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IFRS 18Case studies (Step 3 of 5)

Case study

Step 3 of 5
Practical caseIFRS 18L3 · Advanced

Specified main business activity, aggregation, the "other" label and expenses by nature of a manufacturer that finances its customers

8 documents11 tasks≈ 120 min
0 / 12 items completed
Standards
IFRS 18 — Presentation and Disclosure in Financial Statements
Assistance levelNo help · reduced assistance
  • Method: withdrawn
  • Checklist: withdrawn
  • Hints: withdrawn
  • Step-by-step work: shown

Case brief

Situation

Gantrel SA (fictitious entity) makes agricultural machines and finances the purchase of its machines by its customers through a dedicated unit. It prepares its 20X7 statement of profit or loss under IFRS 18. You assess its specified main business activity, correct the classification of the interest on customer loans, judge the "other" label and prepare the note on expenses by nature, its operating expenses being presented by function.

Your assignment

Judge whether Gantrel has a specified main business activity and what it implies for the classification of the interest on customer loans and of the interest on cash; record the reclassification; say how the case treats the lease interest of the manufacturer-lessor; apply the aggregation principles and the roles of the statements and the notes; judge the "other" label; say whether a note by nature is required and compute the totals of employee benefits and depreciation to disclose; present the effect of the entry on the financial statements; 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.

Advanced level: no help, the work is grouped by kind.

Documents

File documents

8 documents: open each one to read it.

Document 1Memo

Entity profile and case conventions

Gantrel SA (fictitious entity) makes agricultural machines and closes its accounts on 31 December 20X7; its functional currency is the euro. Case conventions: amounts in EUR; case convention (pedagogical assumption, not attributed to the standard): the lease interest of the manufacturer-lessor stays in the operating category under the policy of the entity, without the case deciding the question; the interest on own cash stays in investing; the note by nature includes the amounts included in assets; the entry is illustrative.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Customer loan portfolio€52,000,000.00
Interest on customer loans€4,600,000.00
Interest on cash€130,000.00
Lease interest of the manufacturer-lessor€95,000.00
Other operating expenses€1,240,000.00
Insurance€540,000.00
Legal fees€310,000.00
Miscellaneous small items€390,000.00
Employee benefits in expenses€6,300,000.00
Employee benefits included in assets€450,000.00
Employee benefits per the annual payroll statement€6,750,000.00
Depreciation in expenses€2,100,000.00
Depreciation included in assets€300,000.00
Caterer invoice€5,200.00

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 sort8

  • Entity profile and case conventions

  • Evidence on the financing of customers

  • Interest income in the 20X7 ledger

  • Management note: manufacturer-lessor leasing

  • Detail of "other operating expenses"

  • Expenses by nature of 20X7

  • Presentation of operating expenses

  • Invoice of a caterer

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      11 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 1Professional judgement

        Does Gantrel have a specified main business activity?

      2. Task 2Analysis

        What effects on the classification of the interest on customer loans and on cash?

      3. Task 3Journal entries

        Record the reclassification of the interest on customer loans.

        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

      4. Task 4Analysis

        How does the case treat the lease interest of the manufacturer-lessor?

      5. Task 5Analysis

        Which aggregation principles and which roles of the primary statements and the notes apply?

      6. Task 6Professional judgement

        Can the "other operating expenses" keep the "other" label?

      7. Task 7Analysis

        Is a note on expenses by nature required?

      8. Task 8Calculation

        Compute the total of employee benefits to disclose in the note.

        Calculator

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

        Part 1 · Calculation

        Compute the total of employee benefits to disclose in the note.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      9. Task 9Calculation

        Compute the total depreciation of property, plant and equipment to disclose in the note.

        Calculator

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

        Part 1 · Calculation

        Compute the total depreciation of property, plant and equipment to disclose in the note.

        1. €

        Checks

        • 0 / 1 step entered
        • Amounts readable

      10. Task 10Effects on the financial statements

        What is the effect of the reclassification 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

      11. Task 11Conclusion

        Write the conclusion.

      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 / 12).

      Document this file

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

      Normative references

      • IFRS 18 §83