Skip to main content
IFRS Academy

CERTYNEX IFRS ACADEMY

My account — Professional

Search the Academy

Home
My learning path
Exercises & quizzes
Cases
Workpapers
Exams
My progress

Cases

Practical case

Professional fileIAS 8L4 · Expert

Review file of accounting changes and restatements of a retail group

11 documents18 tasks≈ 240 min
0 / 32 items completed
Standards
IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Groupe Vasquerel (fictitious entity) is closing its 20X5 consolidated statements. The closing memo combines a prior period error, two changes in policy of which one is partly impracticable, a change in estimate, a settled claim, a policy to be developed and an IFRS issued but not applied. You prepare the review file, submitted to the reviewer before sign-off.

Your assignment

Classify the points, set the policy for the reuse credits, assess the changes in policy and standard X, quantify the restatements (inventory, rebates, tax, equity, comparatives), deal with the impracticability at Vasquerel Jardin and the change in estimate, measure what point (e) puts at stake, post the entries, measure their effect, prepare the disclosures and conclude.

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

11 documents: open each one to read it.

Document 1Memo

Group closing memo

Groupe Vasquerel (fictitious entity, DIY and garden retail) is preparing its 20X5 consolidated statements, which present 20X4 as comparative; tax rate of 25% for all periods. Points raised by the finance department: (a) volume rebates owed to suppliers of Vasquerel Négoce were never recognised (D2); (b) Vasquerel Bricolage moves from weighted average cost to FIFO, in line with the rest of the group (D4); (c) Vasquerel Jardin also adopts FIFO, but its data before 20X5 are lost (D5); (d) the useful life of the racking is revised (D6); (e) a claim against a carrier, not recognised until then, was settled in 20X5 by a receipt of 75,000, included in the draft 20X5 profit of 3,075,000; the CFO proposes to take it to opening equity; (f) a policy must be set for packaging reuse credits (D8); (g) a new IFRS has been issued and will apply from 1 January 20X7 (D9).

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Draft consolidated 20X5 profit€3,075,000.00
Receipt on settlement of the carrier claim€75,000.00
Group tax rate25%
Scenario 1 (20X3 obligation)€120,000.00
Probability of scenario 150%
Scenario 2 (20X3 obligation)€160,000.00
Probability of scenario 225%
Scenario 3 (20X3 obligation)€200,000.00
Probability of scenario 325%
Obligation at 31 December 20X4€230,000.00
Final settlement of the 20X3 obligation (June 20X5)€176,000.00
Reported cost of purchases 20X4€31,500,000.00
Reported retained earnings at 1 January 20X4€8,400,000.00
Reported profit for 20X4€1,260,000.00
Dividends for 20X4€400,000.00
Reported retained earnings at 31 December 20X4€9,260,000.00
Purchase 1 (quantity)10,000 units
Purchase 1 (unit cost)€12.00
Purchase 2 (quantity)15,000 units
Purchase 2 (unit cost)€14.00
Purchase 3 (quantity)5,000 units
Purchase 3 (unit cost)€16.40
Units sold in 20X324,000 units
FIFO − average cost difference at 31 December 20X4€17,200.00
Difference on garden furniture€21,000.00
Difference on tools€15,000.00
Cost of the racking€900,000.00
Accumulated depreciation at 31 December 20X4€360,000.00
Previous annual charge€90,000.00
Remaining life4 years
New residual value€60,000.00
Date of the changeJanuary 1 20X5
Group materiality threshold€150,000.00
Reuse credits earned in 20X5€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 sort11

  • Group closing memo

  • Omitted volume rebates (Vasquerel Négoce)

  • Published consolidated equity

  • Vasquerel Bricolage: inventory layers and formula difference

  • Vasquerel Jardin: lost data

  • Fixed asset register: racking

  • Accounts committee of 12 February 20X6

  • Reuse credits programme

  • New IFRS issued

  • Annual report layout brief

  • Confirmation from the tax adviser

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

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

      1. Task 1Analysis

        Classify points (a) to (g) of the closing memo.

      2. Task 2Professional judgement

        Set the group's policy for the reuse credits.

        Calculator

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

        Part 1 · Calculation

        Set the group's policy for the reuse credits.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Professional judgement

        Is the move to FIFO permitted? What about standard X?

      4. Task 4Calculation

        Measure Vasquerel Bricolage inventory at 31 December 20X3 under both formulas.

        Calculator

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

        Part 1 · Calculation

        Measure Vasquerel Bricolage inventory at 31 December 20X3 under both formulas.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Inventory at FIFO

      5. Task 5Calculation

        Determine the cumulative effect of the change at the opening of 20X4 and the effect specific to 20X4.

