Chapter 1, Introductory Cases Dublin Small Animal Clinic, Inc. 1 page; introductory



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Undergraduate intermediate accounting

First-year MBA/Executive MBA Financial accounting

Financial reporting

Financial statement analysis



  1. Mitchells & Butlers plc

15 pages; advanced

Revaluation model (fair value) for fixed assets

IFRS reporting

Securitization of fixed assets (pubs)

Losses on hedges of anticipated transactions

Segment analysis


This is an interesting case that covers several advanced topics. Mitchells & Butlers is a British pub-restaurant chain. One main issue is that Mitchells & Butlers uses the revaluation method to value its land and buildings. The case describes IFRS cost and revaluation model rules and also includes the firm’s fixed asset disclosure note.

Mitchells & Butlers also reports exceptional items. IFRS specifically prohibits extraordinary items, which U.S. GAAP allows in very limited circumstances. IFRS does not even mention exceptional items, but many European firms report exceptional items separately from normal operating income. There appears to be no difference between extraordinary and exceptional items, other than the name.

Mitchells & Butlers reported a $500 million loss on derivatives contracts over a two year period. Those derivatives were obtained to protect an anticipated real estate transaction that was cancelled. The derivatives included one contract to fix the price at which the firm would acquire real estate, and a second contract to fix the rate at which it would borrow funds to acquire the real estate. Mitchells & Butlers lost money on both contracts, as real estate prices and interest rates both plummeted.

Mitchells & Butlers also used its land and buildings as collateral in a securitization issue that included ten different tranches, four for fixed income notes and six for floating interest rate notes. The securitization note discloses that Mitchells & Butlers purchased interest rate swaps to convert the six floating rate debt tranches to fixed interest rate notes.





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