IAS 36 · Case studies (Step 3 of 5)
Case study
The Hélion group (a fictitious group) manufactures industrial packaging at three sites: Lyon (unit A), Bordeaux (unit B) and Lille (unit C). Each site sells its output to its own customers and management monitors performance site by site. The goodwill of 300,000 arising on the acquisition of the Bordeaux site has been allocated to unit B. The head office building, which serves the three sites, does not generate cash inflows of its own. You are performing the annual test at 31 December 20X5.
Your assignment
Using the documents, determine the carrying amount of unit B to be tested, any impairment loss and its allocation between goodwill and the other assets, then record it. 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.
Advanced level: no help, the work is grouped by kind.
5 documents: open each one to read it.
Document 1Table
Carrying amounts at 31 December 20X5 (excluding goodwill) and remaining useful lives: unit A 1,000,000 (10 years); unit B 1,500,000 (20 years); unit C 2,000,000 (5 years). Head office building: 600,000.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Date of the test | December 31 20X5 | |
| Carrying amount of unit A | €1,000,000.00 | |
| Remaining useful life of unit A | 10 years | |
| Carrying amount of unit B | €1,500,000.00 | |
| Remaining useful life of unit B | 20 years | |
| Carrying amount of unit C | €2,000,000.00 | |
| Remaining useful life of unit C | 5 years | |
| Carrying amount of the head office building | €600,000.00 | |
| Plant and equipment of B | €1,000,000.00 | |
| Buildings of B | €500,000.00 | |
| Fair value less costs of disposal of the buildings of B | €480,000.00 | |
| Goodwill allocated to unit B | €300,000.00 | |
| Value in use of unit B | €1,500,000.00 | |
| Fair value less costs of disposal of unit B | €1,400,000.00 | |
| Market share of unit B | 18% |
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.
Carrying amounts and lives of the units
Minutes of the finance committee
Detail of unit B
Valuation report on unit B
Market study
8 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
What is the level of the test? How are goodwill and the head office building dealt with?
Task 2Calculation
Allocate the head office building to the three units.
Part 1 · Calculation
Allocate the head office building to the three units.
Result: Share of the head office allocated to unit C
Task 3Calculation
Calculate the carrying amount of unit B to be compared with its recoverable amount.
Part 1 · Calculation
Calculate the carrying amount of unit B to be compared with its recoverable amount.
Task 4Calculation
Calculate the impairment loss of unit B.
Part 1 · Calculation
Calculate the impairment loss of unit B.
Task 5Calculation
Allocate the loss between goodwill and the other assets.
Part 1 · Calculation
Allocate the loss between goodwill and the other assets.
Result: Loss allocated to the assets other than goodwill
Task 6Journal entries
Which entry do you record at 31 December 20X5?
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 7Effects on the financial statements
What is the impact on the financial statements?
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
Notes
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 8Conclusion
Write the conclusion.
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 / 10).
Document this file
These working papers use the data and results of this case.
Normative references