        Calculator

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

        Part 1 · Calculation

        Determine the cumulative effect of the change at the opening of 20X4 and the effect specific to 20X4.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Effect specific to 20X4 (increase in profit)

      6. Task 6Calculation

        Estimate the rebate obligation at 31 December 20X3 without hindsight.

        Calculator

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

        Part 1 · Calculation

        Estimate the rebate obligation at 31 December 20X3 without hindsight.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Calculation

        Isolate the part of the error relating to 20X4.

        Calculator

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

        Part 1 · Calculation

        Isolate the part of the error relating to 20X4.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Calculation

        Compute the tax effects and net amounts.

        Calculator

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

        Part 1 · Calculation

        Compute the tax effects and net amounts.

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

        Checks

        • 0 / 8 steps entered
        • Amounts readable

        Result: Net effect on 20X4 profit (policy)

      9. Task 9Calculation

        Determine restated retained earnings at 1 January 20X4.

        Calculator

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

        Part 1 · Calculation

        Determine restated retained earnings at 1 January 20X4.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Net decrease at 1 January 20X4

      10. Task 10Calculation

        Restate the cost of purchases and 20X4 profit, then reconcile equity at 31 December 20X4.

        Calculator

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

        Part 1 · Calculation

        Restate the cost of purchases and 20X4 profit, then reconcile equity at 31 December 20X4.

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

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Reported − restated difference at 31 December 20X4

      11. Task 11Professional judgement

        Is the restatement of Vasquerel Jardin impracticable? From when?

      12. Task 12Calculation

        Compute the Vasquerel Jardin adjustment at 1 January 20X5 and the restated 20X5 opening equity.

        Calculator

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

        Part 1 · Calculation

        Compute the Vasquerel Jardin adjustment at 1 January 20X5 and the restated 20X5 opening equity.

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

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Restated retained earnings at 1 January 20X5

      13. Task 13Calculation

        Compute the revised racking charge and the effect of the change.

        Calculator

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

        Part 1 · Calculation

        Compute the revised racking charge and the effect of the change.

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

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Effect on 20X6 to 20X8

      14. Task 14Calculation

        Measure what the CFO's proposal on point (e) puts at stake.

        Calculator

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

        Part 1 · Calculation

        Measure what the CFO's proposal on point (e) puts at stake.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: What the classification of (e) puts at stake

      15. Task 15Journal entries

        Present the entries: restatements, Vasquerel Jardin adjustment, racking and reuse credits.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 12

        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 2 · Journal entry · Journal entries

        Entry 2 of 12

        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 3 · Journal entry · Journal entries

        Entry 3 of 12

        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 12

        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 12

        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 12

        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 12

        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 12

        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 9 · Journal entry · Journal entries

        Entry 9 of 12

        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 10 · Journal entry · Journal entries

        Entry 10 of 12

        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 11 · Journal entry · Journal entries

        Entry 11 of 12

        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 12 · Journal entry · Journal entries

        Entry 12 of 12

        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

      16. Task 16Effects on the financial statements

        What is the cumulative effect of these entries?

        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

      17. Task 17Analysis

        Prepare the IAS 8 disclosures and record the findings on the draft notes.

      18. Task 18Conclusion

        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 weighted scenario must exclude the June 20X5 settlement
      • BlockingResolvedDocument the reasonable efforts before concluding on impracticability
      • Non-blockingOpenComplete the disclosure on standard X (quantified impact if possible)

      Information requests

      • ObtainedRequest to the tax adviser on the treatment of the restatements
      • Assumption documentedRequest to Vasquerel Jardin's software vendor

      Completion checklist

      • Classification of every point of the closing memoDone
      • Restatement schedule reconciledDone
      • Entries checked and balancedDone
      • Impracticability memo signedDone
      • Disclosure on standard X to be finalisedTo review
      • Earnings per share (unlisted group)Not 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 8 §5
      • IAS 8 §4
      • IAS 8 §7
      • IAS 8 §8
      • IAS 8 §10
      • IAS 8 §11
      • IAS 8 §12
      • IAS 8 §13
      • IAS 8 §14
      • IAS 8 §19
      • IAS 8 §20
      • IAS 8 §22
      • IAS 8 §24
      • IAS 8 §32
      • IAS 8 §32A
      • IAS 8 §34
      • IAS 8 §34A
      • IAS 8 §35
      • IAS 8 §36
      • IAS 8 §38
      • IAS 8 §41
      • IAS 8 §42
      • IAS 8 §44
      • IAS 8 §46
      • IAS 8 §48
      • IAS 8 §51
      • IAS 8 §53
      • IAS 8
      • IAS 8 §29
      • IAS 8 §30
      • IAS 8 §39
      • IAS 8 §49