Cross-IFRS · Case studies (Step 3 of 5)
Practical case
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IAS 7 Statement of Cash Flows — wording before IFRS 18Applicable today
Applies to annual periods beginning before January 1, 2027.
Brenvaux Frais Group, a fictitious group distributing fresh and frozen food to restaurants and local shops (380 employees, three logistics platforms), IFRS consolidated financial statements presenting one comparative year, year end 31 December, amounts in euros; the group leases most of its warehouses and trucks.
L1 · Guided · Year N — closing at 31 December N
You follow the cash of the Brenvaux Frais group over three years. In N, new trucks are leased and you must decide where the lease payments go; the full statement for N then brings in income taxes paid, a provision for claims and inventories; in N+1, a new leased platform, a restoration provision, a Swiss franc account and a tax receivable complicate the reconciliation; in N+2, a disposal, a specific tax and a proposal to reclassify interest call for your judgement. For each event, the central question is the same: was there a cash flow, and in which activity should it be classified? All figures, rates, tax legislation and contracts are case data; Brenvaux’s choices (indirect method starting from profit before tax, interest paid and dividends paid in financing activities, IFRS 16 exemptions, useful lives and depreciation methods) are case data: they are options or judgements of the entity, never obligations imposed by the standards. Teaching assumptions and professional judgements are flagged as such. IAS 7 is taught in its wording before IFRS 18.
Standards involved: IAS 7 Statement of Cash Flows (classification of cash flows, non-cash transactions) and IFRS 16 Leases (lessee’s lease liability, exemptions, classification of payments). Classify each payment of N, calculate the principal and interest portions of the lease payments, record the payment entry and complete the note.
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Context · Dated fact of the file
Brenvaux Frais Group, a fictitious group distributing fresh and frozen food to restaurants and local shops (380 employees, three logistics platforms), IFRS consolidated financial statements presenting one comparative year, year end 31 December, amounts in euros; the group leases most of its warehouses and trucks.
Initial event · L1·Year N — closing at 31 December N · Current stage
Standards involved: IAS 7 Statement of Cash Flows (classification of cash flows, non-cash transactions) and IFRS 16 Leases (lessee’s lease liability, exemptions, classification of payments). Classify each payment of N, calculate the principal and interest portions of the lease payments, record the payment entry and complete the note.
Pieces added
New period · L2·Year N — full statement of cash flows · Upcoming: unlocks after the current stage
New period · L3·Year N+1 — closing at 31 December N+1 · Upcoming: unlocks after the current stage
New period · L4·Year N+2 — closing at 31 December N+2 · Upcoming: unlocks after the current stage
Conclusion · Upcoming: unlocks after the current stage
1 document to work from at this level.
Document 1Contract
| Lease or item | Data | Cash flows of N |
|---|---|---|
| Dorvigne warehouse | lease liability at 1 January N: 960,000; discount rate 5%; fixed annual payment of 208,000 paid on 31 December; variable payment equal to 1% of the site’s sales, not included in the lease liability | 208,000 (fixed payment); 14,000 (variable payment) |
| Refrigerated trucks | lease commenced on 1 January N; two payments of 441,000 paid on 31 December N and N+1; incremental borrowing rate of 5% (implicit rate not determinable) | 441,000 |
| Forklift trucks | 10-month lease with no purchase option; Brenvaux applies the short-term lease exemption to this class of underlying asset | 36,000 |
| Drivers’ tablets | low-value assets; Brenvaux applies the exemption on a lease-by-lease basis | 8,000 |
| Bank loan | interest for N paid when due, with no accrued interest | 60,000 |
| Owned truck | sold in N (proceeds received) | + 48,000 |
Brenvaux’s policies (case data): interest paid classified in financing activities, consistently; dividends paid classified in financing activities; operating cash flows presented using the indirect method, starting from profit before tax. Teaching assumption: interest calculated once a year on the opening liability.
First level: all the data is in the brief and the pieces of this level.
6 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 document 1 in Brenvaux’s statement of cash flows for N.
Principal portion of the fixed payment for the Dorvigne warehouse
Interest portion of the fixed payment for the Dorvigne warehouse
Variable payment for the warehouse, not included in the lease liability
Payments for the forklift trucks (exempt short-term lease)
Payments for the tablets (exempt low-value assets)
Recognition, on 1 January N, of the right-of-use asset and lease liability for the trucks
Interest paid on the bank loan
Proceeds received from the sale of the owned truck
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