Cases
Practical case
Domaines Taillefer SA (fictitious entity) applies the fair value model to its investment property. In 20X5, five properties undergo a change, or an announced change, in use. The entity must decide which give rise to a transfer and measure the difference.
Your assignment
For each situation, judge whether a change in use is evidenced; identify the missing information; compute the transfer differences of situations 1, 2 and 3; record the transfers (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.
Advanced level: no help, the work is grouped by kind.
6 documents: open each one to read it.
Document 1Minutes
Situation 1, building occupied by the entity's departments: cost of 1,600,000 EUR and accumulated depreciation of 400,000 EUR, that is a carrying amount of 1,200,000 EUR. Occupation ends on 1 September 20X5 and a 10-year lease is signed the same day with a third party. Appraisal at that date: 1,500,000 EUR.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of the building (situation 1) | €1,600,000.00 | |
| Accumulated depreciation (situation 1) | €400,000.00 | |
| Carrying amount before transfer (situation 1) | €1,200,000.00 | |
| Fair value at the date of change (situation 1) | €1,500,000.00 | |
| Cost of the warehouse (situation 2) | €1,500,000.00 | |
| Accumulated depreciation (situation 2) | €600,000.00 | |
| Carrying amount before transfer (situation 2) | €900,000.00 | |
| Fair value of the appraisal (situation 2) | €850,000.00 | |
| Cost of the inventory before transfer (situation 3) | €2,000,000.00 | |
| Fair value at the date of change (situation 3) | €2,300,000.00 | |
| Fair value of the property at the date of change (situation 4) | €3,000,000.00 | |
| Carrying amount of the land (situation 5) | €400,000.00 | |
| Expected annual rents (situation 1) | €120,000.00 |
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.
Situation 1: occupied building
Situation 2: occupied warehouse
Situation 3: apartments in inventory
Situation 4: investment property
Situation 5: land
Expected rents
7 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
When is a transfer to or from investment property possible?
Task 2Professional judgement
For each situation, is a change in use evidenced? Justify.
Task 3Missing information
What information is missing to measure the difference of situation 2?
Task 4Calculation
Compute the transfer differences of situations 1, 2 and 3.
Part 1 · Calculation
Compute the transfer differences of situations 1, 2 and 3.
Result: Gain of situation 3
Task 5Journal entries
Record the four transfers.
Part 1 · Journal entry · Journal entries
Entry 1 of 4
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Line 3
Part 2 · Journal entry · Journal entries
Entry 2 of 4
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Line 3
Part 3 · Journal entry · Journal entries
Entry 3 of 4
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Line 3
Part 4 · Journal entry · Journal entries
Entry 4 of 4
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 6Effects on the financial statements
What is their effect 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 7Conclusion
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 / 12).
Document this file
These working papers use the data and results of this case.
Normative references