Prepare the booking entries of the year 2021 and, if any, indicate your assumptions for each entry. (12 Points).


Select the appropriate IFRS to be used for the recognition, measurement and disclosure of key accounting transactions and events in IFRS annual and consolidated financial statements.
Assess the path of recent developments in the construction of such standards,
Evaluate the application of IFRS to a variety of accounting transactions and events.
Critically appraise the impact of the application of IFRS upon financial statements prepared according to those standards


Question 1 15 points
Question 2 40 points
Question 3 10 points
Question 4 15 points
Total 80 points

Question 1 – The VANS – (15 points)

Fun Van is a van dealer, its main activity consists in buying and selling vans to consumers (B to C activity).

Fun Van made 3 van transactions and would like you to prepare the booking entries.

On 01/05/2021 Fun Van acquired 3 similar vans for 20,000CCY each.

One will be used for 200,000kms year by Peter, he will use this van for commercial purpose.

The second one will be sold to client A for 30,000CCY on 01/06/2021. Client A is the best client and will receive a 5% discount.

On 01/06/2021, the last one will be leased 2 years to client Z for 6,000CCY a year. The company expects to rent the van at least 5 years for a minimum total income of 26,000CCY.

Maintenance of vans is expected to be 2,000 CCY per 50,000 kms.
At the end of the year Peter made 60,000 kms and client Z 20,000kms.

Current market conditions are favourable, the company borrowed 60,000CCY with 0% interest rate to finance the acquisitions of the 3 vans.
NB: the borrowing operation is no expected to be part of the journal entries to be prepared, focus on the 3 acquisitions and future incomes and charges from these acquisitions.

For the 3 van transactions, first, identify the appropriate IFRS Standard to be applied. (3 Points)
Second, Prepare the booking entries of the year 2021 and, if any, indicate your assumptions for each entry. (12 Points)

Please use appendix A (Xls file)

Question 2 – Wishes – (30 points)

You have recently been recruited as advisor and your first engagement will be at (the company). This Company is producing high tech computers.

The company is established for 10 years and is no longer a start-up.
The company recently made a Leverage Buy Out (LBO) and has been financed by venture capitalists. This investor requires the company to prepare its financial reports under IFRS.

Your company is assisting the Company in this transition period.

The finance director asked you to prepare booking entries (initial recognition and subsequent measurement of 2021 only).

1. Student should select the appropriate IFRS standard.

2. Then prepare the booking entries for the first year (initial recognition and subsequent measurements (if any).

Please use appendix B (Xls file)
Board member Department Transactions
Julie Finance Julie was in charge of the LBO.
On 01-01-2021, the company issued a zero-coupon bond with a nominal value of 30 million CCY. The company will have to pay-back 33 million CCY in 10 years time to investors.
Pedro Logistics Pedro suggests investing in a new machine.
Investment cost is 10,000,000CCY.
Useful life is 20 years.
Residual value is expected to be of 300,000CCY.
The company will receive a grant by 1,000,000CCY for this project.
Fair value is estimated at 10,000,000CCY.
Nikita Marketing A competitor went bankrupt and its assets are for sale.
He thinks the patent on logistics could reduce cost by 500,000CCY a year for the next 4 years.
The purchasing price was 1,000,000CCY and at the end of the year the fair value was assessed at 800,000 CCY.
Karol Tax Karol wants to optimize tax charges within the group and hear about equity certificates that can lead to tax savings in particular with operations with the swiss subsidiary.
The financing contract with the subsidiary in Switzerland was set at 10,000,000CCY.
In return, the mother company will receive 15% of the income after tax of the subsidiary plus 1% of interests on the face value.
The mother company financed this transaction with the same conditions but with its shareholder settled in the Nether-land.
At the end of the year the net profit is expected to be 1,000,000CCY for the swiss subsidiary and 15,000,000CCY for
Amine HR Amine suggests rewarding some employees.
It consists in giving 35,000 shares with a strike price at 50 CCY of
The stock price of the company varies from 50 CCY (max) to 40 CCY (min).

Question 3 – Impairment – 10 (points)

The net book value of the assets of a cash-generating unit (CGU) of a company are as follows:

€ (‘000)
Goodwill 50,000
Patents and copyrights 50,000
Property, plant and equipment 150,000
Total 250,000

There are indications that this CGU should be impaired. Its value in use is estimated to be €180m.
The fair value less costs to sell is €60m for the patents and copyrights and €100m for the property, plant and equipment.

According to IAS 36 and assuming cost model is used:
– Assess the amount of impairment loss,
– Allocate the impairment loss between the assets of the CGU,
– Prepare the booking entry.

Please use appendix C (Xls file)

Question 4 – Revenue – 15 (points)

An entity manufactures a baby swing product, for which it gives a full warranty for all manufacturing defects. In 2020 reporting period, the entity sells 500,000 baby swings at 2,000€ each.

To sell these products, the company must pay a commission to distributor of 200€ each, which is including in the selling price of 2,000€.

The sell cannot be realised without passing the norms control performed by the authority in charge, this certificate costs 100€ per item.

If customers find minor repair faults, the entity will incur a cost of €2 million for repairs. If customers detect major faults, the entity will incur a cost of €50 million to replace all of the baby swings.

The baby swing product has been in the market for 5 years and there is a history of having 3% of baby swings returned for minor repairs and 0.5% for replacement because of major faults. The management of the entity believes that the same proportions can be expected in 2021.

Prepare the booking entries and indicate your assumptions for each entry.

Please use appendix C (Xls file).