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IAS 10Case studies (Step 3 of 5)

Case study

Step 3 of 5

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.

Professional fileIAS 10L4 · Expert

Review file of the events after the reporting period of an industrial group

10 documents17 tasks≈ 240 min
0 / 24 items completed
Standards
IAS 10 — Events after the Reporting Period
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Caldérac Industries SA (fictitious entity) is finalising its 20X5 statements. Between the reporting date and approval, management received a lawyer's letter, a bank letter, a customer's receivership notice, the statement of inventory sales and management board minutes. You prepare the review file of the events after the reporting period, submitted to the reviewer before approval.

Your assignment

Set the authorisation date and the period to be analysed, classify the events, quantify the adjustments (dispute, receivable, inventory, tax, profit), post the entries and measure their effect, measure the non-adjusting events, deal with the dividend, assess going concern, 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

Events

Chronology of the file

  1. December 31 20X5Reporting date · Dated fact of the file

    Document 1

  2. January 20 20X6Date of the receivership · Dated fact of the file

    Document 5

  3. February 8 20X6Date of the flood · Dated fact of the file

    Document 8

  4. February 12 20X6Date of the judgment · Dated fact of the file

    Document 2

  5. March 1 20X6Signing date of the acquisition · Dated fact of the file

    Document 4

  6. March 3 20X6Disclosure of the scandal · Dated fact of the file

    Document 7

  7. March 5 20X6Press announcement of results · Dated fact of the file

    Document 1

  8. March 10 20X6Declaration date of the interim dividend · Dated fact of the file

    Document 4

  9. March 15 20X6Announcement of the Tramerel closure · Dated fact of the file

    Document 4

  10. March 24 20X6Authorisation of submission to the supervisory board · Dated fact of the file

    Document 1

  11. April 2 20X6Start of the strike · Dated fact of the file

    Document 9

  12. April 8 20X6Review by the supervisory board · Dated fact of the file

    Document 1

  13. May 20 20X6Approval by the general meeting · Dated fact of the file

    Document 1

Documents

File documents

10 documents: open each one to read it.

Document 1Memo

Closing timetable and governance

Caldérac Industries SA (fictitious entity, pumps and hydraulic equipment) has a 31 December 20X5 reporting date; tax rate of 25%. The company has a management board and a supervisory board, the latter made up solely of non-executive members. Annual results are announced to the press on 5 March 20X6. On 24 March 20X6, the management board approves the statements and authorises their submission to the supervisory board, which reviews them on 8 April 20X6; the general meeting will approve them on 20 May 20X6. The articles give no party the power to amend the statements after issue (case data). Draft 20X5 profit before the points below: 3,600,000; materiality threshold: 100,000.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Reporting dateDecember 31 20X5
Press announcement of resultsMarch 5 20X6
Authorisation of submission to the supervisory boardMarch 24 20X6
Review by the supervisory boardApril 8 20X6
Approval by the general meetingMay 20 20X6
Draft 20X5 profit€3,600,000.00
Tax rate25%
Materiality threshold€100,000.00
Amount set by the judgment (Ostrand dispute)€420,000.00
Provision at 31 December 20X5 (Ostrand dispute)€300,000.00
Date of the judgmentFebruary 12 20X6
Environmental claim: low end of the range€150,000.00
Environmental claim: high end of the range€250,000.00
Confirmed credit facility€15,000,000.00
Horizon of the confirmation and the forecasts18 months
Tellmar acquisition price€4,800,000.00
Signing date of the acquisitionMarch 1 20X6
Declaration date of the interim dividendMarch 10 20X6
Distributable profit€3,000,000.00
Payout rate30%
Announcement of the Tramerel closureMarch 15 20X6
Cash needs over 18 months€9,500,000.00
Gross receivable from Corbassin€210,000.00
Loss allowance at 31 December 20X5€30,000.00
Carrying amount of the receivable€180,000.00
Estimated recovery rate20%
Date of the receivershipJanuary 20 20X6
Cost of the P-series batch€700,000.00
Selling price obtained€640,000.00
Selling costs€32,000.00
Fair value at 31 December 20X5€1,240,000.00
Fair value at 24 March 20X6€1,054,000.00
Disclosure of the scandalMarch 3 20X6
Date of the floodFebruary 8 20X6
Carrying amount of the items destroyed€260,000.00
Compensation accepted by the insurer€180,000.00
Start of the strikeApril 2 20X6

