1. avatar says

    Hey, I’m having trouble watching this video. All the other videos are fine but this one continues to reload over and over again. I tried on numerous devices (Phone, laptop, tablet and even a P.C). Please help.

  2. avatar says

    Thanks Mike, you are quicker than Batman!
    One thing I want to confirm here that whenever the “Negative” goodwill arises then it should always completely add in Group Retained Earning ? It doesn’t really matter that either a NCI value is given or it proportionate ?? I mean should we require to apportion the amount of negative goodwill if NCI is not proportionate ??

  3. avatar says


    I’d like some help on the following question:

    “The acquisition of Subsidiary (S) by Parent (P) took place on 1/10/x0.
    Immediately after the acquisition P transferred an item of plant with a carrying amount of $4,000 to S an agreed value of $5,000. At this date the plant had a remaining life of 2 1/2 years.
    P had included the profit the profit on this transfer as a reduction in its depreciation costs. All depreciation is charged to the CoS.”

    Calculate the depreciation.
    Consolidated accounts are being prepared for the YE 31.3.x1

    The answer says depreciation is:
    Profit on transfer $5000 – $4000 = $1,000
    Proportion depreciated 0.5 / 2.5 = ($200)
    Unrealised Profit = $800

    Dr CoS $800
    Cr Plant $800

    My question is, why is the profit multiplied by 0.5?
    Is it because although a full years’ depreciation should be charged in the year of acquisition, P acquired S half way through their financial year and therefore have pro-rated the depreciation charge?
    If this is the case, what has happened to the remaining depreciation charge for that year? Are we to assume that depreciation prior to acquisition has already been charged to CoS?


    • Profile photo of MikeLittle says

      The depreciation of that asset is split into two parts. The first part (the first six months of the year) the depreciation is accounted for in the records of the parent company and is taken into account in arriving at the carrying value as at date of transfer.

      The second part (since date of acquisition until the year end) is accounted for in the subsidiary and, since it’s only half a year, then the element of depreciation that is to be charged in the subsidiary’s statement of profit or loss is depreciation for a full year but then divided by 2 because it’s only for half a year

      It’s actually an unfortunate example because the depreciation for half a year on the $5,000 asset is $1,000 and that figure is the same as the pup on the initial transfer :-(

      You say in your post that “although a full year’s depreciation should be charged in the year of acquisition ….”

      What makes you think that?

      • avatar says

        Thanks Mike :-)

        In my last comment, I meant that the rule is for a full years depreciation to be charged in the year of acquisition and none in the year of disposal.

        Ordinarily if the asset was acquired on 1.10.x0 then depreciation should’t have been pro-rated, but from what I understand, half the years’ depreciation was already charged in the Subsidiary, therefore the remaining half would be charged to the Parent after acquisition, and when looking at the group accounts, a whole year’s depreciation would have been charged.

        Or maybe I am just totally confused… in which case I think I will just give up and focus on answering the rest of the questions correctly.

      • Profile photo of MikeLittle says

        Hi Simone

        Don’t give up!

        The parent is selling to the subsidiary so 6 months’ pre-transfer depreciation is in the parent and now we need 6 months’ post-transfer depreciation in the subsidiary.

        You are quoting this rule to me as though it is cast in tablets of stone “…. the rule is for a full year’s depreciation ….”

        That’s not a rule! It’s a policy that some companies choose to adopt, but it’s not a rule

  4. Profile photo of Chris says

    Hi Mike
    Apologies for raising this query on the lecture site rather than “ask the tutor”. Just thought it might be quicker than referring back to the lecture example. My query is if the example above had made the exact same transaction but from the sub to the parent (i.e. PUP of 10 on sale less the excess of 5 on dep’n now in parent company) then the net effect is now a reduction in the sub rather than parent – Dr Ret Earn, CR TNCA etc.

    Does the sub now present as follows on the consolidated statement of retained earnings (for the sub);

    Per Question 600
    Pre Acq (275)
    Less: PUP (5)
    Post Acq 320

    This would leave post-acq for parent as 60% x 320 = $192,000. I’m assuming this is correct as the 600 would (theoretically) already incorporate the accelerated depn etc. Equally the NCI of 40% in W4 would then be 40% x 320 = $128,000.

    Many thanks for your help in advance and many thanks for getting me through my F4 paper last month too!

    Kindest Regards


    • Profile photo of MikeLittle says

      This is pure chance that I saw this post – I rarely look at the comments after the lectures. You, of all people, should know that I respond always when the post is on “Ask the Tutor” but it’s a rare occurrence that I see other posts.

      Your principles are correct (I don’t have the question in front of me, but so long as the figures that you are using are correct, then so too are your observations)

      Congratulations of your F4 roaring success – I bet you’re missing it now….all that fun and excitement!

  5. Profile photo of Jonathan says

    Hi Mike, im just wondering why the net pups is written off against the retained earning of the selling company only.
    Taking this example, the parent made a sale of asset to the sub making a profit of 10. Therefore the subsidiary is charging extra depreciation (of 5)
    So logically, the profit of 10 should be charged against the retained earning of the parent while the extra depreciation of 5 should be added on to the retained earning of the subsisidiary. This would affect working 3 . cons retained earning.right?

    • Profile photo of MikeLittle says

      Jonathan, if ever in the future you want a tutor to respond, please post your question on the ask the tutor page. It’s a rare occurrence that we look at other posts!

      It used to be the case that we eliminated the profit on disposal from the seller’s retained earnings and added the excess depreciation back to the buyer’s retained earnings.

