Cases
Practical case
Tavelle SA (fictitious entity), a logistics company, closes its accounts on 31 December 20X6; the financial statements are authorised for issue on 12 March 20X7. It has three bank borrowings, two of which carry covenants. You prepare the classification of each borrowing, the reclassification entry, the total of current liabilities and the disclosure. This standard applies until IFRS 18 applies (annual periods beginning on or after 1 January 2027); the IFRS 18 course presents what changes.
Your assignment
For borrowing A, compute the non-current portion and judge the right to defer; for borrowing B, compute the non-current portion before the effect of the covenant, judge the right to defer, take into account the waiver obtained in February and record the reclassification; for borrowing C, judge the effect of the intention of management; compute the total of current liabilities; state the disclosure to give on borrowing A; present the effect on the financial statements; conclude.
Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.
Advanced level: no help, the work is grouped by kind.
8 documents: open each one to read it.
Document 1Memo
Tavelle SA (fictitious entity) operates warehouses and closes its accounts on 31 December 20X6; its functional currency is the euro. Case conventions: amounts in EUR; the ratios are expressed as multiples; case convention (pedagogical assumption, not attributed to the standard): the entry is illustrative; no liquidity presentation. This standard applies until IFRS 18 applies (annual periods beginning on or after 1 January 2027).
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Outstanding of borrowing A | €3,600,000.00 | |
| Instalment of borrowing A within 12 months | €450,000.00 | |
| Limit of the ratio of borrowing A (multiple) | 3.5 units | |
| Ratio at 31 December 20X6 (multiple) | 2.9 units | |
| Outstanding of borrowing B | €2,000,000.00 | |
| Instalment of borrowing B within 12 months | €400,000.00 | |
| Interest cover required (multiple) | 4 units | |
| Interest cover at 31 December 20X6 (multiple) | 3.4 units | |
| Trade and other current payables | €1,250,000.00 | |
| Accrued expenses | €310,000.00 | |
| Portions of the borrowings within 12 months | €850,000.00 | |
| Current liabilities per the draft statement of financial position | €4,010,000.00 | |
| Outstanding of borrowing C | €700,000.00 | |
| Forecast ratio at 31 March 20X7 | 3.2 units | |
| Forecast ratio at 30 September 20X7 | 3.3 units |
Not every document matters: identify those that affect the accounting treatment.
Part 1 · Classification · Analysis
Sort each document: does it affect the accounting treatment?
Drag each item into its category, or tap the category under the item.
Company profile and case conventions
Borrowing A: Vanlis Bank
Borrowing B: Kordal Bank
Waiver letter from Kordal Bank
Other current liabilities
Borrowing C: revolving facility
Treasury note: covenant forecasts
Statement of a borrowing repaid in 20X5
10 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.
Task 1Calculation
Borrowing A: compute the non-current portion.
Part 1 · Calculation
Borrowing A: compute the non-current portion.
Task 2Professional judgement
Borrowing A: does the entity have the right to defer settlement at the closing date?
Task 3Calculation
Borrowing B: compute the non-current portion before the effect of the covenant.
Part 1 · Calculation
Borrowing B: compute the non-current portion before the effect of the covenant.
Task 4Professional judgement
Borrowing B: does the entity have the right to defer at the closing date, in view of the February waiver?
Task 5Journal entries
Record the reclassification of borrowing B to current.
Part 1 · Journal entry · Journal entries
Entry 1 of 1
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Task 6Professional judgement
Borrowing C: does the intention to repay in September 20X7 change the classification?
Task 7Calculation
Compute the total of current liabilities.
Part 1 · Calculation
Compute the total of current liabilities.
Task 8Analysis
What information to give on borrowing A, classified as non-current but subject to a covenant?
Task 9Effects on the financial statements
What is the effect of the reclassification on the financial statements?
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Task 10Conclusion
Write the conclusion.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 11).
Document this file
These working papers use the data and results of this case.
Normative references