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IFRS 16Case studies (Step 3 of 5)

Practical case

Step 3 of 5
File · Progressive casePath L1 → L4L1 · Fundamental

Halvoran Logistics: the Saint-Aubry warehouse lease, from signature to amendment

Halvoran Logistics SAS, a fictitious e-commerce logistics company (210 employees), IFRS financial statements, year end 31 December, amounts in euros.

3 documents5 tasks
0 / 5 tasks completed
Period
Year N (signature and analysis of the contracts)
Standards
IFRS 16 — Leases
Levels
0 / 4 levels validated
Current level
L1 · Guided≈ 75 min
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

L1 · Guided · Year N (signature and analysis of the contracts)

Level 1 — Is there a lease, and which one must be recognised?

On 15 November N−1, Halvoran Logistics signs a contract with Orbelis Real Estate, a fictitious lessor, for cell C3 of the Saint-Aubry logistics building, together with maintenance and security services. The keys are handed over on 1 January N. You follow this contract, from the lessee's point of view, over three years: analysis of the contract and initial measurement in N, revision of the indexed payment in N+1, then an extension amendment and the closing file in N+2. Halvoran's other contracts only appear at level 1, for the analysis of scope and exemptions. All figures are case data; teaching assumptions and professional judgements are flagged as such. Teaching assumption: amounts are rounded to the euro and calculations are chained on the rounded amounts; a difference of a few euros with an unrounded calculation is therefore accepted.

Standard involved: IFRS 16 Leases (identifying a lease, separating components, lessee exemptions, lease term). Before calculating anything, you must know what is being accounted for. Read the three documents, then answer the questions in order: each one prepares the next.

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 / 3 consulted) · to do
  • Answer the questions of the level (0 / 5) · to do
  • Validate the level, then read the conclusion · to do

Events

The file, period by period

2 / 6 stages reached

  1. Context · Dated fact of the file

    Halvoran Logistics: the Saint-Aubry warehouse lease, from signature to amendment

    Halvoran Logistics SAS, a fictitious e-commerce logistics company (210 employees), IFRS financial statements, year end 31 December, amounts in euros.

  2. Initial event · L1Year N (signature and analysis of the contracts) · Current stage

    Level 1 — Is there a lease, and which one must be recognised?

    Standard involved: IFRS 16 Leases (identifying a lease, separating components, lessee exemptions, lease term). Before calculating anything, you must know what is being accounted for. Read the three documents, then answer the questions in order: each one prepares the next.

    Pieces added

    • Extract from the Orbelis contract (case data)
    • Observable prices, accounting policies and note from the real estate director (case data)
    • Halvoran's other contracts in N (case data)

  3. New period · L2Year N (commencement date and first year end) · Upcoming: unlocks after the current stage

    Upcoming stage

  4. New period · L3Year N+1 · Upcoming: unlocks after the current stage

    Upcoming stage

  5. New period · L4Year N+2 · Upcoming: unlocks after the current stage

    Upcoming stage

  6. Conclusion · Upcoming: unlocks after the current stage

    Upcoming stage

Documents

Case documents

3 documents to work from at this level.

Document 1Contract

Extract from the Orbelis contract (case data)

  • Subject: cell C3 (9,800 m²) of the Saint-Aubry logistics building, designated in the contract and separated from the other cells by fire walls; access reserved to Halvoran (badges and keys).
  • Use: Halvoran alone decides which goods are stored, the operating hours, the customers served and the layout of the racks.
  • Orbelis's rights: Orbelis may move Halvoran to another cell on the site only from 1 January N+6 and only if the building is restructured; it may enter the cell for maintenance and temporarily replace faulty equipment.
  • Restrictions: no storage of hazardous materials, mandatory insurance, compliance with the site safety rules.
  • Services: Orbelis maintains the cell's technical installations (dock doors, sprinklers) and provides security for the site.
  • Consideration: 240,000 per year, single invoice payable in advance on 1 January, indexed every 1 January from N+1 on the logistics rent index (LRI, a fictitious index) published in mid-December.
  • Term: non-cancellable period of 5 years (1 January N to 31 December N+4); 3-year extension option at Halvoran's discretion, at the market rent at that time; neither party may terminate during the non-cancellable period.

Data

Facts of the file

Entity
Halvoran Logistics SAS, a fictitious e-commerce logistics company (210 employees), IFRS financial statements, year end 31 December, amounts in euros.
Period
Year N (signature and analysis of the contracts)
Current level
L1 · Guided
Standards
IFRS 16 — Leases

Pieces carried over from earlier levels

First level: all the data is in the brief and the pieces of this level.

Questions

5 parts to answer, marked when you submit the level.

  • Information to identify1
  • Analysis and judgement2
  • Calculations1
  • Questions1

Information to identify

Find the useful facts in the pieces before concluding.

Part 1 · Classification · Recognition

Classify each of Halvoran's contracts according to its treatment by the lessee.

  1. Saint-Aubry cell C3 (lease component)

  2. Forklift A, 9 months with no option

  3. Forklift B, 10 months + reasonably certain 6-month option

  4. Handheld scanners

  5. Delivery van, 36 months

  6. Palexo shared storage

4 more questions will appear once the current question is complete.

Complete the question to continue.

Workspace

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

Saved on this device only; never graded.

Conclusion

Answer every part to submit the level and see the conclusion.

Normative references

  • IFRS 16 §5
  • IFRS 16 §6
  • IFRS 16 §8
  • IFRS 16 §9
  • IFRS 16 §12
  • IFRS 16 §13
  • IFRS 16 §14
  • IFRS 16 §15
  • IFRS 16 §16
  • IFRS 16 §18
  • IFRS 16 §19
  • IFRS 16 §20
  • IFRS 16 §22
  • IFRS 16 §23
  • IFRS 16 §24
  • IFRS 16 §25
  • IFRS 16 §26
  • IFRS 16 §27
  • IFRS 16 §28
  • IFRS 16 §29
  • IFRS 16 §30
  • IFRS 16 §31
  • IFRS 16 §32
  • IFRS 16 §36
  • IFRS 16 §37
  • IFRS 16 §38
  • IFRS 16 §39
  • IFRS 16 §40
  • IFRS 16 §41
  • IFRS 16 §42
  • IFRS 16 §43
  • IFRS 16 §44
  • IFRS 16 §45
  • IFRS 16 §46
  • IFRS 16 §47
  • IFRS 16 §49
  • IFRS 16 §50
  • IFRS 16 §52
  • IFRS 16 §53
  • IFRS 16 §58
  • IFRS 16 §60
  • IFRS 16
  • IFRS 16 §B3
  • IFRS 16 §B4
  • IFRS 16 §B5
  • IFRS 16 §B6
  • IFRS 16 §B8
  • IFRS 16 §B13
  • IFRS 16 §B14
  • IFRS 16 §B15
  • IFRS 16 §B18
  • IFRS 16 §B20
  • IFRS 16 §B21
  • IFRS 16 §B24
  • IFRS 16 §B26
  • IFRS 16 §B30
  • IFRS 16 §B37
  • IFRS 16 §B39
  • IFRS 16 §B40
  • IFRS 16 §B41