Practice Activity 21.6 IFRS 11 implications of the presence of several joint arrangements in a cont

Practice Activity 21.6 IFRS 11 implications of the presence of several joint arrangements in a contractual arrangement

Assume that People Furniture Limited and Fine Glass Limited enter into a contract to produce furniture and related accessories. Furniture With Glass, a newly incorporated entity, has been structured to execute the purpose of the investors. People Furniture Limited and Fine Glass Limited each have voting rights of 50 percent in the new company.

Required:

i. Explain the implications of the assets and liabilities held by People Furniture Limited and Fine Glass Limited in the new entity.

ii.Assume that the People Furniture Limited and Fine Glass Limited modify the features of the new company through their contractual arrangement so that in a specified proportion, each has an interest in the assets and is liable for the liabilities of the new company. What is the implication of the modification to the new company for the joint arrangement?

Suggested answer to practice activity 21.6