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IAS 34Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIAS 34 · IAS 33 · IFRS 7 · IFRS 13L4 · Expert

Third-quarter report of a listed group: goodwill impairment not reversed, fair value, notes, earnings per share, compliance statement and follow-up of IFRS 18

9 documents12 tasks≈ 90 min
0 / 14 items completed
Standards
IAS 34 — Interim Financial ReportingIAS 33 — Earnings per ShareIFRS 7 — Financial Instruments: DisclosuresIFRS 13 — Fair Value Measurement
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

Hélios Group (fictitious entity), a listed group that makes and installs solar equipment, closes its accounts on 31 December and publishes a condensed report at the end of each quarter. You prepare the report for the third quarter of 20X6 (period ended 30 September 20X6). It must explain the significant events since the last annual period, including a goodwill impairment loss recognised at 30 June and a transfer between levels of the fair value hierarchy, present earnings per share, carry an accurate compliance statement and say where the group stands with regard to IFRS 18.

Your assignment

Say what the notes of the report must contain and what the draft does too much and too little; judge, event by event, what is significant; compute the carrying amount of goodwill and the control difference with the draft; record the impairment loss of the half-year; say what to think of the reversal of EUR 150,000 shown in the draft; deal with the fair value transfer, earnings per share and the compliance statement; indicate the missing additional information; place IFRS 18; present the effect of the entry; 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

9 documents: open each one to read it.

Document 1Memo

Group profile and case conventions

Hélios Group (fictitious entity) makes and installs solar equipment; its shares are traded on a regulated market; it closes its accounts on 31 December and publishes a condensed report at the end of each quarter; its functional currency is the euro. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to the standard): the group does not apply IFRS 18 early; the goodwill impairment loss is given by the impairment test of the unit; the entry is illustrative; the computation of earnings per share and the detailed fair value information belong to the IAS 33, IFRS 7 and IFRS 13 courses.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Goodwill at 31 December 20X5€1,800,000.00
Goodwill impairment loss at 30 June€450,000.00
Goodwill shown in the draft third-quarter report€1,500,000.00
Holding transferred from level 2 to level 3€320,000.00
Notes of the last annual report20 units
Annual notes reproduced unchanged14 units
Pre-tax profit of the nine months€3,200,000.00
Settlement of the dispute with the supplier€12,000.00
Profit attributable to ordinary shareholders€2,430,000.00
Weighted average number of ordinary shares8,100,000 units

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 sort9

  • Group profile and case conventions

  • Goodwill of the Hélios Distribution unit

  • Transfer between fair value levels

  • Draft notes and events of the period

  • Earnings per share: data for the nine months

  • Draft note 1: basis of preparation

  • Seasonality of the activity

  • Question of the audit committee on IFRS 18

  • Offer from a recruitment firm

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

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

      1. Task 1Analysis

        What must the notes of the report contain and what does the draft do too much and too little?

      2. Task 2Professional judgement

        Among the impairment loss, the fair value transfer and the dispute settlement, which events are significant for the notes?

      3. Task 3Calculation

        Compute the carrying amount of goodwill after the impairment loss and the control difference with the draft.

        Calculator

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

        Part 1 · Calculation

        Compute the carrying amount of goodwill after the impairment loss and the control difference with the draft.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Control difference with the draft (1,500,000 − 1,350,000)

      4. Task 4Journal entries

        Record the goodwill impairment loss at 30 June.

        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

      5. Task 5Analysis

        Is the reversal of EUR 150,000 shown in the draft allowed?

      6. Task 6Analysis

        Must the fair value transfer be mentioned in the notes, and which course details the information?

      7. Task 7Analysis

        What is missing from the draft as regards earnings per share?

      8. Task 8Professional judgement

        Can the compliance statement of draft note 1 be kept?

      9. Task 9Analysis

        What additional information is missing from the notes?

      10. Task 10Analysis

        Where does the group stand with regard to IFRS 18 for this report?

      11. Task 11Effects 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. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      12. Task 12Conclusion

        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 / 14).

      Document this file

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

      Normative references

      • IAS 34 §19
      • IAS 34 §11