Cases
Practical case
Usinage Valmère SAS (fictitious entity) acquires and places in service on 1 January 20X5 a machine costing 500,000 EUR and receives on the same day an equipment grant of 100,000 EUR from a region. The entity has not yet fixed the presentation of the grant: it compares deferred income with deduction from the carrying amount.
Your assignment
Characterise the grant and recall the two presentations; compute the annual release (deferred income), the cost net of the grant, the reduced depreciation and the difference in net effect on profit or loss; record the grant and the depreciation under each presentation (case data) and present their effect; 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.
Intermediate level: help remains available, on demand.
Method
File checklist
3 documents: open each one to read it.
Document 1Contract
Grant agreement of 1 January 20X5: 100,000 EUR paid on the day the machine is placed in service, in support of its acquisition; the region expects the entity to operate the machine throughout its useful life (condition that will be met: the entity has the intention and the ability to operate it).
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Equipment grant received | €100,000.00 | |
| Cost of the machine | €500,000.00 | |
| Useful life of the machine | 10 years | |
| Residual value of the machine | €0.00 | |
| Gross annual depreciation (IAS 16 baseline) | €50,000.00 | |
| Annual maintenance | €12,000.00 |
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.
Grant agreement
Asset register
Maintenance contract
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 1Analysis
What is the nature of the grant and which presentations does the standard allow?
Task 2Calculation
Compute the annual release of deferred income.
Part 1 · Calculation
Compute the annual release of deferred income.
Task 3Calculation
Compute the cost of the machine net of the grant.
Part 1 · Calculation
Compute the cost of the machine net of the grant.
Task 4Calculation
Compute the annual depreciation on the net cost.
Part 1 · Calculation
Compute the annual depreciation on the net cost.
Task 5Calculation
Compute the difference in net effect on profit or loss between the two presentations.
Part 1 · Calculation
Compute the difference in net effect on profit or loss between the two presentations.
Task 6Journal entries
Record the grant and the depreciation with deferred income.
Part 1 · Journal entry · Journal entries
Entry 1 of 3
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 3
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 3 · Journal entry · Journal entries
Entry 3 of 3
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 7Journal entries
Record the grant and the depreciation with the deduction.
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
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 8Effects on the financial statements
What is the effect of deferred income 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
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 9Effects on the financial statements
What is the effect of the deduction 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
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — 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 / 16).
Document this file
These working papers use the data and results of this case.
Normative references