Cases
Practical case
Lumera SA (fictitious entity) prepares the notes on its financial instruments for the closing date of 31 December 20X6. The line item for current financial assets and the line item for financial liabilities group instruments of a different nature. You draw up the framework of the disclosures: classes, categories and risks.
Your assignment
Say what the two objectives of the disclosures on financial instruments are; group the instruments of each line item into classes and reconcile the classes to the line item; compute the total of the classes of each line item; distinguish the classes from the categories of the measurement basis; identify the risk of each class and the qualitative information to provide; recognise the fair value gains of the year and state their effect; conclude. One document is 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.
Fundamental level: the method, help and references are shown.
Method
File checklist
5 documents: open each one to read it.
Document 1Memo
Lumera SA (fictitious entity) closes its accounts on 31 December 20X6; its functional currency is the euro. Case conventions: amounts in EUR; the measurement bases are those of the accounting; case convention (pedagogical assumption, not attributed to IFRS 7): the classes retained follow the nature of the instruments; no instrument is offset.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Line item of current financial assets | €3,000,000.00 | |
| Trade receivables | €2,100,000.00 | |
| Listed debt securities | €600,000.00 | |
| Currency derivatives | €300,000.00 | |
| Fair value gain on the derivatives (profit or loss) | €40,000.00 | |
| Fair value gain on the securities (other comprehensive income) | €25,000.00 | |
| Line item of financial liabilities | €2,000,000.00 | |
| Trade payables | €1,100,000.00 | |
| Bank borrowings | €700,000.00 | |
| Dividends payable | €200,000.00 | |
| Cost of the brochure | €14,000.00 |
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.
Company profile and case conventions
Current financial assets at 31 December 20X6
Financial liabilities at 31 December 20X6
Financial risk management policy
Sales brochure
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.
Task 1Analysis
What are the two objectives of the disclosures on financial instruments?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 2Professional judgement
Group the instruments of each line item into classes.
Distinguish the case data, the assumption and your judgment.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 3Analysis
Reconcile the classes of assets to the line item: compute their total.
Set out the facts, the question raised, then your analysis.
Part 1 · Calculation
Reconcile the classes of assets to the line item: compute their total.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 4Analysis
Reconcile the classes of liabilities to the line item: compute their total.
Set out the facts, the question raised, then your analysis.
Part 1 · Calculation
Reconcile the classes of liabilities to the line item: compute their total.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 5Analysis
Why are the classes not confused with the categories of the measurement basis?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 6Analysis
Which risk dominates in each class?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 7Analysis
Which qualitative information is to be provided for each type of risk?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 8Journal entries
Record the fair value gain on the currency derivatives.
Identify the accounts affected and the direction of each movement; check the balance.
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 9Journal entries
Record the fair value gain on the debt securities.
Identify the accounts affected and the direction of each movement; check the balance.
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 10Effects on the financial statements
What is the effect of the two entries on the financial statements?
For each financial statement, state the line affected, the direction and the amount.
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 11Conclusion
Write the conclusion.
Write a conclusion that cites the facts and the treatment chosen.
This answer is not marked automatically: after submitting, you will compare it with the solution.
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 / 15).
Document this file
These working papers use the data and results of this case.
Normative references