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Practical caseIAS 32L2 · Intermediate

Instruments settled in own shares: fixed-for-fixed condition, settlement options, contingent clause and option plan within IFRS 2

6 documents9 tasks≈ 75 min
0 / 15 items completed
Standards
IAS 32 — Financial Instruments: Presentation
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Calvire SA (fictitious entity), whose functional currency is the euro, entered into several contracts on its own shares in 20X6. You prepare the classification note for these contracts at the closing date of 31 December 20X6.

Your assignment

Rule out of the scope of IAS 32 the option plan of the employees; compute the fixed amount of the warrants in euros; measure the effect of an exercise price in dollars; measure the effect of a variable number of shares; classify the contract with a choice of settlement and the security with a contingent clause; record the collection of the exercise price of the euro warrants; conclude. One document is not useful.

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

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 6 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 15) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

6 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Calvire SA (fictitious entity) closes its accounts on 31 December 20X6; its functional currency is the euro. Case conventions: amounts in EUR unless otherwise stated; the terms are those of the contracts; case convention (pedagogical assumption, not attributed to IAS 32): the dollar warrants are offered to a single investor and not to all the shareholders pro rata; the contingent clause of the security is genuine; the two exchange rates are scenarios; for the entry, the euro warrants are issued without a premium and all are exercised.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Options granted to employees5,000 units
Euro warrants20,000 units
Exercise price per warrant in euros€12.00
Dollar warrants10,000 units
Total exercise price in dollars$140,000.00
Counter-value in the first scenario€112,000.00
Counter-value in the second scenario€100,000.00
Value of the shares to be delivered€600,000.00
Price of the first scenario€10.00
Price of the second scenario€12.00
Own shares of the forward contract8,000 units
Securities with a contingent clause€250,000.00
Annual rent of the head office€96,000.00

Sorting the information

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.

To sort6

  • Company profile and case conventions

  • Employee option plan and euro warrants

  • Dollar warrants

  • Contract to deliver shares and forward contract

  • Security with a contingent clause

  • Note on the head-office lease

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      9 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.

      1. Task 1Analysis

        Which contracts fall within IAS 32 and which one within IFRS 2?

      2. Task 2Analysis

        Compute the fixed amount payable on exercise of the euro warrants.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the fixed amount payable on exercise of the euro warrants.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Analysis

        Compute the difference in the euro counter-value of the exercise price of the dollar warrants between the two scenarios.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the difference in the euro counter-value of the exercise price of the dollar warrants between the two scenarios.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Analysis

        Compute the number of shares to be delivered at the first price.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the number of shares to be delivered at the first price.

        1. units

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Analysis

        Compute the number of shares to be delivered at the second price.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the number of shares to be delivered at the second price.

        1. units

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Professional judgement

        Classify each of the five contracts within IAS 32 as an equity instrument or a financial liability or asset.

      7. Task 7Journal entries

        Record the collection of the exercise price of the euro warrants, if all are exercised.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      8. Task 8Effects on the financial statements

        What is the effect of the entry on the financial statements?

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      9. Task 9Conclusion

        Write the conclusion.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 15).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IAS 32 §25
      • IAS 32 §26