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Professional fileIAS 7L4 · Expert

File for preparing the consolidated statement of cash flows of a retail group

12 documents23 tasks≈ 300 min
0 / 32 items completed
Standards
IAS 7 — Statement of Cash Flows
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

The Hestrel group (fictitious entity, DIY and garden retail) is closing its 20X8 consolidated financial statements. The year combines the acquisition of Brivaldi SAS, the disposal of Hestrel Atlantique, a purchase of non-controlling interests, new leases, a dollar loan, a US subsidiary, trapped cash and a supplier finance programme. The draft statement does not reconcile with cash. You prepare the file, submitted to the reviewer before sign-off. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Your assignment

Prepare the 20X8 consolidated statement of cash flows and its notes from the twelve documents: qualify cash, settle the classifications, determine the operating (indirect method, checked with the direct method), investing, group and financing cash flows, reconcile cash, financing liabilities and the programme liabilities, post the entries, measure their effect, prepare the disclosures and conclude. Two items of information are missing; one document is unrelated to the file.

You prepare a complete file: documents, work, entries and conclusion, then compare your work with the solution and the review points of the file.

Autonomous professional situation

As on a real engagement: no method, no checklist and no hints. You identify the issues yourself, organise the work and defend your conclusion.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

12 documents: open each one to read it.

Document 1Table

Comparative consolidated statements of financial position

Hestrel group, at 31 December 20X7 then 20X8 (EUR). Assets: property, plant and equipment 8,400,000 and 9,890,000; right-of-use assets 1,200,000 and 1,320,000; goodwill 900,000 and 2,030,000; investment in Lysandre Logistique (associate, equity method) 1,100,000 and 1,160,000; six-month term deposit: nil and 300,000; inventories 3,100,000 and 3,600,000; trade receivables 2,600,000 and 3,050,000; cash and cash equivalents in assets 1,350,000 and 1,130,000; total 18,650,000 and 22,480,000. Liabilities and equity: bank borrowings 4,000,000 and 6,450,000; bank overdrafts 150,000 and 280,000; lease liabilities 1,250,000 and 1,300,000; trade and other payables 2,900,000 and 3,380,000; current tax payable 180,000 and 230,000; interest payable 40,000 and 55,000; provisions 300,000 and 360,000; share capital and premium 3,000,000 and 3,600,000; non-controlling interests 400,000 and 180,000; retained earnings 6,430,000 and 6,645,000.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Property, plant and equipment at the beginning€8,400,000.00
Property, plant and equipment at the end€9,890,000.00
Right-of-use assets at the beginning€1,200,000.00
Right-of-use assets at the end€1,320,000.00
Goodwill at the beginning€900,000.00
Goodwill at the end€2,030,000.00
Investment in Lysandre Logistique at the beginning€1,100,000.00
Investment in Lysandre Logistique at the end€1,160,000.00
Six-month term deposit (other financial assets) at the end€300,000.00
Inventories at the beginning€3,100,000.00
Inventories at the end€3,600,000.00
Trade receivables at the beginning€2,600,000.00
Trade receivables at the end€3,050,000.00
Cash and cash equivalents in assets at the beginning€1,350,000.00
Cash and cash equivalents in assets at the end€1,130,000.00
Total assets at the beginning€18,650,000.00
Total assets at the end€22,480,000.00
Bank borrowings at the beginning€4,000,000.00
Bank borrowings at the end€6,450,000.00
Bank overdrafts at the beginning€150,000.00
Bank overdrafts at the end€280,000.00
Lease liabilities at the beginning€1,250,000.00
Lease liabilities at the end€1,300,000.00
Trade and other payables at the beginning€2,900,000.00
Trade and other payables at the end€3,380,000.00
Current tax payable at the beginning€180,000.00
Current tax payable at the end€230,000.00
Interest payable at the beginning€40,000.00
Interest payable at the end€55,000.00
Provisions at the beginning€300,000.00
Provisions at the end€360,000.00
Share capital and premium at the beginning€3,000,000.00
Share capital and premium at the end€3,600,000.00
Non-controlling interests at the beginning€400,000.00
Non-controlling interests at the end€180,000.00
Retained earnings at the beginning€6,430,000.00
Retained earnings at the end€6,645,000.00
Revenue€24,000,000.00
Cost of sales excluding depreciation€15,600,000.00
Employee benefits expense€4,100,000.00
Other operating expenses€1,740,000.00
Depreciation of property, plant and equipment€950,000.00
Depreciation of right-of-use assets€380,000.00
Gain on disposal of equipment€40,000.00
Gain on disposal of Hestrel Atlantique€150,000.00
Share of profit of Lysandre Logistique€180,000.00
Unrealised exchange loss on the dollar loan€50,000.00
Unrealised exchange gain on dollar cash€25,000.00
Interest expense (including lease interest)€260,000.00
Interest expense excluding lease interest€190,000.00
Operating profit€1,295,000.00
Current tax expense€520,000.00
Profit for the year€795,000.00
Of which non-controlling interests€30,000.00
Additions of the period excluding subsidiaries€1,800,000.00
Cost of the equipment sold€600,000.00
Accumulated depreciation of the equipment sold€440,000.00
Carrying amount of the equipment sold€160,000.00
Assets derecognised with Hestrel Atlantique€700,000.00
Net charge to provisions€60,000.00
New loan drawn€3,000,000.00
Contractual repayments paid€1,200,000.00
New leases€500,000.00
Lease payments€520,000.00
Interest included in the lease payments€70,000.00
Price paid in cash for Brivaldi€2,400,000.00
Shares issued to the sellers of Brivaldi€600,000.00
Total consideration for the acquisition€3,000,000.00
Brivaldi's property, plant and equipment€1,500,000.00
Brivaldi's inventories€700,000.00
Brivaldi's trade receivables€500,000.00
Brivaldi's trade payables€450,000.00
Brivaldi's bank loan assumed€600,000.00
Brivaldi's current tax payable€30,000.00
Disposal price received in cash€1,300,000.00
Hestrel Atlantique's cash at the disposal date€180,000.00
Hestrel Atlantique's inventories€250,000.00
Hestrel Atlantique's trade receivables€220,000.00
Hestrel Atlantique's trade payables€200,000.00
Price paid for 10 % of Hestrel Services€300,000.00
Carrying amount of the interests purchased€250,000.00
Cash on hand at the beginning€15,000.00
Demand deposits at the beginning€1,035,000.00
Money market fund at the beginning€300,000.00
Cash on hand at the end€20,000.00
Demand deposits at the end€860,000.00
Money market fund at the end€250,000.00
Six-month term deposit placed in November 20X8€300,000.00
Hestrel Inc.'s cash at the beginning (translated)€400,000.00
Hestrel Inc.'s net cash flows translated at monthly average rates€100,000.00
Hestrel Inc.'s cash at the end (translated)€525,000.00
Trapped cash of the Morvanie subsidiary€140,000.00
Programme liabilities at the beginning€800,000.00
Invoices entered into the programme€4,800,000.00
Payments to the bank€4,650,000.00
Programme liabilities at the end€950,000.00
Of which already paid to suppliers at the beginning€600,000.00
Of which already paid to suppliers at the end€780,000.00
Other operating expenses paid€1,680,000.00
Dividend declared and paid€500,000.00
Store openings planned12 units
Brivaldi's cash at 1 July 20X8 (confirmation)€250,000.00

