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Practical caseIFRS 7 · IAS 7L3 · Advanced

Liquidity risk and market risk: maturity analysis on contractual cash flows, supplier finance and sensitivity analysis

6 documents14 tasks≈ 90 min
0 / 17 items completed
Standards
IFRS 7 — Financial Instruments: DisclosuresIAS 7 — Statement of Cash Flows
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Harven SA (fictitious entity) finances its business with a floating-rate bank loan, a fixed-rate bond and trade payables, part of which goes through a supplier finance provider. For the closing date of 31 December 20X6, you prepare the maturity analysis and the sensitivity analysis.

Your assignment

Spread the undiscounted contractual cash flows of the financial liabilities over three maturity buckets and compute the total of each bucket and then the grand total; compare it with the carrying amount and explain the difference; measure the concentration of the trade payables with the finance provider; assess the change in rates retained, compute the effect on profit or loss and place the effect on equity; record the drawing of the bank loan and state its 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.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

6 documents: open each one to read it.

Document 1Memo

Company profile and case conventions

Harven SA (fictitious entity) closes its accounts on 31 December 20X6; its functional currency is the euro. Case conventions: amounts in EUR; the flows are those of the contracts, without discounting; case convention (pedagogical assumption, not attributed to IFRS 7): the floating rate of the closing date applies to all the future interest of the bank loan; the carrying amount includes only the amounts due at 31 December 20X6; no hedge and no tax.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Carrying amount of the loan€2,000,000.00
Loan flows, first bucket€1,100,000.00
Loan flows, second bucket€1,050,000.00
Floating-rate exposure at the closing date€2,000,000.00
Carrying amount of the bond€1,000,000.00
Bond flows, first bucket€40,000.00
Bond flows, second bucket€40,000.00
Bond flows, third bucket€1,040,000.00
Trade payables, first bucket€800,000.00
Payables going through the finance provider€520,000.00
Total of the flows according to the contracts€4,070,000.00
Carrying amount of the financial liabilities€3,800,000.00
Reasonably possible change in the rate1%
Renewal of the fleet€64,000.00

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

  • Company profile and case conventions

  • Floating-rate bank loan

  • Bond and trade payables

  • Totals of the contracts and carrying amount

  • Change in rates retained by management

  • Note on the vehicle fleet

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      14 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

        Which maturity buckets to retain and on what basis to take up the flows?

      2. Task 2Calculation

        Compute the total of the first bucket.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the first bucket.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Calculation

        Compute the total of the second bucket.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the second bucket.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Compute the total of the third bucket.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the third bucket.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Calculation

        Compute the total of the undiscounted contractual cash flows.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the undiscounted contractual cash flows.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Calculation

        Compute the difference between the total of the flows and the carrying amount.

        Calculator

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

        Part 1 · Calculation

        Compute the difference between the total of the flows and the carrying amount.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Analysis

        What does the difference between the contractual flows and the carrying amount represent?

      8. Task 8Analysis

        What share of the trade payables goes through the finance provider, and why describe it?

        Calculator

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

        Part 1 · Calculation

        What share of the trade payables goes through the finance provider, and why describe it?

        1. %

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Professional judgement

        Is the change in rates retained by management a reasonably possible change?

      10. Task 10Calculation

        Compute the effect on profit or loss of the increase retained.

        Calculator

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

        Part 1 · Calculation

        Compute the effect on profit or loss of the increase retained.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Analysis

        What is the effect on equity, and which conventions of the case support it?

      12. Task 12Journal entries

        Record the drawing of the bank loan on 31 December 20X6.

        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

      13. Task 13Effects on the financial statements

        What is the effect of the entry 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

        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. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      14. Task 14Conclusion

        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 / 17).

      Document this file

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

      Normative references

      • IFRS 7 §39
      • IFRS 7 §B11F