Cross-IFRS · Case studies (Step 3 of 5)
Practical case
Norvalia Énergie SA, a fictitious company that produces biomass pellets (140 employees), IFRS financial statements, year end 31 December, amounts in euros.
L1 · Guided · Year N — 1 January
You follow the construction of a dryer financed by a zero-rate public loan and an asset grant. For each item, two questions: which standard does it fall under, and what is its effect on the cost of the asset and on profit or loss? All amounts and the presentation policy are case data; the boundary between IAS 20 and IFRS 9 for the loan is given by the case. Case convention, not imposed by the standards: the benefit of the reduced rate does not reduce the expenditure used for the capitalisation of borrowing costs. Teaching assumption: income tax effects are ignored and the dryer is treated as a qualifying asset.
Measure the loan and classify the items of the project.
Fundamental level: the method, help and references are shown.
Method
File checklist
2 / 6 stages reached
Context · Dated fact of the file
Norvalia Énergie SA, a fictitious company that produces biomass pellets (140 employees), IFRS financial statements, year end 31 December, amounts in euros.
Initial event · L1·Year N — 1 January · Current stage
Measure the loan and classify the items of the project.
Pieces added
New information · L2·Year N — 1 January · Upcoming: unlocks after the current stage
New period · L3·Year N — 31 December · Upcoming: unlocks after the current stage
New period · L4·Year N — closing · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
1 document to work from at this level.
Document 1Supporting document
| Item (case data) | Information |
|---|---|
| Asset | biomass dryer, 12-month construction, ready for use on 31 December N; useful life 10 years, no residual value |
| Payment to the builder | 1,400,000 on 1 January N |
| Asset grant | 200,000 received on 1 January N from the ministry, conditions regarded as met |
| Public loan | 1,000,000 received on 1 January N, interest-free, repayable at maturity in 3 years; reference market rate 6% |
| Specific borrowing | the loan finances the dryer exclusively; no investment income |
| Company policy | grant and rate benefit deducted from the carrying amount of the asset; the other presentation is studied for comparison |
First level: all the data is in the brief and the pieces of this level.
2 parts to answer, marked when you submit the level.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Measure the loan and classify the items of the project.
Document 1Supporting document
| Item (case data) | Information |
|---|---|
| Asset | biomass dryer, 12-month construction, ready for use on 31 December N; useful life 10 years, no residual value |
| Payment to the builder | 1,400,000 on 1 January N |
| Asset grant | 200,000 received on 1 January N from the ministry, conditions regarded as met |
| Public loan | 1,000,000 received on 1 January N, interest-free, repayable at maturity in 3 years; reference market rate 6% |
| Specific borrowing | the loan finances the dryer exclusively; no investment income |
| Company policy | grant and rate benefit deducted from the carrying amount of the asset; the other presentation is studied for comparison |
Part 1 · Calculation
Measure the public loan at the date of receipt and compute the benefit of the below-market rate (amounts in EUR).
Result: Benefit of the below-market rate
1 more question 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