Cross-IFRS · Case studies (Step 3 of 5)
Practical case
Ostrevia Logistics SAS, a fictitious logistics provider for e-commerce (140 employees), single site in Morlanne, IFRS financial statements, year end 31 December, amounts in euros.
L1 · Guided · Year N — 1 January N, setting up the site
Ostrevia Logistics operates a warehouse in Morlanne that it leases from Foncière Tordanne (a fictitious entity) and fits out with its own installations: an automated sorting system and a fleet of forklift trucks. You follow the site over three years: setting up the lease and the equipment in N, an amendment to the lease in N+1, then the loss of a major customer and the impairment test of the site in N+2. Three standards meet: IFRS 16 for the lease, IAS 16 for the equipment, IAS 36 for the impairment of the right-of-use asset and the equipment. All figures are case data; teaching assumptions and professional judgements are flagged as such. Teaching assumption: amounts are rounded to the euro at each step; no rate or period quoted in the case is imposed by a standard.
Standards involved: IFRS 16 Leases (initial recognition by the lessee) and IAS 16 Property, Plant and Equipment (initial cost). On 1 January N, the warehouse lease commences and the equipment is put into service. Read the two documents, then answer in order: each question prepares the next.
Fundamental level: the method, help and references are shown.
Method
File checklist
2 / 6 stages reached
Context · Dated fact of the file
Ostrevia Logistics SAS, a fictitious logistics provider for e-commerce (140 employees), single site in Morlanne, IFRS financial statements, year end 31 December, amounts in euros.
Initial event · L1·Year N — 1 January N, setting up the site · Current stage
Standards involved: IFRS 16 Leases (initial recognition by the lessee) and IAS 16 Property, Plant and Equipment (initial cost). On 1 January N, the warehouse lease commences and the equipment is put into service. Read the two documents, then answer in order: each question prepares the next.
Pieces added
New period · L2·Year N — year end at 31 December N · Upcoming: unlocks after the current stage
New period · L3·Year N+1 · Upcoming: unlocks after the current stage
New period · L4·Year N+2 · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
2 documents to work from at this level.
Document 1Contract
| Clause | Content |
|---|---|
| Lessor | Foncière Tordanne (a fictitious entity) |
| Leased asset | 18,000 m² warehouse in Morlanne, remaining useful life of the building estimated at 40 years |
| Commencement date | 1 January N |
| Term | 8 non-cancellable years, no extension option and no purchase option; no transfer of ownership |
| Rent | 200,000 per year, payable in arrears on 31 December |
| Interest rate implicit in the lease | not disclosed by the lessor, cannot be readily determined |
| Ostrevia's incremental borrowing rate at 1 January N | 5% per year |
| Lease incentive | 20,000 paid by the lessor to Ostrevia on 1 January N (contribution to the move) |
| Estate agent's commission | 11,789, owed by Ostrevia only because the lease is signed |
Discount factor of an annuity of 1 over 8 years at 5% (payments at year end): 6.463213.
First level: all the data is in the brief and the pieces of this level.
4 parts to answer, marked when you submit the level.
Find the useful facts in the pieces before concluding.
Part 1 · Classification · Recognition
Classify each item in documents 1 and 2 according to its treatment at 1 January N.
Estate agent’s commission (11,789)
Lease incentive received from the lessor (20,000)
Transport of the sorting system (14,000)
Installation and assembly (46,000)
Testing whether it functions properly (6,000)
Training of operators (9,500)
Opening ceremony of the site (3,200)
Share of head-office costs (4,000)
Recoverable VAT on the system invoice (159,600)
3 more questions 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