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IFRS 15Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 15L4 · Expert

Group revenue review: principal or agent, warranties, gift cards and disclosures

6 documents10 tasks≈ 90 min
0 / 14 items completed
Standards
IFRS 15 — Revenue from Contracts with Customers
Assistance levelFree workspace · autonomous situation
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: withdrawn

Case brief

Situation

The Solvane group (fictitious entities) operates, through its subsidiary Solvane Market, an online marketplace on which third-party merchants offer their products, together with a range of home equipment sold under its own brand, Solvane Home. The subsidiary also sells gift cards and warranty extensions. As head of consolidation, you are reviewing the group's revenue at 31 December 20X5 and preparing the related note.

Your assignment

Determine whether Solvane Market acts as principal or as agent for each specified good, calculate the marketplace commission and record the summary entry for its sales; classify the statutory warranty and the warranty extension; calculate the revenue from unexercised gift card rights and record the entries releasing the contract liability; measure the impact on the financial statements and prepare the content of the note. One document is not useful and one piece of information is missing.

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.

  • Organise the work
  • Document each point
  • Argue the conclusion

Documents

File documents

6 documents: open each one to read it.

Document 1Contract

Marketplace merchant terms and conditions

Marketplace merchant terms and conditions (extract): each third-party merchant freely sets the price of its products, ships them from its own warehouses and remains responsible to the buyer for their conformity, returns and after-sales service. Solvane Market never holds these products; it collects the buyer's card payment when the order is placed, keeps a commission of 15% and remits the balance to the merchant within 30 days. It bears the risk of fraud and non-payment on card payments; the subsidiary's management controller argues that this risk makes Solvane Market the principal for these sales.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Marketplace commission rate15%
Amounts collected from buyers for third-party merchants' products€2,400,000.00
Amounts due to third-party merchants€2,040,000.00
Solvane Home sales paid other than by gift card€1,500,000.00
Statutory warranty provision (IAS 37, case data)€18,000.00
Sérénité extensions sold and collected in 20X5€120,000.00
Gift cards sold in 20X5€500,000.00
Gift cards redeemed in 20X5€324,000.00
Expected unexercised rights (management estimate)€50,000.00
Rights expected to be exercised€450,000.00
Trade receivables at the beginning of the year€85,000.00
Trade receivables at year end€95,000.00
Contract liability at the beginning of the year (deposits)€30,000.00
Sublease rental income (IFRS 16)€60,000.00
Fair value of the warehouse€3,200,000.00

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 sort6

  • Marketplace merchant terms and conditions

  • Extract from the Solvane Market general ledger

  • Technical memo on warranties

  • Gift card memo

  • Group balances and other data

  • Warehouse valuation report

Relevant to the treatment0

    No effect0

      Workspace

      Work programme

      Organise your work freely: deal with each point, then argue your conclusion.

      1. Task 1Analysis

        Does Solvane Market act as principal or as agent for the third-party merchants' products and for the Solvane Home range?

      2. Task 2Calculation

        Calculate the marketplace commission.

        Calculator

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

        Part 1 · Calculation

        Calculate the marketplace commission.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      3. Task 3Journal entries

        Record the summary entry for the marketplace sales.

        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

        3. Line 3

        TotalsDebit0Credit0

      4. Task 4Professional judgement

        How do you classify the statutory warranty and the Sérénité extension?

      5. Task 5Calculation

        Calculate the revenue from unexercised rights and the gift card contract liability at year end.

        Calculator

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

        Part 1 · Calculation

        Calculate the revenue from unexercised rights and the gift card contract liability at year end.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Gift card contract liability at year end

      6. Task 6Journal entries

        Record the entries releasing the gift card contract liability.

        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

        TotalsDebit0Credit0

      7. Task 7Effects on the financial statements

        What is the impact of the entries on the financial statements?

        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

        5. Notes

        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 8Analysis

        Which information do you present in the revenue note?

        Calculator

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

        Part 1 · Calculation

        Which information do you present in the revenue note?

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

        Checks

        • 0 / 4 steps entered
        • Amounts readable

        Result: Transaction price allocated to performance obligations unsatisfied at year end

      9. Task 9Missing information

        Which information is missing to finalise the note?

      10. Task 10Conclusion

        Write the conclusion.

      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 / 14).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 15 §B34
      • IFRS 15 §B34A
      • IFRS 15 §B35
      • IFRS 15 §B35B
      • IFRS 15 §B36
      • IFRS 15 §B37
      • IFRS 15 §B37A
      • IFRS 15 §B28
      • IFRS 15
      • IFRS 15
      • IFRS 15
      • IFRS 15
      • IFRS 15 §114
      • IFRS 15
      • IFRS 15 §116
      • IFRS 15 §119
      • IFRS 15 §120
      • IFRS 15 §123
      • IFRS 15 §126