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 sort12

  • Comparative consolidated statements of financial position

  • Consolidated statement of profit or loss 20X8

  • Property, plant and equipment roll-forward

  • Loan agreements

  • Lease schedule

  • Acquisition note for Brivaldi SAS

  • Minutes: disposal and purchase of non-controlling interests

  • Bank statements and confirmations

  • Supplier finance programme agreement and report

  • Finance department's year-end memo

  • Strategic plan 20X9-20X11

  • Bank confirmation of Brivaldi's cash

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        List the documents, the transactions of the year and the points to decide.

      2. Task 2Professional judgement

        Qualify the components of cash and the unavailable balances.

      3. Task 3Calculation

        Determine cash and cash equivalents at the beginning and at the end.

        Calculator

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

        Part 1 · Calculation

        Determine cash and cash equivalents at the beginning and at the end.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Cash and cash equivalents at the end

      4. Task 4Calculation

        Compute the effect of exchange rate changes on cash.

        Calculator

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

        Part 1 · Calculation

        Compute the effect of exchange rate changes on cash.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      5. Task 5Professional judgement

        Settle the classifications to be justified, including those of interest, dividends and taxes given the status of the group.

      6. Task 6Calculation

        Compute the changes in working capital excluding subsidiaries acquired and disposed of.

        Calculator

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

        Part 1 · Calculation

        Compute the changes in working capital excluding subsidiaries acquired and disposed of.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Change in trade payables

      7. Task 7Calculation

        Compute the non-cash items.

        Calculator

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

        Part 1 · Calculation

        Compute the non-cash items.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Compute the interest paid.

        Calculator

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

        Part 1 · Calculation

        Compute the interest paid.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Interest paid through interest payable

      9. Task 9Calculation

        Compute the tax paid.

        Calculator

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

        Part 1 · Calculation

        Compute the tax paid.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Calculation

        Determine the net operating cash flow with the indirect method.

        Calculator

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

        Part 1 · Calculation

        Determine the net operating cash flow with the indirect method.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Net cash from operating activities

      11. Task 11Calculation

        Compute the receipts from customers.

        Calculator

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

        Part 1 · Calculation

        Compute the receipts from customers.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      12. Task 12Calculation

        Compute the payments to suppliers and to employees.

        Calculator

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

        Part 1 · Calculation

        Compute the payments to suppliers and to employees.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Payments to employees

      13. Task 13Calculation

        Compute the purchases paid and the proceeds from disposals of equipment.

