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July 31, 2014 at 5:27 pm
In F7 December 2009 Question 1 Pandar. I have small doubt regarding the ‘pup’.
The ‘pup’ amount, we take into the calculations of ‘FV of TNA of Subsidiary on DOA’ only when Subsidiary is selling goods to parent at a profit & not vice-versa? Is it?
August 1, 2014 at 8:45 am
I sat and listened to the whole of my re-worked answer to Pandar this morning and nowhere could I find any mention of a pup in existence as at date of acquisition.
Remember, the goodwill net asset calculation is AS AT DATE OF ACQUISITION and has nothing to do with any post-acquisition activities
March 29, 2014 at 6:18 pm
Thanks for the compliments and good luck in the next exams
March 29, 2014 at 4:37 pm
Thanks Mike Little and Opentution Staff, I managed to Pass F7 using this website and the materials provided here. Since I started studying ACCA, this has been my best website and I am grateful to have come across it. You guys rock 😛 😛
March 7, 2014 at 3:48 am
Hi MikeLittle, I would like to ask you a question. I don’t understand this question.
(ii) Immediately after its acquisition of Salva, Pandar invested $50 million in an 8% loan note from Salva. All interest accruing to 30 September 2009 had been accounted for by both companies. Salva also has other loans in issue at 30 September 2009.
March 7, 2014 at 12:10 pm
If the interest has been accounted for correctly, then one company will be showing interest / investment income and the other will be showing a finance chage / interest expense.
These need to cancelled to the extent of 8% x $50m for however many months since acquisition
In addition, within Pandar’s investments will be shown the $50m invested in Salva’s loan
That $50m needs to be cancelled from Pandar’s investments and from Salva’s long term liabilities
March 7, 2014 at 1:04 pm
OK but I don’t understand this answer
$21m + $2m = $23m
$23m / 2 = $11.5m
$11.5m – $0 = $11.5m
$11.5m – $2m = $9.5m
March 8, 2014 at 3:07 am
I just found this answer from ACCA examiner’s answer.
The interest on the 8% loan note is $2 million ($50 million x 8% x 6/12). This is included in Salva’s income statement in the post-acquisition period. Thus Salva’s profit for the year of $21 million has a split of $11·5 million pre-acquisition ((21 million + 2 million interest) x 6/12) and $9·5 million post-acquisition.
But I still cannot figure out…
March 8, 2014 at 11:41 am
Ah. Ok! We need to time apportion this year’s subsidiary profits. Per the question, the profit for the year is $21, but that is AFTER charging the $2m loan interest. Profit BEFORE that interest was charged would therefore have been $23m for the year and we know that the $2m is specifically attributable to the post acquisition period.
So, split the $23m into two 6 month periods = $11.5m in each 6 months.
Then deduct the specific $2 interest cost from the profits of the post acquisition 6 months.
That now leaves us with $11.5m for the first 6 months pre-acquisition and $9.5m for the second 6months post acquisition
Understand it now?
March 8, 2014 at 12:35 pm
I understand now. Thank you very much!
March 8, 2014 at 7:08 pm
May 9, 2014 at 5:41 pm
Hi, can you please state the double entry for the interest part of this question?
i understood the treatment that we need to do but somehow i can’t figure out the double entry.
i only knew the intragroup interest double entry :
DR Interest Income/CR Finance Cost
May 19, 2015 at 8:49 am
I don’t understand why we don’t have to eliminate the US$2,000 interst from the post-acquisition profit because it is the intra-loan.
May 19, 2015 at 9:17 am
It IS eliminated. That juggling with the $21million profit for the year and splitting it into $11.5 / $9.5 shows that the interest on the 8% loan has been correctly allocated to the post-acquisition period
On consolidation we will simply ignore the $4,000 loan interest received and we well ignore $4,000 of the subsidiary’s finance charges
This is not an add-back (nor a deduction) – it’s simply a “consolidation adjustment”. Don’t include $4,000 income and don’t include $4,000 expense
May 26, 2015 at 8:11 am
hello?I understood why the time apportion should consider the finance cost. but there is another qustion,there is also activities (like URP )are attributable to post-acquisition period .So why don’t consider them when split the R/E?
Thanks a lot!
November 28, 2013 at 5:32 pm
Thank you, I have 1 question, why did we not record amortisation for Internet domain, which I assume to be (20m/5yrs)*6/12 =2m, please.
November 29, 2013 at 6:11 pm
The brand is ‘indefinately renewable’. Non current assets with infinite useful life are not depreciated/amortised.
November 30, 2013 at 1:54 am
You have spoken very well, now I get it, thank you for your contribution.
November 28, 2013 at 4:07 pm
Why was there no amortisation on the domain name?
November 28, 2013 at 6:59 pm
Carol and Taura, I’ll answer your questions when I have easier access to the internet. Please, Carol ( not Taura) respond to this post so I shall see that I have an outstanding query
November 28, 2013 at 7:12 pm
Hi, i await your response re brand amortisation. Thanks.
The brand is ‘indefinately renewable’. Non current assets with infinite useful life are not depreciated/amortised. This question as awful tricks! First the interest charges and then this amortisation.
Thank u for the explanation Mr.MikeLittle.
November 29, 2013 at 6:49 pm
May 3, 2013 at 8:57 pm
Sir in the bpp kit the goodwill is 113900,pls help asap
May 3, 2013 at 9:09 pm
Oh i got it
November 26, 2012 at 10:10 am
In this lecture, the carrying value of the investment in associate (to be included in Con S o FP) is calculated as cost + share of post acq LOSS. (starts from 21:30 in the lecture) But in the course notes, it’s calculated as cost + share of post acq RET’D EARS. (Chapter 11, Page 64)
I’m confused about the difference.
November 26, 2012 at 11:01 am
@c0712, The line “Our share of post acquisition…..” would hopefully be our share of post acquisition profits. But in the unfortunate situation where an associate has made a post acquisition loss, then that’s the base figure from which we compute our share.
If I were to say ” ….plus our share of the Associate’s post acquisition results …” would that eliminate your confusion?
November 26, 2012 at 2:22 pm
@MikeLittle, Ah! I got it! Thank you so much!
November 20, 2012 at 10:44 am
Can you explain why the profit for the year is not taken away from retained earning and then calculate the portion of profit thereafter for retained earnings?
November 10, 2012 at 6:44 am
well sir i think you are the best teacher ever
October 30, 2012 at 3:57 pm
The answers for the exam paper and the one that is shown in this lecture is different. G/will in the answer paper is 98.8 whereas u’ve calculated it to be 114.9. There are other differences as well. Can you pls tell me which one to follow? Thanks!!
November 10, 2012 at 10:27 am
@yojana, Hi, the answers which I recorded were from the questions which were in the Kaplan exam kit. Kaplan are unfortunately not authorised to publish the exam questions in precisely the same form as the exam.
I had not realised at the time of recording that the questions I was answering were not EXACTLY the exam questions.
May 31, 2012 at 5:30 pm
can i knw why we don’t adjust the profit (when calculating the share of NCI for the interest expense paid to the parent ….. koz its is not a realised expense…. like an unrealised profit…. is it the concept of prudence??????
May 20, 2012 at 5:44 pm
I cant get the sound on podcasts – is there a problem with the site?? (sound working for other things) ?
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