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Practical caseIAS 7L4 · Expert

A distributor's reverse factoring programme: qualification and disclosures

5 documents7 tasks≈ 90 min
0 / 10 items completed
Standards
IAS 7 — Statement of Cash Flows
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Fontrevel Distribution SA (fictitious entity) distributes household equipment. Since 20X3, its suppliers have been able to sell their invoices to Banque Orsanne under a programme set up by Fontrevel. The audit committee asks for a full note for the 20X5 financial statements.

Your assignment

Qualify the arrangements, document the classification of the liabilities and of the payments, reconcile the programme liabilities, present the entry for the bank's remuneration and its effect, draft the note and conclude. One item of information is missing.

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.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

5 documents: open each one to read it.

Document 1Contract

Reverse factoring agreement with Banque Orsanne

Agreement signed by Fontrevel and Banque Orsanne: the bank offers approved suppliers to pay the invoices approved by Fontrevel, at 30 days; Fontrevel undertakes to pay the bank 120 days after the invoice date, instead of 60 days for purchases outside the programme; no security is given; the group's parent guarantees Fontrevel's commitments. The agreement describes the remuneration of the bank borne by Fontrevel as interest: 18,000 in 20X5.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Remuneration paid to the bank in 20X5€18,000.00
Programme invoices payable at the beginning€1,850,000.00
Invoices entered into the programme€9,600,000.00
Payments to the bank€9,300,000.00
Exchange differences on dollar invoices€20,000.00
Programme invoices payable at the end€2,170,000.00
Of which already paid to suppliers by the bank at the beginning€1,400,000.00
Of which already paid to suppliers by the bank at the end€1,720,000.00
Spending settled by purchasing cards€240,000.00
Documentary letters of credit outstanding€500,000.00
Annual consumption (MWh)380 units

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 sort5

  • Reverse factoring agreement with Banque Orsanne

  • Programme platform report

  • Finance department note

  • Other payment arrangements

  • Energy audit of the warehouses

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        Which arrangements are supplier finance arrangements?

      2. Task 2Professional judgement

        How should the programme liabilities and the payments to the bank be classified?

        Calculator

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

        Part 1 · Calculation

        How should the programme liabilities and the payments to the bank be classified?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Reconcile the programme liabilities.

        Calculator

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

        Part 1 · Calculation

        Reconcile the programme liabilities.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Reconciliation difference

      4. Task 4Journal entries

        Present the entry for the bank's remuneration.

        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

      5. Task 5Effects on the financial statements

        What is its effect?

        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. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      6. Task 6Analysis

        Draft the note on supplier finance arrangements.

      7. Task 7Conclusion

        Write the conclusion.

      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 / 10).

      Document this file

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

      Normative references

      • IAS 7 §6
      • IAS 7 §14
      • IAS 7 §44B
      • IAS 7 §44C
      • IAS 7 §44F
      • IAS 7 §44G
      • IAS 7 §44H