        Calculator

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

        Part 1 · Calculation

        Compute the purchases paid and the proceeds from disposals of equipment.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Proceeds from disposal of equipment

      14. Task 14Calculation

        Determine the group cash flows.

        Calculator

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

        Part 1 · Calculation

        Determine the group cash flows.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Dividends received from Lysandre Logistique

      15. Task 15Calculation

        Split the lease payments and check the repayments.

        Calculator

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

        Part 1 · Calculation

        Split the lease payments and check the repayments.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Repayments derived from the balances

      16. Task 16Calculation

        Determine the investing and financing cash flows and the net change.

        Calculator

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

        Part 1 · Calculation

        Determine the investing and financing cash flows and the net change.

        1. €
        2. €
        3. €
        4. €

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Net decrease in cash

      17. Task 17Calculation

        Reconcile cash.

        Calculator

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

        Part 1 · Calculation

        Reconcile cash.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Cash reconciliation difference

      18. Task 18Calculation

        Prepare the reconciliation of financing liabilities.

        Calculator

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

        Part 1 · Calculation

        Prepare the reconciliation of financing liabilities.

        1. €
        2. €
        3. €
        4. €
        5. €
        6. €
        7. €
        8. €
        9. €

        Checks

        • 0 / 9 steps entered
        • Amounts readable

        Result: Difference on accrued interest

      19. Task 19Calculation

        Reconcile the liabilities of the supplier finance programme.

        Calculator

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

        Part 1 · Calculation

        Reconcile the liabilities of the supplier finance programme.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Difference on programme liabilities

      20. Task 20Journal entries

        Present the entries for the underlying transactions.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 8

        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

        3. Line 3

        4. Line 4

        TotalsDebit0Credit0

        Calculator

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

        Part 2 · Journal entry · Journal entries

        Entry 2 of 8

        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

        3. Line 3

        TotalsDebit0Credit0

        Calculator

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

        Part 3 · Journal entry · Journal entries

        Entry 3 of 8

        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

        Calculator

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

        Part 4 · Journal entry · Journal entries

        Entry 4 of 8

        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

        Calculator

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

        Part 5 · Journal entry · Journal entries

        Entry 5 of 8

        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

        Calculator

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

        Part 6 · Journal entry · Journal entries

        Entry 6 of 8

        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

        Calculator

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

        Part 7 · Journal entry · Journal entries

        Entry 7 of 8

        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

        Calculator

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

        Part 8 · Journal entry · Journal entries

        Entry 8 of 8

        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

      21. Task 21Effects on the financial statements

        Measure their effect 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. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      22. Task 22Analysis

        Prepare the disclosures.

      23. Task 23Conclusion

        Write the conclusion of the file.

      File review

      Points raised during the review of this file: read them as the preparer would.

      Review notes

      • BlockingResolvedThe draft did not reconcile cash: term deposit omitted from investing cash flows
      • BlockingResolvedFinancing liabilities reconciliation: loan assumed from Brivaldi missing
      • Non-blockingOpenClassification of the programme payments: documented judgement of the entity, as IAS 7 does not set it (paras. 44F to 44H)

      Information requests

      • ObtainedRequest to the bank: confirmation of Brivaldi's cash at 1 July 20X8
      • Assumption documentedRequest to Hestrel Inc.: dates and rates of each dollar cash flow

      Completion checklist

      • Statement agreed to closing cashDone
      • Direct and indirect methods agreeDone
      • Financing liabilities reconciliation linked to the statementsDone
      • Note on obtaining and losing controlDone
      • Classification of the programme payments approvedTo review
      • Transition reliefs for the first application of the supplier finance disclosuresNot applicable

      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 / 32).

      Document this file

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

      Normative references

      • IAS 7 §6
      • IAS 7 §7
      • IAS 7 §8
      • IAS 7 §9
      • IAS 7 §10
      • IAS 7 §12
      • IAS 7 §14
      • IAS 7 §16
      • IAS 7 §17
      • IAS 7 §18
      • IAS 7 §19
      • IAS 7 §20
      • IAS 7 §25
      • IAS 7 §26
      • IAS 7 §27
      • IAS 7 §28
      • IAS 7 §31
      • IAS 7 §32
      • IAS 7 §33A
      • IAS 7 §34A
      • IAS 7 §34B
      • IAS 7 §34C
      • IAS 7 §34D
      • IAS 7 §35
      • IAS 7 §37
      • IAS 7 §38
      • IAS 7 §39
      • IAS 7 §40
      • IAS 7 §41
      • IAS 7 §42
      • IAS 7 §42A
      • IAS 7 §42B
      • IAS 7 §43
      • IAS 7 §44
      • IAS 7 §44A
      • IAS 7 §44B
      • IAS 7 §44C
      • IAS 7 §44D
      • IAS 7 §44E
      • IAS 7 §44F
      • IAS 7 §44G
      • IAS 7 §44H
      • IAS 7 §45
      • IAS 7 §46
      • IAS 7 §48
      • IAS 7 §49