Cases
Practical case
Ondes Atlantique (a fictitious radio group) closes its accounts on 31 December and applies the cost model to its intangible assets. It holds a national broadcasting licence, licence A, regarded since its acquisition as having an indefinite useful life, and has just acquired a digital frequency licence, licence B. You are preparing the 20X1 year-end entries and the note to the financial statements.
Your assignment
Using the contracts, the regulator's letter and the valuation report, review the useful life of both licences and determine the amounts to recognise and their consequences for 20X1 and 20X2. Some documents are 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.
Advanced level: no help, the work is grouped by kind.
Document 1
Document 4
Document 2
5 documents: open each one to read it.
Document 1Contract
Licence A acquired on 1 January 20X0 for 600,000. Renewable every ten years at a negligible administrative cost; the regulator has always renewed it for operators meeting their obligations. Since the acquisition, management has regarded the useful life as indefinite; the licence is not amortised and the 20X0 annual impairment test showed no loss.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Acquisition date of licence A | January 1 20X0 | |
| Cost of licence A | €600,000.00 | |
| Date the letter was received | December 31 20X1 | |
| Remaining term of licence A | 3 years | |
| Residual value of licence A | €0.00 | |
| Recoverable amount of licence A | €480,000.00 | |
| Acquisition date of licence B | January 1 20X1 | |
| Cost of licence B | €240,000.00 | |
| Initial contractual term of licence B | 5 years | |
| National audience share | 12% |
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.
Contract and history of licence A
Regulator's letter
Valuation report on licence A
Licence B contract
Audience survey
8 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
Is the indefinite useful life of licence A still supported at 31 December 20X1? What are the consequences?
Task 2Professional judgement
Which useful life do you use for licence B, and what charge for 20X1?
Part 1 · Calculation
Which useful life do you use for licence B, and what charge for 20X1?
Task 3Calculation
Calculate the impairment loss on licence A at 31 December 20X1.
Part 1 · Calculation
Calculate the impairment loss on licence A at 31 December 20X1.
Task 4Calculation
Calculate the amortisation charge for licence A for 20X2.
Part 1 · Calculation
Calculate the amortisation charge for licence A for 20X2.
Task 5Journal entries
Which entries do you record at 31 December 20X1?
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 6Journal entries
Which amortisation entry for licence A will you record in 20X2?
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 7Effects on the financial statements
What is the impact of the 20X1 entries 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
Notes
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 8Conclusion
Write the conclusion and the disclosures for the notes.
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 / 12).
Document this file
These working papers use the data and results of this case.
Normative references