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Practical caseIFRS 18L2 · Intermediate

Required subtotals, exchange differences, hedging and the build-up of profit for the period

6 documents11 tasks≈ 90 min
0 / 12 items completed
Standards
IFRS 18 — Presentation and Disclosure in Financial Statements
Assistance levelHelp on demand · assistance on request
  • Method: on request
  • Checklist: on request
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Calvaro SA (fictitious entity), an exporter of agricultural equipment, prepares its 20X7 statement of profit or loss under IFRS 18. The ledger contains exchange differences, a derivative hedging a dollar loan and a property tax that are wrongly classified. You correct the classification, then build the subtotals down to profit for the period.

Your assignment

Classify the income and expenses of the ledger into categories; judge the classification of the exchange differences; under the advanced level, classify the hedging derivative according to the rule of the standard, then that of the property tax; record the two reclassifications; compute profit before financing and income taxes, profit before income taxes and profit for the period; present the effect of the entries 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

  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 / 12) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

6 documents: open each one to read it.

Document 1Memo

Entity profile and case conventions

Calvaro SA (fictitious entity) exports agricultural equipment and closes its accounts on 31 December 20X7; its functional currency is the euro; it has no specified main business activity. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to the standard): the dollar loan is a pure financing debt, the forward contract, designated as a hedging instrument, manages only the exchange risk on that loan and the entries are illustrative. The content of IAS 12, IAS 21 and IFRS 9 is not duplicated.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Revenue€25,000,000.00
Cost of sales€15,500,000.00
Overheads recorded€4,290,000.00
Property tax€60,000.00
Other operating income recorded€210,000.00
Deposit interest€110,000.00
Interest on the dollar loan€380,000.00
Income tax€1,350,000.00
Result of the discontinued operation€200,000.00
Profit per the ledger€3,940,000.00
Exchange gain on receivables€140,000.00
Exchange loss on the loan€90,000.00
Gain on the hedging forward contract€70,000.00
Total operating expenses after reclassification€19,760,000.00
Other operating income after reclassification€140,000.00
Net financing expenses€400,000.00
Invoice of the consulting firm€26,000.00

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

  • Entity profile and case conventions

  • Income and expenses in the 20X7 ledger

  • Exchange differences and forward contract

  • Property tax

  • Summary after the corrections of the preparer

  • Invoice of a consulting firm

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      11 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

        Classify the income and expenses of the ledger into the five categories.

      2. Task 2Professional judgement

        In which category to classify the exchange gain and the exchange loss?

      3. Task 3Professional judgement

        Advanced level: in which category to classify the gain on the hedging forward contract, under IFRS 18?

      4. Task 4Analysis

        Advanced level: how to classify the property tax?

      5. Task 5Journal entries

        Record the reclassification of the exchange loss to financing.

        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

      6. Task 6Journal entries

        Record the reclassification of the gain on the forward contract to financing.

        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

      7. Task 7Calculation

        Compute profit before financing and income taxes.

        Calculator

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

        Part 1 · Calculation

        Compute profit before financing and income taxes.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Compute profit before income taxes.

        Calculator

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

        Part 1 · Calculation

        Compute profit before income taxes.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Compute profit for the period.

        Calculator

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

        Part 1 · Calculation

        Compute profit for the period.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Effects on the financial statements

        What is the cumulative effect of the two entries 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

      11. Task 11Conclusion

        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 / 12).

      Document this file

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