Cases
Practical case
Montrel SA (fictitious entity) publishes several measures in its 20X7 earnings release. It prepares its statements under IFRS 18. You identify the management-defined performance measures, reconcile the one that is such a measure to the most directly comparable specified subtotal, compute the income tax effect and the effect on non-controlling interests of each item and correct on the way a classification found during the reconciliation.
Your assignment
Among the 5 measures of the release, say which are management-defined performance measures; say why operating profit is not one; record the reclassification detected; compute the measure "adjusted operating profit" and the net effect of tax and non-controlling interests of the two reconciling items; describe the information to give in the note and its objective; present the effect of the entry 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.
Advanced level: no help, the work is grouped by kind.
6 documents: open each one to read it.
Document 1Memo
Montrel SA (fictitious entity) makes medical equipment and closes its accounts on 31 December 20X7; its functional currency is the euro. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to the standard): management applies the statutory rate of 25 % to the tax effect; no impairment loss within the scope of IAS 36 is recognised in 20X7; the entry is illustrative. The content of IAS 33 is not duplicated.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Published measures | 5 units | |
| Operating profit recorded | €6,150,000.00 | |
| Gain on the sale of equity securities | €220,000.00 | |
| Operating profit after reclassification | €5,930,000.00 | |
| Restructuring costs | €400,000.00 | |
| Amortisation of acquired intangibles | €260,000.00 | |
| Tax effect of the restructuring | €100,000.00 | |
| Effect of the restructuring on non-controlling interests | €30,000.00 | |
| Tax effect of the amortisation | €65,000.00 | |
| Effect of the amortisation on non-controlling interests | €19,500.00 | |
| Closing bank balance | €1,840,000.00 |
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.
Entity profile and case conventions
Earnings release: published measures
Operating profit and reconciling items
Tax and non-controlling interest effects of the items
Reclassification line of the gain on sale
Bank statement of December
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.
Task 1Professional judgement
Which of the 5 measures of the release are management-defined performance measures?
Task 2Analysis
Why is operating profit not a management-defined measure?
Task 3Journal entries
Record the reclassification of the gain on sale of securities to investing.
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 4Calculation
Compute the measure "adjusted operating profit".
Part 1 · Calculation
Compute the measure "adjusted operating profit".
Task 5Calculation
Compute the net effect of tax and non-controlling interests of the restructuring.
Part 1 · Calculation
Compute the net effect of tax and non-controlling interests of the restructuring.
Task 6Calculation
Compute the net effect of tax and non-controlling interests of the amortisation of acquired intangibles.
Part 1 · Calculation
Compute the net effect of tax and non-controlling interests of the amortisation of acquired intangibles.
Task 7Analysis
What information must the note contain and what is its objective?
Task 8Effects on the financial statements
What is the effect of the reclassification 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
Task 9Conclusion
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 / 10).
Document this file
These working papers use the data and results of this case.
Normative references