Cases
Practical case
Orlane Industrie SA (fictitious entity) closes its books on 31 December 20X6. It is controlled by Orlane Holding SA, itself controlled ultimately by the Orlane Foundation; it has significant influence over Brisval SA (associate) and holds Orlane Services SAS (subsidiary). In 20X6 it sold goods to Brisval in two deliveries, received services from Orlane Services and settled the related payable in cash; it also monitors a receivable from Brisval, part of which is impaired. Management prepares the related party note.
Your assignment
Identify the category of each related party and the information about the parent; compute the total of sales to the associate and record them; compute the total of services received from the subsidiary and record the settlement; recompute the closing allowance, check it, compute the net balance of the receivable and record the expense of the period; assess whether an arm's length statement can be made; describe the content of the note; 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.
Intermediate level: help remains available, on demand.
Method
File checklist
6 documents: open each one to read it.
Document 1Memo
Control structure: Orlane Holding SA controls Orlane Industrie SA and publishes consolidated financial statements available to the public. The Orlane Foundation controls Orlane Holding SA, and therefore the entity ultimately, and does not publish consolidated financial statements.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| First-quarter delivery | €55,000.00 | |
| Third-quarter delivery | €35,000.00 | |
| Administrative services | €30,000.00 | |
| IT services | €12,000.00 | |
| Gross balance of the receivable | €126,000.00 | |
| Opening allowance | €4,000.00 | |
| Allowance expense of the year | €6,000.00 | |
| Receivables written off | €1,000.00 | |
| Closing allowance recorded | €9,000.00 | |
| Head office rent for 20X7 | €31,000.00 |
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.
Control structure
Sales to Brisval SA
Services received from Orlane Services SAS
Statement of the receivable from Brisval SA
Management note on the terms
Head office rent
12 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
In which category of related party do you place Orlane Holding SA, Orlane Services SAS and Brisval SA, and what must be disclosed about the parent?
Task 2Calculation
Compute the total of the sales of the year to the associate.
Part 1 · Calculation
Compute the total of the sales of the year to the associate.
Task 3Journal entries
Record those credit sales.
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 4Calculation
Compute the total of the services received from the subsidiary.
Part 1 · Calculation
Compute the total of the services received from the subsidiary.
Task 5Journal entries
Record the cash settlement of the payable.
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 6Calculation
Recompute the closing allowance and check it against the amount recorded.
Part 1 · Calculation
Recompute the closing allowance and check it against the amount recorded.
Result: Control difference
Task 7Calculation
Compute the net balance of the receivable from Brisval SA.
Part 1 · Calculation
Compute the net balance of the receivable from Brisval SA.
Task 8Journal entries
Record the allowance expense of the year.
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 9Professional judgement
Can an arm's length statement be made for the sales to Brisval SA and for the services of Orlane Services SAS?
Task 10Analysis
What is the minimum content of the note for the receivable from Brisval SA?
Task 11Effects on the financial statements
What is the cumulative effect of the three entries requested (sale, settlement, allowance charge) 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 12Conclusion
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 / 14).
Document this file
These working papers use the data and results of this case.
Normative references