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why is the answer of example 4 different from the answer in the note?
which chapter – what’s the question name?
Chapter 10 example4. BPP book seems ignore the dividen payment by subsidiary and then attribute the post acquisition retain earning to NCI and parent.
Is this example 4, chapter 10 from the course notes? Viktorija and Natalija? If so, I have no idea what your question is about! I HAVE ignored the dividend from the subsidiary in the notes answer. The lecture MAY still give a “proof” of the final amount and in that proof we DO need to include the subsidiary dividend paid to the parent to calculate the “normal” working W3. But you are unlikely ever to have to prove the amount calculated as the consolidated profits for the year or reconcile W3 with the figure at the end of the Consolidated Statement of Income.
A wonderful lecture!
I have the same question: are there videos for examples 5 & 6? thanks so much!
@mikelittle Thank you for the lecture. However I am facing problems in questions 5 and 6. I am happy with the concept but still don’t feel confident about it.
In these questions is there a check like we used to do in question 1-4 in which the amount as per our working 3 matches with the PAT- H Dividend- NCI share.
Hi – yes, there is the proof and it’s the normal working 3 song. Take the consolidated profit after tax, deduct parent dividend and deduct nci share of subsidiary this year’s profits after tax and you should get there
Oh got it . In question 5 we would deduct W3 (a) from W 3 (b) to arrive at the same figure i.e. consolidated profit after tax, deduct parent dividend and deduct nci share of subsidiary this year’s profits after tax. Thank You Mike. You are a saviour.
Is the lecture for example 5 posted online? I can just find example 1,2,3 and 4. Thank you for anyone who can answer…
sir i have a problem with a parent and an associate: i know this notes doesnt cover associates: my problem is this:
when a parent sells goods to an associate, the parent is the one making the profit but why is it that only the parents share of the profits is debited in the concosolidated retained earnings
Because the associate is NOT a group company. The IFRSIC Interpretations Committee decided that it IS appropriate to eliminate JUST the parent’s share of any unrealised profits arising from a transaction with an associate
Mr. Mike, on the issue of the pup, in example 3, there was a margin on the intra group transfer. you accounted for that by adding it back to the cost of sales. now in example 4, there was a mark up on the same type of sale and u ALSO handled it by adding it back to the cost of sales. Why the same treatment for mark-up AND margin sales?
Could you also explain the rationale behind adding the pup to the cost os sales? I thot that since the entire transaction amount was removed from both buyer’s and seller’s records( by deducting from revenue AND cost of sales), that the pup was included in those amounts?
Mark up and margin are simply ways of calculating the pup.
Having calculated it, it needs to be added to cost of sales, whether it’s mark up or margin, the treatment is the same
Why add to cost of sales? Because it’s an unrealised profit. By adding, we increase cost of sales and therefore REDUCE the recognised profit
The elimination if the intra-group sale is because it’s in the original buyer’s purchases / cost of sales and in the other company’s closing inventory so is already deducted from cost of sales.
We cannot now include it in the revenue of the original purchaser and in the other company’s purchases – that would have included the amount twice in cost of sales and once in revenue ( but it hasn’t been “sold” – just transferred within the group )
It’s been a while I’ve not keep in touch with ACCA. Just want to make sure if “Associates” have been removed from F7??
I can confirm that accounting for associates is still within the F7 syllabus
Also can the lecturer help us with Associates Ch 11. I would love to clear my concepts on that.
Many thanks. These lectures are the best I had. Quickly clear my concept
Is this just me or the lecture ended at Example 4? I can only see upto 9.35. Please help me as I need to know how to do example 5 and 6.
Many thanks for the wonderful lectures,they r great help……….in example 6- retained earnings brought forward, in cant understand wher the 6000 of div rules come from.plse help
For Example 5
Do we have to prepare pre and post RE, can we not just go with Consolidated RE as with all the privious examples we have done.
Also why is declared divident ignored when preparing RE. I understand they are included in the statement of Changes in Equity but that is not what we have been asked for. We only need stat of CI and Consolidated RE to go in the statement of FP. It can be argued that we need two stat. of CI one for group and one for Subs. but the questions specifies fugure not figures?
I am just worried what is it that I missed as I only prepared Consolidated RE and included declared divident which is why my figure is different from yours?
@despina, If I have missed the dividend which Didzis is expecting from Ansis in working 3, then that’s an error – it should be included in working 3 for the Statement of Financial Position
There is no need to prepare the working 3 brought forward. I get students to do it to show that it’s exactly the same working as for Retained Earnings carried forward. You will NOT be asked for a Statement of Changes in Equity in question 1. However, you may very well be asked to do it in question 2.
My students do it for Didzis / Ansis so I can show them what it looks like on day 2 of the course so they are ready for the same layout when we get to day 4 of the course – that’s when we start looking at question 2 issues
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