IAS 38 · Case studies (Step 3 of 5)
Case study
Maison Orlane (a fictitious cosmetics group) closes its accounts on 31 December 20X1. During the year, it launched its own Lumen brand, built a file of loyal customers and obtained control of Verdance, the owner of the brand of the same name. The finance director wishes to show all these resources as assets, together with the value of the business estimated by an expert. You are preparing the analysis memo and the entries.
Your assignment
Using the documents below, analyse each item, distinguish what can be recognised as an intangible asset from what must be expensed, record the entries for the year and state their impact. Not all the documents are 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
Costs of the Lumen brand in 20X1: launch advertising campaign 80,000, paid in cash; design of the logo and packaging by an agency 25,000, invoice payable; registration of the trademark with the industrial property office 3,000, paid in cash.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Launch advertising campaign | €80,000.00 | |
| Logo and packaging design by the agency | €25,000.00 | |
| Trademark registration | €3,000.00 | |
| Internal costs of building the file | €40,000.00 | |
| Date control of Verdance was obtained | October 1 20X1 | |
| Fair value of the Verdance brand | €500,000.00 | |
| Fair value of the Verdance customer list | €120,000.00 | |
| Gap between estimated value and net assets | €2,000,000.00 | |
| Annual rent from 20X2 | €18,000.00 |
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.
Costs of the Lumen brand
File of loyal customers
Consolidation department memo on Verdance
Extract from the expert's report on the value of the business
Office lease amendment
5 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
Can the Lumen brand, the file of loyal customers and the gap in the value of the business be recognised as assets?
Task 2Professional judgement
How should the brand and customer list acquired with Verdance be treated in the consolidated financial statements?
Task 3Journal entries
Which entries do you record in 20X1 for the costs of the Lumen brand and of the file?
Part 1 · Journal entry · Journal entries
Entry 1 of 4
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 4
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 3 · Journal entry · Journal entries
Entry 3 of 4
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 4 · Journal entry · Journal entries
Entry 4 of 4
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 4Effects on the financial statements
What is the impact of these entries on the 20X1 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
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 5Conclusion
Write the conclusion of the memo to the finance director.
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).
Normative references