IAS 33 · Case studies (Step 3 of 5)
Case study
Valmeris SA (fictitious entity) closes its books on 31 December 20X6; its ordinary shares are traded on a regulated market. In 20X6 it issued ordinary shares for cash on 1 April, repurchased own shares on 1 October and declared a dividend on its preference shares. Management prepares basic earnings per share.
Your assignment
State whether the entity is within the scope of the standard and identify the numerator and the denominator; compute the earnings attributable to the ordinary shareholders; weight the share movements and compute the weighted average number; compute basic earnings per share; record the issue and the repurchase; present their effect on the financial statements; 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.
Fundamental level: the method, help and references are shown.
Method
File checklist
Document 1
Document 3
Document 3
Document 1
4 documents: open each one to read it.
Document 1Memo
Valmeris SA (fictitious entity) closes its books on 31 December 20X6. Its ordinary shares are traded on a regulated market and it prepares consolidated financial statements. Case conventions: share movements are dated on the first day of the month indicated, weighting uses whole months out of 12 and earnings per share is rounded to two decimals (half up).
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Start of the year | January 1 20X6 | |
| End of the year | December 31 20X6 | |
| Per-share basis (one share) | 1 unit | |
| Profit for 20X6 attributable to the parent | €1,285,000.00 | |
| Preference dividend declared for 20X6 (after tax) | €88,000.00 | |
| Ordinary shares at 1 January 20X6 | 900,000 units | |
| Shares issued on 1 April 20X6 | 240,000 units | |
| Date of the issue | April 1 20X6 | |
| Cash received on the issue | €1,440,000.00 | |
| Amount credited to share capital | €480,000.00 | |
| Amount credited to share premium | €960,000.00 | |
| Own shares repurchased on 1 October 20X6 | 120,000 units | |
| Date of the repurchase | October 1 20X6 | |
| Cost of the repurchase paid in cash | €660,000.00 | |
| Proposed ordinary dividend per share | €0.35 |
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.
Entity profile and case conventions
Profit for the year and preference shares
Ordinary share movements in 20X6
Proposed ordinary dividend
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.
Task 1Analysis
Is Valmeris SA within the scope of the standard and what are the numerator and the denominator of basic earnings per share?
Set out the facts, the question raised, then your analysis.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Task 2Calculation
Compute the earnings attributable to the ordinary shareholders.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the earnings attributable to the ordinary shareholders.
Task 3Calculation
Weight the opening shares, the issue and the repurchase over time.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Weight the opening shares, the issue and the repurchase over time.
Result: Shares repurchased on 1 October weighted (to deduct)
Task 4Calculation
Compute the weighted average number of ordinary shares.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute the weighted average number of ordinary shares.
Task 5Calculation
Compute basic earnings per share.
Start from the data in the pieces, set the formula, check the unit and the order of magnitude.
Part 1 · Calculation
Compute basic earnings per share.
Task 6Journal entries
Record the issue of shares of 1 April.
Identify the accounts affected and the direction of each movement; check the balance.
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.
Line 1
Line 2
Line 3
Task 7Journal entries
Record the repurchase of own shares of 1 October.
Identify the accounts affected and the direction of each movement; check the balance.
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.
Line 1
Line 2
Task 8Effects on the financial statements
What is the cumulative effect of the two entries on the financial statements?
For each financial statement, state the line affected, the direction and the amount.
Part 1 · Classification · Analysis
State the direction of the effect on each financial statement aggregate.
Financial position (balance sheet)
Profit or loss
Other comprehensive income
Equity
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 9Conclusion
Write the conclusion.
Write a conclusion that cites the facts and the treatment chosen.
This answer is not marked automatically: after submitting, you will compare it with the solution.
Your working draft for this file: points noted, leads, intermediate calculations.
Saved on this device only; never graded.
Complete every item of the file to submit it (0 / 11).
Document this file
These working papers use the data and results of this case.
Normative references