IAS 36 · Case studies (Step 3 of 5)
Case study
Cité des Congrès de Loire (a fictitious company) operates an auditorium that it measures under the revaluation model. The last revalued amount dates from 31 December 20X1. Data and methods chosen by the entity: it does not transfer the revaluation surplus to retained earnings as the asset is depreciated and, on a revaluation, it eliminates the accumulated depreciation against the gross carrying amount (a method it chose among those IAS 16 permits). Teaching assumption: tax effects are ignored. You are involved in the 20X2 and 20X3 year-ends.
Your assignment
Determine the treatment of the auditorium at 31 December 20X2: revaluation under IAS 16, then impairment test under IAS 36, allocation between profit or loss and other comprehensive income, entries and the following depreciation charge. Then analyse the situation at 31 December 20X3: any reversal, cap, allocation, consistency with fair value, entries and 20X4 depreciation. 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.
Document 2
Document 3
4 documents: open each one to read it.
Document 1Table
Auditorium record: revalued amount at 31 December 20X1 of 2,000,000, revaluation surplus of 400,000 arising at that date; remaining useful life of 20 years from 1 January 20X2; nil residual value. 20X2 depreciation already recorded: 100,000.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Revalued amount at 31 December 20X1 | €2,000,000.00 | |
| Revaluation surplus of the auditorium | €400,000.00 | |
| Remaining useful life at 1 January 20X2 | 20 years | |
| Residual value | €0.00 | |
| 20X2 depreciation | €100,000.00 | |
| 20X2 year-end | December 31 20X2 | |
| Fair value at 31 December 20X2 | €1,520,000.00 | |
| Costs of disposal at 31 December 20X2 | €114,000.00 | |
| Value in use at 31 December 20X2 | €1,330,000.00 | |
| 20X3 year-end | December 31 20X3 | |
| Fair value at 31 December 20X3 | €1,440,000.00 | |
| Costs of disposal at 31 December 20X3 | €120,000.00 | |
| Value in use at 31 December 20X3 | €1,600,000.00 | |
| Amount of the loan offered | €300,000.00 | |
| Rate of the loan offered | 3.5% |
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.
Auditorium record
Reports at 31 December 20X2
Reports at 31 December 20X3
Bank financing offer
17 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
In which order are IAS 16 and IAS 36 applied to the auditorium at 31 December 20X2, and why?
Task 2Calculation
Calculate the revaluation decrease under IAS 16 and its allocation at 31 December 20X2.
Part 1 · Calculation
Calculate the revaluation decrease under IAS 16 and its allocation at 31 December 20X2.
Result: Reduction of the gross carrying amount
Task 3Journal entries
Which revaluation entry do you record at 31 December 20X2?
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 4Calculation
Determine the recoverable amount at 31 December 20X2.
Part 1 · Calculation
Determine the recoverable amount at 31 December 20X2.
Result: Recoverable amount at 31 December 20X2
Task 5Calculation
Calculate the impairment loss under IAS 36 and its allocation at 31 December 20X2.
Part 1 · Calculation
Calculate the impairment loss under IAS 36 and its allocation at 31 December 20X2.
Result: Carrying amount after impairment
Task 6Journal entries
Which impairment entries do you record at 31 December 20X2?
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
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 7Calculation
Calculate the depreciation charge for 20X3.
Part 1 · Calculation
Calculate the depreciation charge for 20X3.
Task 8Journal entries
Which depreciation entry do you record in 20X3?
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 9Professional judgement
Is a reversal justified at 31 December 20X3?
Task 10Calculation
Determine the recoverable amount and the cap on the reversal at 31 December 20X3.
Part 1 · Calculation
Determine the recoverable amount and the cap on the reversal at 31 December 20X3.
Result: Carrying amount after reversal
Task 11Calculation
Calculate the reversal and its allocation.
Part 1 · Calculation
Calculate the reversal and its allocation.
Result: Reversal in other comprehensive income
Task 12Journal entries
Which reversal entries do you record at 31 December 20X3?
Part 1 · Journal entry · Journal entries
Entry 1 of 2
One line = one account and one side. Add a line if the entry needs more; the balance check updates live.
Line 1
Line 2
Part 2 · Journal entry · Journal entries
Entry 2 of 2
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 13Analysis
Is a further revaluation under IAS 16 needed at 31 December 20X3?
Task 14Calculation
Calculate the depreciation charge for 20X4.
Part 1 · Calculation
Calculate the depreciation charge for 20X4.
Task 15Effects on the financial statements
What is the impact of the 20X2 year-end entries 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 16Effects on the financial statements
What is the impact of the 20X3 entries 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 17Conclusion
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 / 22).
Document this file
These working papers use the data and results of this case.
Normative references