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 sort10

  • Closing timetable and governance

  • Lawyer's letter of 18 March 20X6

  • Bank's letter of 16 March 20X6

  • Management board minutes (March 20X6)

  • Notice of receivership of the customer Corbassin

  • Inventory sales after the reporting date

  • Statement of the listed share portfolio

  • Loss report: flooding of the Lisle warehouse

  • Human resources memo

  • Internal social committee newsletter

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

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

      1. Task 1Analysis

        Determine the authorisation date and the period to be analysed.

      2. Task 2Analysis

        Classify each event identified.

      3. Task 3Calculation

        Compute the adjustment to the provision for the Ostrand dispute.

        Calculator

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

        Part 1 · Calculation

        Compute the adjustment to the provision for the Ostrand dispute.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Compute the loss on the Corbassin receivable.

        Calculator

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

        Part 1 · Calculation

        Compute the loss on the Corbassin receivable.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Additional loss on the receivable

      5. Task 5Calculation

        Determine the net realisable value of the P-series batch and the write-down.

        Calculator

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

        Part 1 · Calculation

        Determine the net realisable value of the P-series batch and the write-down.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Inventory write-down

      6. Task 6Calculation

        Total the adjustments and compute their tax effect.

        Calculator

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

        Part 1 · Calculation

        Total the adjustments and compute their tax effect.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Adjustments net of tax

      7. Task 7Calculation

        Determine the adjusted 20X5 profit.

        Calculator

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

        Part 1 · Calculation

        Determine the adjusted 20X5 profit.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      8. Task 8Journal entries

        Post the adjusting entries at 31 December 20X5.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 4

        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 4

        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 4

        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 4

        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

      9. Task 9Effects on the financial statements

        What is the effect of the adjustments on the 20X5 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

      10. Task 10Calculation

        Measure the fall in the Quelvrane shares after the reporting date.

        Calculator

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

        Part 1 · Calculation

        Measure the fall in the Quelvrane shares after the reporting date.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      11. Task 11Calculation

        Estimate the financial effect of the flood to be disclosed.

        Calculator

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

        Part 1 · Calculation

        Estimate the financial effect of the flood to be disclosed.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      12. Task 12Calculation

        Compute the interim dividend declared.

        Calculator

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

        Part 1 · Calculation

        Compute the interim dividend declared.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      13. Task 13Journal entries

        Post the dividend entry in the right period.

        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

      14. Task 14Effects on the financial statements

        What is the effect of this entry, and on which period?

        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

      15. Task 15Professional judgement

        Is the going concern basis still appropriate?

        Calculator

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

        Part 1 · Calculation

        Is the going concern basis still appropriate?

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      16. Task 16Analysis

        Prepare the IAS 10 disclosures and record the findings on the draft notes.

      17. Task 17Conclusion

        Write the conclusion of the file.

      File review

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

      Review notes

      • BlockingResolvedUse 24 March 20X6, not the general meeting of 20 May 20X6
      • BlockingResolvedThe Corbassin loss must take the expected recovery into account
      • Non-blockingOpenComplete the estimate of the closure cost as soon as it is available

      Information requests

      • ObtainedRequest to the bank on the leverage covenant
      • Assumption documentedRequest to the management board on the cost of the Tramerel closure

      Completion checklist

      • Review period defined and every event classifiedDone
      • Adjustments schedule reconciled to profitDone
      • Entries checked and balancedDone
      • Going concern memo signedDone
      • Effect of the Tramerel closure to be completedTo review
      • Power to amend after issue (none under the articles)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 / 24).

      Document this file

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

      Normative references

      • IAS 10 §3
      • IAS 10 §4
      • IAS 10 §5
      • IAS 10 §6
      • IAS 10 §7
      • IAS 10 §8
      • IAS 10 §9
      • IAS 10 §10
      • IAS 10 §11
      • IAS 10 §12
      • IAS 10 §13
      • IAS 10 §14
      • IAS 10 §15
      • IAS 10 §16
      • IAS 10 §17
      • IAS 10 §18
      • IAS 10 §19
      • IAS 10 §20
      • IAS 10 §21
      • IAS 10 §22