IAS 40 · Case studies (Step 3 of 5)
Case study
Foncière Marnay SA (fictitious entity) applies the cost model to its investment property. In 20X5, it sells building A, held for 6 years, and replaces a lift in building B, which it keeps. The depreciation, the carrying amount, the gain or loss on disposal and the treatment of the old part must be determined.
Your assignment
Compute the annual depreciation charge of building A, the carrying amounts of building A and of the old lift, the gain or loss on disposal and the loss on the replaced part; identify the missing information; record the transactions (case data) and present their effect; conclude.
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.
4 documents: open each one to read it.
Document 1Table
Building A, acquired on 1 January 20X0 and sold on 31 December 20X5: cost of 4,000,000 EUR, estimated residual value of 400,000 EUR, useful life of 30 years, straight-line depreciation. Accumulated depreciation at 31 December 20X5, including the charge of 20X5: 720,000 EUR (6 years). No indication of impairment.
The figures of the documents, gathered for your work.
| Item | Value | Found in |
|---|---|---|
| Cost of building A | €4,000,000.00 | |
| Estimated residual value of building A | €400,000.00 | |
| Useful life of building A | 30 years | |
| Accumulated depreciation of building A at disposal | €720,000.00 | |
| Net disposal proceeds of building A | €3,600,000.00 | |
| Cost of the new lift | €250,000.00 | |
| Cost of the old lift | €150,000.00 | |
| Accumulated depreciation of the old lift | €60,000.00 | |
| Rents received in 20X5 on building A | €310,000.00 |
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.
Building A at cost
Sale contract
Replacement of the lift of building B
Rents received
Organise your work freely: deal with each point, then argue your conclusion.
Task 1Analysis
Which model applies after initial recognition and when is derecognition made?
Task 2Calculation
Compute the annual depreciation charge of building A.
Part 1 · Calculation
Compute the annual depreciation charge of building A.
Task 3Calculation
Compute the carrying amount of building A at disposal and that of the old lift.
Part 1 · Calculation
Compute the carrying amount of building A at disposal and that of the old lift.
Result: Carrying amount of the old lift
Task 4Calculation
Compute the gain or loss on disposal of building A.
Part 1 · Calculation
Compute the gain or loss on disposal of building A.
Task 5Calculation
Compute the loss on the old part replaced.
Part 1 · Calculation
Compute the loss on the old part replaced.
Task 6Missing information
What information is missing to fix the date of disposal?
Task 7Journal entries
Record the depreciation, the replacement of the lift and the disposal.
Part 1 · Journal entry · Journal entries
Entry 1 of 3
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 3
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
Line 4
Part 3 · Journal entry · Journal entries
Entry 3 of 3
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
Line 4
Task 8Effects on the financial statements
What is their effect 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
Part 2 · Calculation · Analysis
Quantify the effect on the aggregates concerned.
Result: Amount of the effect — Equity
Task 9Conclusion
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 / 13).
Document this file
These working papers use the data and results of this case.
Normative references