Cases
Practical case
Tarvane Industries SA (fictitious entity) closes its books on 31 December 20X6. In 20X6 it acquired corporate bonds, listed shares for the trading desk, a strategic unlisted stake and a structured note indexed to a stock index. The finance department prepares the classification of these four instruments, their initial measurement and the first entries.
Your assignment
Classify each instrument, supporting the business model and the contractual cash flows; compute the initial amount of each; compute the fair value change of the Sablon stake at the reporting date; record the acquisitions of the bonds and of the Norvelle shares and the remeasurement of the Sablon stake; present the cumulative effect on the financial statements; 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
Tarvane Industries SA (fictitious entity) closes its books on 31 December 20X6 and places part of its surplus cash in four financial instruments acquired in 20X6. Case conventions: amounts in EUR; the initial fair value is the market price paid excluding costs; transaction costs are given; no tax is considered; the entries are illustrative.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Initial fair value of the Corvane bonds | €1,980,000.00 | |
| Directly attributable broker commissions (A) | €12,000.00 | |
| Initial fair value of the Norvelle shares | €500,000.00 | |
| Commissions on the Norvelle shares (B) | €4,000.00 | |
| Cash paid for the Norvelle shares | €504,000.00 | |
| Initial fair value of the Eurolink note | €250,000.00 | |
| Commissions on the Eurolink note (D) | €1,000.00 | |
| Initial fair value of the Sablon stake | €300,000.00 | |
| Directly attributable legal fees (C) | €3,000.00 | |
| Fair value of the Sablon stake at 31 December 20X6 | €336,000.00 | |
| Expected interest in the 20X7 budget | €98,000.00 |
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
Corvane corporate bonds (instrument A)
Norvelle shares and Eurolink structured note (instruments B and D)
Sablon Énergie stake (instrument C)
Treasury budget 20X7
10 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
Classify the Corvane bonds (A): assess the business model and the contractual cash flows, then retain the category.
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 2Analysis
Classify the Norvelle shares (B) and the Eurolink structured note (D).
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 3Analysis
Classify the Sablon stake (C) and state the effect of the election on the presentation of fair value changes.
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 4Calculation
Compute the initial amount of each instrument on recognition.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the initial amount of each instrument on recognition.
Result: Initial amount of the Eurolink note (D), excluding commissions
Task 5Analysis
Compute the fair value change of the Sablon stake (C) to recognise at the reporting date.
Set out the facts, the question raised, then your analysis.
Part 1 · Calculation
Compute the fair value change of the Sablon stake (C) to recognise at the reporting date.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 6Journal entries
Record the acquisition of the Corvane bonds (A).
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 7Journal entries
Record the acquisition of the Norvelle shares (B).
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
Line 3
Task 8Journal entries
Record the remeasurement of the Sablon stake (C) at 31 December 20X6.
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 9Effects on the financial statements
What is the cumulative effect of the three 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 10Conclusion
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 / 13).
Document this file
These working papers use the data and results of this case.
Normative references