially satisfied at the date of the contract modification. The effect that the contract
modification has on the transaction price, and on the entitys measure of progress towards complete
satisfaction of the performance obligation, is recognised as an adjustment to revenue (either as an
increase in or a reduction of revenue) at the date of the contract modification (ie the adjustment to
revenue is made on a cumulative catch-up basis).
If the remaining goods or services are a combination of items (a) and (b), then the entity shall
account for the effects of the modification on the unsatisfied (including partially unsatisfied)
performance obligations in the modified contract in a manner that is consistent with the objectives of
this paragraph.
Consequently, the entity accounts for the contract modification as if it were part of the original contract (in
accordance with 21(b) of IFRS 15). The entity updates its measure of progress and estimates that it has
satisfied 51.2% of its performance obligation (420 000 EUR actual costs incurred 820 000 EUR total
expected costs). The entity recognises additional revenue of 91 200 EUR [(51.2 % complete 1 350 000
EUR modified transaction price) 600 000 EUR revenue recognised to date] at the date of the
modification as a cumulative catch-up adjustment.

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2.

The proprietary (parent entity) concept

Accounts receivable (net)

Less accumulated depreciation

Liabilities and shareholders' equity

Book value (BV) Fair Value (FV)

Accounts receivable (net)

90% thereof (majority interest)

10% thereof (non-controlling interest)

Goodwill is calculated as follow:

Fair value of Bass net assets

Goodwill allocated to controlling interest (90%)

Goodwill allocated to non-controlling interest (10%)

Difference between FV and BV

(immediately after combination)

Accounts receivable, net

Less accumulated depreciation

Liabilities and shareholders' equity

Bonds payable, 10%

Total liabilities and equity

Parent's share (% stock ownership)

Acquired share of book value

Allocation step up to fair value of net assets

Book value of net assets

Excess fair value over book value (step-up)

Parent's share (% share ownership)

Parent's share of step up

Non-controlling interest's share of net assets at fair value

3. Elimination entries on preceding workpaper

Investment of share of Bass

Non-controlling interest in valuation

Non-controlling interest in goodwill

* 90% x 41 000 = 36 900

Accounts receivable (net)

Less accumulated depreciation

Bonds payable, 10%

Total liabilities and shareholders' equity

Liabilities and shareholders' equity

Book value (BV) Fair Value (FV)

Accounts receivable (net)

90% thereof (majority interest)

10% thereof (non-controlling interest)

Total identifiable net assets

Difference between FV and

Accounts receivable, net

Less accumulated depreciation

Liabilities and shareholders' equity

Bonds payable, 10%

Total liabilities and equity

1. Investment on Alto companys books

Book value of Bass at acquisition date

Parent's share (% stock ownership)

Acquired share of book value

Allocation step up to fair value of net assets

Book value of net assets

Excess fair value over book value (step-up)

Parent's share (% share ownership)

Parent's share of step up

Parent's share of net assets at fair value (a) + (b)

106 200 / 106 200

3. Elimination entries on preceding workpaper

Investment of share of Bass - Alto

Non-controlling interest in revaluation

* 41,000 90%= 36,900