Cross-IFRS · Case studies (Step 3 of 5)
Practical case
Version of this content
IAS 12 Income Taxes — wording before IFRS 18Applicable today
Applies to annual periods beginning before January 1, 2027.
Vastrelle Instruments SAS, a fictitious company that designs optical sensors for vineyard machinery (60 employees, single production site at Quillemont), IFRS financial statements, year end 31 December, amounts in euros.
L1 · Guided · Year N — closing at 31 December N
In N, Vastrelle Instruments launches the Talvérine project, a sensor that measures grape ripeness on the harvesting machine. You follow the file over three years: research, capitalised development and the first deferred tax in N; commissioning, amortisation and revaluation of the Quillemont land in N+1; arrival of a competitor, impairment loss, tax loss and assessment of the deferred tax asset in N+2. At each step, the central question is the same: which standard does what? The carrying amount of the assets comes from their own standards; deferred tax comes from comparing that carrying amount with the tax base. All figures and all tax rules are case data (fictitious legislation); teaching assumptions and professional judgements are flagged as such, and no method, useful life or rate chosen by Vastrelle is presented as required by the standards. Teaching assumptions: no tax instalments are paid; no other item creates a difference between accounting profit and taxable profit.
Standards involved: IAS 38 Intangible Assets (research, development, cost of the asset, start of amortisation), IAS 36 Impairment of Assets (annual test of an asset not yet available for use) and IAS 12 Income Taxes (tax base, temporary difference, deferred tax liability). Sort the project’s expenditure, calculate the carrying amount, the tax base and the tax for the year, then record the tax entries.
Fundamental level: the method, help and references are shown.
Method
File checklist
2 / 6 stages reached
Context · Dated fact of the file
Vastrelle Instruments SAS, a fictitious company that designs optical sensors for vineyard machinery (60 employees, single production site at Quillemont), IFRS financial statements, year end 31 December, amounts in euros.
Initial event · L1·Year N — closing at 31 December N · Current stage
Standards involved: IAS 38 Intangible Assets (research, development, cost of the asset, start of amortisation), IAS 36 Impairment of Assets (annual test of an asset not yet available for use) and IAS 12 Income Taxes (tax base, temporary difference, deferred tax liability). Sort the project’s expenditure, calculate the carrying amount, the tax base and the tax for the year, then record the tax entries.
Pieces added
New period · L2·Year N+1 — closing at 31 December N+1 · Upcoming: unlocks after the current stage
New period · L3·Year N+2 — closing at 31 December N+2 (part 1) · Upcoming: unlocks after the current stage
New period · L4·Year N+2 — closing at 31 December N+2 (part 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
| Period | Nature | Amount |
|---|---|---|
| January-March N | laboratory work on optical measurement of sugars, with no application chosen yet | 300,000 |
| April-June N | design and testing of the selected prototype, before Vastrelle can demonstrate all the capitalisation criteria | 180,000 |
| July-December N | project engineers, components of the pre-series prototypes, vineyard trials, directly attributable | 960,000 |
| July-December N | training of the sales staff to present the future sensor | 40,000 |
| July-December N | share of head-office general administrative costs, not directly attributable | 55,000 |
| 1 November N | proposal by the technical director: reinstate at 31 December N, in the cost of the asset, the 180,000 of April-June, ‘as the project has proved viable’ | — |
Vastrelle demonstrates all the criteria for capitalising development from 1 July N (technical feasibility, intention and ability to complete and use, probable future benefits, available resources, reliable measurement of the expenditure); this finding is case data. At 31 December N, the sensor is not yet ready for use: it is due to be put into service in mid-N+1.
First level: all the data is in the brief and the pieces of this level.
6 parts to answer, marked when you submit the level.
Find the useful facts in the pieces before concluding.
Part 1 · Classification · Recognition
At 31 December N, classify each item in document 1: cost of the Talvérine intangible asset, or expense of year N.
Drag each item into its category, or tap the category under the item.
Laboratory work of January-March N (300,000)
Design and testing of the prototype in April-June N (180,000)
Directly attributable expenditure of July-December N (960,000)
Training of the sales staff (40,000)
Share of general administrative costs (55,000)
Reinstatement of the 180,000 of April-June proposed by the technical director
5 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