Fair View — IFRS Judgement Under Covenant & Audit Pressure

A four-round, advanced corporate-financial-reporting simulation set inside Rheinwerk Systeme AG, a Mannheim-headquartered, Frankfurt-listed (Prime Standard) industrial-automation group that reports under IFRS (revenue €540M, EBIT €51M, 2,100 staff).

The 31 December 2026 close is underway with audited results due to the supervisory board on 18 February 2027, and three issues converge on the Group Financial Controller's desk in one week. A €24M year-end 'Project Adler' contract bundles delivered hardware (~€14M), incomplete software/integration (~€6M) and a 36-month service that begins in Q1 2027 (~€4M); the commercial team booked the full €24M as 2026 revenue.

A separate €9M receivable is 180+ days overdue from a client now in formal restructuring. And the Big Four group auditor — whose signing partner has held the engagement for nine years — has sent a written query due in seven days.

The bite: a €200M syndicated loan carries a net-debt/EBIT covenant of 3.0x, and management bonuses worth €3.8M vest above an EBIT threshold; recognising Adler in full lands the covenant at a comfortable 2.94x, while the IFRS-15-correct deferral pushes EBIT to ~€46.8M and the covenant to 3.21x — a breach.

Playing the controller, you (1) apply the IFRS 15 five-step model to Adler — identify the distinct performance obligations, allocate the price on a relative stand-alone-selling-price basis, and recognise only what was satisfied; (2) size and disclose an IFRS 9 expected-credit-loss provision on the €9M receivable against the true-and-fair-view obligation; (3) answer the auditor query on the standards rather than the pressure, decide whether to proactively escalate the covenant breach to the audit committee and lender, and handle the nine-year-partner familiarity threat; and (4) defend the statements to the audit-committee chair, facing the 'it's signed and delivered' and 'do we have to disclose it?' pressure and the chair's observation that every estimate broke toward the bonus and the covenant.

The scoring rewards faithful representation and punishes the five classic errors — sign-equals-revenue, a concealed breach, an optimistic receivable, incentive-led judgement, and leaning on the long-tenured partner — so a covenant- or bonus-driven play measurably underperforms the standards-grounded one.

Final KPIs track IFRS Compliance, Earnings Quality, Disclosure Transparency and an Audit-Risk rating, alongside reported EBIT and the live covenant ratio.

An advanced simulation for participants used to working with the main frameworks and trade-offs of the subject, designed for executive education and experienced professionals.