Cross-IFRS · Case studies (Step 3 of 5)
Practical case
Version of this content
IAS 10 Events after the Reporting Period — wording before IFRS 18Applicable today
Applies to annual periods beginning before January 1, 2027.
Ferlianne Robinetterie SA, a fictitious company that manufactures industrial valves and taps (210 employees, an assembly site and a finished goods warehouse), IFRS financial statements, year end 31 December, amounts in euros.
L1 · Guided · Closing at 31 December N — news from January N+1
You follow the closing of Ferlianne Robinetterie during the window between 31 December N and the authorisation of the financial statements for issue, then through year N+1 and the start of N+2. A lawsuit is settled, a customer goes bankrupt, valves are sold at a loss, a fire hits the warehouse, a dividend is proposed; a year later, the loss of a major customer and a refusal by the bank raise the question of going concern. For each event, the central question is the same: did the condition exist at the reporting date? Then: which standard measures the effect? All figures, dates and the governance are case data; teaching assumptions and professional judgements are flagged as such, and no method or estimate chosen by Ferlianne is presented as required by the standards. Teaching assumptions: income tax effects are ignored; Ferlianne does not publish interim financial information.
Standards involved: IAS 10 Events after the Reporting Period (definition, adjusting and non-adjusting events), IAS 37 Provisions, Contingent Liabilities and Contingent Assets (best estimate of a provision) and IAS 2 Inventories (net realisable value). The draft N financial statements were prepared on 10 January N+1; sort the January news, quantify the adjustments and record the entries at 31 December N.
Fundamental level: the method, help and references are shown.
Method
File checklist
2 / 6 stages reached
Context · Dated fact of the file
Ferlianne Robinetterie SA, a fictitious company that manufactures industrial valves and taps (210 employees, an assembly site and a finished goods warehouse), IFRS financial statements, year end 31 December, amounts in euros.
Initial event · L1·Closing at 31 December N — news from January N+1 · Current stage
Standards involved: IAS 10 Events after the Reporting Period (definition, adjusting and non-adjusting events), IAS 37 Provisions, Contingent Liabilities and Contingent Assets (best estimate of a provision) and IAS 2 Inventories (net realisable value). The draft N financial statements were prepared on 10 January N+1; sort the January news, quantify the adjustments and record the entries at 31 December N.
Pieces added
New period · L2·February – March N+1 — up to authorisation for issue · Upcoming: unlocks after the current stage
New period · L3·Year N+1 — closing at 31 December N+1 · Upcoming: unlocks after the current stage
New period · L4·Closing at 31 December N+1 — window up to 20 March N+2 · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
2 documents to work from at this level.
Document 1Supporting document
| Item | Position in the draft |
|---|---|
| Orbelac Thermique lawsuit (a fictitious customer) | action brought in September N for leaks in valves delivered in June N; the lawyer considers an adverse judgment probable: provision of 200,000 (best estimate at the time) |
| VR-50 valve inventory | 2,000 units at a unit cost of 90, i.e. 180,000; since November N, Lunarel (a fictitious competitor) has been selling an equivalent, cheaper model; no write-down |
| Receivable from Dovrand Bâtiment (a fictitious customer) | 120,000, invoice of October N; Dovrand asked for extended payment terms in December N; no impairment |
| Listed shares held | 150,000, fair value at 31 December N |
| Draft profit before tax for N | 2,400,000 |
| Governance (case data) | the board of directors will approve the financial statements and authorise them for issue on 16 March N+1, the date on which they are issued; the general meeting will approve them on 22 May N+1 |
First level: all the data is in the brief and the pieces of this level.
5 parts to answer, marked when you submit the level.
Find the useful facts in the pieces before concluding.
Part 1 · Classification · Recognition
Classify each piece of news in document 2: event requiring adjustment of the accounts at 31 December N, or event not requiring adjustment.
Drag each item into its category, or tap the category under the item.
January sales of the VR-50 at 80, with selling costs of 4 per unit
Brass price increase announced for 1 March N+1
Settlement agreement with Orbelac for 260,000
Compulsory liquidation of Dovrand, which ceased payments in November N
Fall in the value of the listed shares to 120,000 after a general market fall
4 more questions will appear once the current question is complete.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Answer every part to submit the level and see the conclusion.
Normative references