Case Study No Financial Assets 2012 10 16

The Open Country Safari Company Case Study

Michael J C Wells, Director, IFRS Education Initiative, IFRS Foundation

Ann Tarca, former Academic Fellow, IFRS Education Initiative, IFRS Foundation and Professor of Accounting, Business School, University of Western Australia.

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This material has benefited greatly from the feedback and comments from people attending a series of workshops on the Frameworkbased approach to teaching International Financial Reporting Standards (IFRSs) organised by the IFRS Foundation and others and from peer review by a number of a number of anonymous reviewers.

Background

Makeit PLC is a company listed on the London Stock Exchange. The company has operated successfully in the manufacturing sector for more than twenty years and for many years has prepared its financial statements in accordance with IFRSs. Although Makeit presents its financial statements in British Pounds (£), its functional currency is the Euro (€)—mainly because most of the products it manufactures are sold to customers in the Eurozone countries (including Austria, France, Germany, Ireland, Italy and Spain).

In 20X0 Makeit’s board of directors decide to expand Makeit’s operations into new types of business and into a geographic location in which it currently does not operate—SubSaharan Africa. Accordingly, management selects a number of activities in Southern Africa to be carried out as part of a ten-year diversification plan. The company appoints James and Judith Bilkersen to manage its African operations, under the brand name The Open Country Safari Company (Open Safari). The Bilkersens have over fifteen years’ experience in the hospitality industry in Africa and they share a passion for conserving wildlife and natural habitats. Makeit intends to operate a safari lodge and other African operations indefinitely.

An IFRS issue for class discussion |

Which currency is Open Safari’s functional currency?...