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IAS 20Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 20L3 · Advanced

Grant that became repayable: deferred income, deduction and catch-up depreciation

5 documents9 tasks≈ 75 min
0 / 13 items completed
Standards
IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Brasserie Lavandou SA (fictitious entity) closes its books on 31 December 20X5. A region notifies it at the closing date that three grants received must be repaid: an equipment grant presented as deferred income (A), an equipment grant deducted from the carrying amount of the asset (B) and a training grant recognised as income in 20X4.

Your assignment

Characterise the change; compute the immediate expense for A (cumulative releases already recognised) and for the training grant, and the catch-up depreciation for B; reconcile the deferred income of A; identify the missing information; assess the impairment of the new carrying amount of B; record the repayments (case data) and present their effect; conclude.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

5 documents: open each one to read it.

Document 1Contract

Notification from the region

Notification from the region of 20 December 20X5: repayment required of 100,000 EUR for equipment grant A (received on 1 January 20X3, brewing machine of 500,000 EUR, useful life of 10 years, deferred income released on a straight-line basis), of 60,000 EUR for equipment grant B (received on 1 January 20X3, bottling machine of 300,000 EUR, useful life of 8 years, grant deducted from the carrying amount) and of 15,000 EUR for the training grant recognised as income in 20X4 (no deferred income). The condition of maintaining the activity is no longer met.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Repayment required for A€100,000.00
Repayment required for B€60,000.00
Repayment required for the training grant€15,000.00
Deferred income of A not yet released before the repayment€70,000.00
Deferred income of A at the opening of 20X5€80,000.00
Release of A in 20X5€10,000.00
Deferred income of A reported after the repayment€0.00
Cumulative depreciation of B already recognised€90,000.00
Cumulative depreciation of B recalculated on the gross cost€112,500.00
Recoverable amount of B€220,000.00
Communication quote 20X6€8,000.00

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 sort5

  • Notification from the region

  • Deferred income register of A

  • IAS 16 register of B

  • Valuation of B

  • Communication quote

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      9 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        How should the notification be characterised and how should each repayment be treated?

      2. Task 2Calculation

        Compute the immediate expense for A (cumulative releases already recognised) and for the training grant.

        Calculator

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

        Part 1 · Calculation

        Compute the immediate expense for A (cumulative releases already recognised) and for the training grant.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Immediate expense of the training grant

      3. Task 3Calculation

        Compute the catch-up depreciation of B.

        Calculator

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

        Part 1 · Calculation

        Compute the catch-up depreciation of B.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      4. Task 4Calculation

        Reconcile the deferred income of A.

        Calculator

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

        Part 1 · Calculation

        Reconcile the deferred income of A.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Reconciliation difference of the deferred income of A

      5. Task 5Missing information

        What information is missing to settle the amounts to be repaid?

      6. Task 6Professional judgement

        Does the new carrying amount of B call for an impairment loss? Justify.

      7. Task 7Journal entries

        Record the three repayments.

        Calculator

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

        Part 1 · Journal entry · Journal entries

        Entry 1 of 3

        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 2 · Journal entry · Journal entries

        Entry 2 of 3

        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 3 · Journal entry · Journal entries

        Entry 3 of 3

        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

      8. Task 8Effects on the financial statements

        What is 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

      9. Task 9Conclusion

        Write the conclusion.

      Workspace

      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 / 13).

      Document this file

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

      Normative references

      • IAS 20 §32
      • IAS 20 §33