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IAS 32Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 32L4 · Expert

Offsetting, puttable instruments, cooperative member shares and the FICE project: a classification and presentation file

7 documents14 tasks≈ 120 min
0 / 18 items completed
Standards
IAS 32 — Financial Instruments: Presentation
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Orsan Cooperative (fictitious entity) groups farmers. It has issued member shares and redeemable fund units, holds grain contracts and has balances with two counterparties. You prepare the classification and presentation note for the closing date of 31 December 20X6.

Your assignment

Distinguish a contractual debt from a non-contractual debt; classify the two categories of member shares, then the two categories of redeemable units, and place the liquidation units in relation to the exception for puttable instruments; total the equity and the financial liabilities that result; say which of the two grain contracts falls within IAS 32; assess offsetting with each counterparty and compute the net amount presented; record the mandatory annual distribution of the B units and state its effect; say what weight to give to the FICE project; conclude. One document is not useful.

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.

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

Documents

File documents

7 documents: open each one to read it.

Document 1Memo

Profile of the cooperative and case conventions

Orsan Cooperative (fictitious entity) closes its accounts on 31 December 20X6; its functional currency is the euro. Case conventions: amounts in EUR; the terms are those of the documents; case convention (pedagogical assumption, not attributed to IAS 32): the conditions of the exception for the A units and the liquidation units are all met according to the legal opinion; the right of set-off with Alvia is enforceable in all circumstances.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Member shares M1€1,200,000.00
Member shares M2€800,000.00
A units€600,000.00
B units€400,000.00
Fixed distribution of the B units5%
Annual distribution of the B units€20,000.00
Liquidation units€300,000.00
Grain contract G1€90,000.00
Grain contract G2€60,000.00
Tax due to the State€45,000.00
Supplier debt€130,000.00
Deposit with Alvia Bank€400,000.00
Loan from Alvia Bank€150,000.00
Receivable from Brenval€220,000.00
Debt to Brenval€90,000.00
Telephone invoice€2,300.00

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 sort7

  • Profile of the cooperative and case conventions

  • Statutes: member shares

  • Redeemable fund units and liquidation units

  • Grain contracts and debts

  • Balances and agreements with Alvia and Brenval

  • Note on the FICE project

  • Telephone invoice

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

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

      1. Task 1Analysis

        Are the tax debt and the supplier debt financial liabilities?

      2. Task 2Professional judgement

        Classify the member shares M1 and M2.

      3. Task 3Professional judgement

        Classify the redeemable units A and B.

      4. Task 4Professional judgement

        Do the liquidation units fall under the same exception as the A units? What difference in conditions?

      5. Task 5Analysis

        Compute the total of the instruments classified as equity.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the instruments classified as equity.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      6. Task 6Analysis

        Compute the total of the instruments classified as financial liabilities.

        Calculator

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

        Part 1 · Calculation

        Compute the total of the instruments classified as financial liabilities.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      7. Task 7Analysis

        Which of the two grain contracts falls within IAS 32?

      8. Task 8Professional judgement

        Alvia: are both offsetting criteria met?

      9. Task 9Calculation

        Alvia: compute the net amount presented.

        Calculator

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

        Part 1 · Calculation

        Alvia: compute the net amount presented.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Professional judgement

        Brenval: can the receivable and the debt be offset?

      11. Task 11Analysis

        What weight should the FICE project have in the classifications at the closing date?

      12. Task 12Journal entries

        Record the mandatory annual distribution of the B units.

        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

      13. Task 13Effects on the financial statements

        What is the effect of the entry 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. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      14. Task 14Conclusion

        Write the conclusion.

      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 / 18).

      Document this file

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

      Normative references

      • IAS 32 §42
      • IAS 32 §16A
      • IAS 32 §16C