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ACCA F7 lectures F7 notes
November 15, 2015 at 5:58 pm
Firstly just to say, thanks for the lectures, they are a huge help.
I have a question which relates to the fair value adjustments in the retained earnings. Your example makes perfect sense to me and I used this approach to try to answer question 2 part c of the December 2014 specimen paper. In that question you have to create an extract of the Equity section of the consolidated statement of financial position, however in the answer that is provided by ACCA they have not adjusted the retained earnings for the fair value adjustment of the item of plant. So now I am confused, unless I have misunderstood their question I cannot see the difference.
Guidance would be much appreciated, as I am now worried I will get this wrong in the exam. Please let me know if I need to post the actual question here, I was hoping you may be familiar with it.
July 3, 2015 at 3:59 pm
Many thanks to you and Open Tuition for your support.
I was trying to do example 11 of page 46 of the course notes using revaluation surplus. However, I just can’t seem to get to the bottom of it.
Could you please show me how?
I am not a great student, but would like to learn.
May 13, 2015 at 11:06 am
Hi Mike, How did we arrive at $18,000 for the depreciable non-current Asset over 5 years. plus can u please explain a real life example of a non-depreciable current Asset and their features and accounting procedures, entries
January 8, 2015 at 9:48 am
You are so funny
Here what I am after to:
1/ Why we didn’t take 12000 in w3: DNCA ?
2/ This doesn’t relate to this, but in notes i.e goodwill attributable to NCI on acq was $2000. So how we can deal with this? Will we just put it on NCI value in w2?
January 8, 2015 at 10:03 am
1) I keep getting “Blocked plug in” on my computer so I can’t play the video
Please let me know the chapter and question name
2) “Will we just put it on NCI value in w2?” Yes. The nci for working W2 is their proportionate share of fair valued net assets at date of acquisition PLUS the $2,000
January 8, 2015 at 5:11 pm
1/ I am talking about example11 i.e IFRS 13, ch # 7.
Here I talked about w3 of DNCA. I asked why we will not take $12000 of $30000 by depreciating over 2 years.
2/ This doesn’t relate to any example, but it is on page 40 above the example 6 of ch 7.
I asked that “goodwill attributable to NCI on acq was $2000”. So how we can deal with this? Will we just put it on NCI value in w2?
January 8, 2015 at 5:16 pm
I answered your second question in my last post.
I’m now trying to find the appropriate question in order to answer question 1
January 8, 2015 at 5:38 pm
Ok and sorry for that struggle
January 8, 2015 at 7:04 pm
Because by the year end there has been two years’ worth of depreciation on the $30,000 (expected life of 5 years as at date of acquisition, two years have passed so only 60% of $30,000 still in the subsidiary as at consolidation date)
January 9, 2015 at 6:25 am
Thats hugely so genius answer. Thanks Mike, you are accounting savior 😉
September 12, 2014 at 10:22 pm
In the above question which is example 11, if we have to show the revaluation reserve separately it comes to a negative figure .
Non Depriciable NCA 15000
Depriciable NCA 18000
Less Fair Value Adjustments on Acquisition
Non Depriciable NCA 15000
Depriciable NCA 30000
Gross Total (32000)
Our Share 70%
Revaluation Reserve (22400)
How will we show this in the consolidated SOFP?
PS: I’m going to follow the method you showed in the lecture as it is a lo easier to do and reduces my work but just wanted to know how it would be done.
September 13, 2014 at 5:14 pm
I’m not sure what you are trying to achieve here! On acquisition, the fair value adjustments will be notionally entered into the subsidiary’s records – in the case you quote, the double entry will be Dr the depreciable and non-depreciable TNCA by their respective amounts and notionally credit the revaluation account.
As time goes on and we depreciate the assets of the group for the purposes of consolidation, the double entry is Dr the Profit or Loss account and Cr (effectively) the depreciable TNCA
At no stage in that second journal entry have I mentioned making an entry into the revaluation reserve!
September 13, 2014 at 7:12 pm
I’m sorry if my doubts sometime seem stupid and you probably get irritated going through it but thank you for always replying 😀
September 13, 2014 at 9:39 pm
No problem! If it helps you to achieve success and pass these exams, then that’s pleasure enough for me (and for all the other members of “the team”)
August 26, 2014 at 3:05 pm
Sir, i cannot understand what is done in working 3- con. ret. earn. why do we have to add the non-depreciable non-current assets -15,000
Depreciable non-current assets- 18000?
i didn’t get the logic.
August 26, 2014 at 3:45 pm
Kaplan and BPP take a different approach to this mini-topic. They calculate the fair value of net assets at date of acquisition and at date of consolidation. The difference is post acquisition movement in subsidiary’s reserves.
Personally, I don’t like that method!
My way identifies the retained earnings “today” as amended by any fair value adjustments to the subsidiary’s figures and compare that total with the subsidiary’s fair valued retained earnings “then” also as amended for any fair value adjustments to the subsidiary’s figures.
