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IFRS 15Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 15L1 · Fundamental

Bundled cold room, installation and maintenance: five steps and allocation of the price

4 documents8 tasks≈ 50 min
0 / 13 items completed
Standards
IFRS 15 — Revenue from Contracts with Customers
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Cryalis Froid SAS (a fictitious entity) manufactures and sells modular cold rooms for the food trades. On 1 October 20X1, it signs with Maison Vernet Traiteur SARL (a fictitious entity) a contract covering a CF-40 cold room, its installation at the customer's site and the maintenance of the equipment. You are preparing the financial statements of Cryalis Froid for the year ended 31 December 20X1.

Your assignment

Check whether there is a contract within the meaning of IFRS 15, identify the performance obligations, allocate the transaction price between them, determine on which date and for which amount revenue is recognised in 20X1, record the entries of the year and measure their impact on the financial statements at 31 December 20X1.

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.

Fundamental level: the method, help and references are shown.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 4 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 13) · to do
  • Submit the file, then assess yourself · to do

Events

Chronology of the file

  1. October 1 20X1Date of signature of the contract · Dated fact of the file

    Document 1

  2. December 15 20X1Date of acceptance by the customer · Dated fact of the file

    Document 4

Documents

File documents

4 documents: open each one to read it.

Document 1Contract

Contract signed with Maison Vernet Traiteur

Contract signed on 1 October 20X1 by both parties; neither of them can terminate it without compensating the other. Subject: supply of a CF-40 cold room, standard installation at the customer's site (assembly, electrical connection, commissioning) and preventive and corrective maintenance for 24 months from 1 January 20X2. Fixed overall price: 54,000, presented in the contract as follows: cold room 50,000, installation free of charge, maintenance 4,000. Payment terms: deposit of 30% on signature, i.e. 16,200, received on 1 October 20X1; balance invoiced on acceptance of the installation, payable within 30 days. The balance invoice remains due in full, even though the maintenance has not yet been provided.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Date of signature of the contractOctober 1 20X1
Fixed overall contract price€54,000.00
Price of the cold room presented in the contract€50,000.00
Price of maintenance presented in the contract€4,000.00
Maintenance period24 months
Deposit rate30%
Deposit received on signature€16,200.00
Observable separate selling price of the cold room (stand-alone selling price)€48,000.00
Observable separate selling price of the maintenance contract (stand-alone selling price)€8,000.00
Expected cost of installation€3,200.00
Usual margin on cost25%
Estimated stand-alone selling price of installation€4,000.00
Date of acceptance by the customerDecember 15 20X1
Balance invoice€37,800.00

Sorting the information

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.

To sort4

  • Contract signed with Maison Vernet Traiteur

  • Extract from the price list and separate sales

  • Memo from the finance department

  • Delivery note, acceptance report and balance invoice

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      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.

      1. Task 1Analysis

        Is the contract signed with Maison Vernet Traiteur a contract within the meaning of IFRS 15?

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      2. Task 2Analysis

        Identify the performance obligations in the contract.

        Set out the facts, the question raised, then your analysis.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Identify the performance obligations in the contract.

        1. units

        Checks

        • 0 / 1 step entered
        • Amounts readable

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      3. Task 3Calculation

        Allocate the transaction price to the performance obligations.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Allocate the transaction price to the performance obligations.

        1. €
        2. €
        3. €
        4. €

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Total price allocated

      4. Task 4Journal entries

        Record the entry for the deposit received on signature.

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      5. Task 5Analysis

        On which date and for which amount is revenue recognised in 20X1?

        Set out the facts, the question raised, then your analysis.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        On which date and for which amount is revenue recognised in 20X1?

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Contract liability at the reporting date

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      6. Task 6Journal entries

        Record the entries for the acceptance of the cold room and its installation.

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

        Calculator

        Click in an answer field to be able to insert the result.

        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.

        1. Line 1

        2. Line 2

        3. Line 3

        TotalsDebit0Credit0

      7. Task 7Effects on the financial statements

        What is the impact of these entries on the financial statements at 31 December 20X1?

        For each financial statement, state the line affected, the direction and the amount.

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

        Calculator

        Click in an answer field to be able to insert the result.

        Part 2 · Calculation · Analysis

        Quantify the effect on the aggregates concerned.

        1. €
        2. €
        3. €

        Checks

        • 0 / 3 steps entered
        • Amounts readable

        Result: Amount of the effect — Equity

      8. Task 8Conclusion

        Write the conclusion and answer the sales director.

        Write a conclusion that cites the facts and the treatment chosen.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      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

      • IFRS 15 §9
      • IFRS 15 §10
      • IFRS 15 §22
      • IFRS 15 §25
      • IFRS 15 §27
      • IFRS 15 §29
      • IFRS 15 §73
      • IFRS 15 §74
      • IFRS 15 §76
      • IFRS 15 §77
      • IFRS 15 §78
      • IFRS 15 §79
      • IFRS 15 §38