This second value, subsidiary’s retained earnings “then” is found in working W2 Goodwill
The “then” figure is shown as adjusted for the fair values of the inventory (now sold), the non-depreciable non-current assets and the depreciable non-current assets
If we are to be able to compare like with like to discover the post acquisition retained earnings, we need to adjust the retained earnings figure “today” by those same three adjustments
Inventory – all sold, so no adjustment
Non-depreciable non-current assets – presumably (in the absence of contrary information) still owned but, because it’s non-depreciable, they are shown at their original value of $15,000
Depreciable non-current assets – again, in the absence of contrary information, we still own these assets. But what is their value “today”. It’s $30,000, 5 year life, two years since acquisition, therefore $18,000 notional book value
Does that explain it for you?
awesome wajid says
November 10, 2014 at 11:13 pm
Dear sir mike, if i solve fair values from ur approach, will my answer be the same as bpp? overall financial statement will match by same figures?
September 17, 2015 at 9:44 am
in 11 eg; you haven’t taken 20,000 fair value of inventory, assuming that all have been sold.but,
1. since, we calculate the good will solely for consolidation purpose and as of DOA. don’t we need to take them. because, the inventory has direct impact to the console retain earnings and console inventory
2. in my previous studies (CMA -Sri Lanka) We accounted total good will and total good will impairment only in CSOFP and not adjusted in to NCI. as there are arisen for consolidation purpose only.
September 17, 2015 at 10:25 am
If I’m thinking of the correct example, we are preparing financial statements 2 years after acquisition
What is going to be the fair value of inventory 2 years after acquisition?
Maybe your previous studies were before the revision of IFRS 3 or maybe the nci was value on a proportional basis
September 17, 2015 at 11:10 am
Dear Mr. Mike,
noted you comment for eg.11 with thanks…..Can you pls clarify further,
I’m very clear on Fair value adjustment for Fixed assets and other assets…..
further I’m very clear on your view too. after two years later…..the stock has to be sold out fully. it’s ok, Sir
But,since we calculate good will on the date of acquisition and since there is a fair value for inventory rather than the book value as of DOA…..shouldn’t it be adjusted when calculating the good will….as same as fair value adjustment for fixed and other asset ….
or else….are there different accounting treatment for fixed assets and inventory
September 17, 2015 at 1:28 pm
Are you really certain that the inventory fair value hasn’t been used in calculating the goodwill? I’m 100% certain that it HAS been incorporated into the goodwill calculation.
I suggest that you check it again!
July 17, 2014 at 7:16 pm
Dear Mike Sir,
I want to know if ‘Complex Groups’ (A owns 60% in B and then B has a 60% share in another company C) are in DipIFR syllabus. I am preparing for DipIFR for December 2014.
July 18, 2014 at 5:22 am
Hi, I’ve just checked the syllabus on the ACCA website! It talks about “simple groups” so no, complex groups are not examinable
I bet that’s a relief for you!
July 18, 2014 at 6:04 am
Thanks, Mike sir!
July 18, 2014 at 2:35 pm
May 10, 2014 at 7:21 pm
I know the TNCA lol
Mike u are a great lecturer! I have a good feeling about F7.
April 27, 2014 at 12:58 pm
I know this is very basic but HOW did you get 18k of depreciation for the 2 years? On the answers at the back of the course notes, the total depreciation (30k) is multiplied by 60%. How did they arrive at that? I mean, 2 years comprise 40% of the 5 years through this calculation:
(2/5) * 100 = 40%
Which means the depreciation that occurred during the 2 years is 12,000.
How did you arrive at 18,000?
Sorry, I dont mean to waste anyone’s time by asking a silly question but I am really stuck at this!
May 4, 2014 at 12:23 am
@amansoor you are correct in the calc of depr’n of 12,000 however the figure of 18000 that is reflected is the nbv of the asset: cost less depr’n to date (30,000-12000=18000)……
April 26, 2014 at 4:58 pm
LOL I lost it at the “TNCA song”! Hilarious!
April 9, 2014 at 11:55 pm
shouldnt the NCI figure be 78,900?
ass 64,500 + 14,400 = 78,900?
February 17, 2014 at 2:43 pm
Hi mr mike . i want ask about revaluation assets in consolidation F S
On 1 January 20X7 Hardy owned some items of equipment with a book value of $45,000 that had a fairvalue of $57,000. These assets were originally purchased by Hardy on 1 January 20X5 and are being
depreciated over 6 years.
hardly is subsidery
i know 12000 revaluation will put in GW calculation and TNCA in CoFS completly .
but i dont know how can i deal with dep in CoRE and TNCA
February 17, 2014 at 2:50 pm
Please post this again on the “Ask the tutor” page
November 27, 2013 at 11:48 am
please mr mikel i want ask about form of answer in exam . I will answer in excel sheet? or in white papers or what?
f7 will be my first exam . please help
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