      This changed about 4 years ago so the NET adjustment is now made in the seller’s retained earnings


  6. Profile photo of Muideen says

    Fantastic! The step by step approach is interesting. I recommend these series of lectures for all ICAN students in Nigeria.
    Question sir.
    The method used to treat inter group non current assets. How can we compute depreciation if useful life of the asset is unknown using the short method you recommended?
    I mean how can I compute depreciation using (unrealized profit divided by remaining useful life)

    • Profile photo of MikeLittle says

      A question HAS to give you that information. Let me turn your question round ….. how can you calculate depreciation if you use the “long” way round and the examiner doesn’t tell you remaining useful life?

  7. avatar says

    Could you please explain, the example says, that assets fully depreciated in the year of purchase and none in the year of sale.
    Is this a kind of examiner trick? because we do have a sale (to our subsidiary) but we still charge depreciation?

    • Profile photo of MikeLittle says

      Yes, but it’s the subsidiary that is charging depreciation because the subsidiary has just bought the asset.

      The parent has sold the asset and therefore is not charging depreciation (in the year of sale)


      • avatar says

        PUP = Provision for Unrealised Profits 😀

        Quick and easy way for PUP:
        Profit from transfer / number of years remaining useful life

        Profit from transfer less answer above = PUP

        That diagram helped me understand the fast way to calculate.


  8. Profile photo of jay0v says

    Great lectures Sir, I’ve Passed my 5 exams (F1, F2, F3, F4, F6) on first attempts with the help of opentution. Without these i would have been stuck in ACCA forever. Thank you for sharing the great knowledge and helping us.

  9. Profile photo of Accountmanaic says

    sir, i’m madly in love with your delivery. impeccable lectures… but i just wanna be sure if i could, in the adding of TNCA of Lina and Asta, just reduce the assets by only the net adjustment (5) rather than -10+5. Just don’t like losing silly marks so i wanna be sure…. thanks sir.

    • Profile photo of MikeLittle says

      You can expect two types of depreciation in the F7 exam – normally it’s straight line and reducing balance. But sum of the digits method has been asked and, in a recent question 5 (I think) there was a “complex asset” question involving 5 (I think) elements of a ship being depreciated in different ways over different periods of time. Yes, question 2 will typically have both s-l and reducing balance, but others could be in there too

  10. Profile photo of hamzaharoon says

    Dear Sir Mike,

    I read the comments and you said that this lecture is outdated so Do I only view the notes or if this lecture is still applicable for current exams? Please do reply me asap, Thanks in advance :)

    • Profile photo of MikeLittle says


      The only little way in which it is outdated is in the treatment of the depreciation on the transferred non-current asset.

      In the lecture the extra depreciation calculated on the profit element of the transferred asset is adjusted in the records of the buyer.

      This has now changed and the NET gain on transfer, net after the depreciation, is adjusted in the records of the selling company – so there’s no adjustment to be made to the records of the buying company


      • Profile photo of hamzaharoon says

        Thank you sir, that means its still applicable now with only a little bit of exception of treatment of non current assets transferred, Thanks Again I understood, God bless you! :)

      • avatar says

        Mike, every thing fine but this changes in the net effect of profit and dep changed by whom. I mean by IAS or IFRS can you please give the reference.

        Thank you sir, God bless you
        Can you please mark the reference through which the changed affected

      • Profile photo of MikeLittle says

        The video recording equipment is no longer as available to us as formerly. No, I haven’t re-recorded the section – I’ll see if I can find time over the coming close season, but thanks for reminding me

      • avatar says

        That would be great, sir. But as I have a exam this session and since the older method is not anymore applicable. So we will deduct the excess depreciation from the PUP and then deduct the net amount from the selling company’s assets?

      • Profile photo of MikeLittle says

        Correct. So the only change from the recording is that, instead of adjusting the depreciation in the buyer’s records, the NET pup on the TNCA transfer is adjusted in the seller’s records

  11. avatar says

    I think you have loaded the wrong video because this one up here is exactly the same as the previous video which is “INTER-ENTITY TRANSACTIONS DIVIDENDS EXAMPLE4′ and it doesn’t talk about transfer of non current assets at all ……………can you check it out. Thank you again!

  12. avatar says

    I can view all other videos but I just can’t view the ACCA F7 TRANSFER OF NON-CURRENT ASSETS under chapter 8. I’ve tried it for two days with different devices and different browsers.I’ve used different computers and smart phones but still can’t view this video. It gives me the same thing, it is blank no buttons or whatsoever…I can see the comments under the video but there is nothing on the top where the video supposed to be except the big red title. HELP! Can anybody please help me out here!!!!!!!

      • avatar says

        Thank you so much!
        yes i can play it now and you are right I can’t access youtube here without some “breaking through”
        but thanks anyway!

      • avatar says

        I think you have loaded the wrong video because this one up here is exactly the same as the previous video which is “INTER-ENTITY TRANSACTIONS DIVIDENDS EXAMPLE4′ and it doesn’t talk about transfer of non current assets at all ……………can you check it out. Thank you again!

  13. Profile photo of Mahoysam says

    Dear Mr Little,

    Thanks for this. It is all clear, just one little detail which is confusing me, in example 3 – I am not very sure where did we get the figure of 100 from? The non current asset had a carrying value of 80 and it was sold for 90, am really not sure why we calculated it as sold for 100 and therefore the PUP is 20.

    Thank you!

    • Profile photo of MikeLittle says

      I think that, if you read the other posts on this string, you’ll find the answer to your question. The lecture MAY have been using an example I made up on the spur of the moment whereas the course notes should be correct

      • Profile photo of Mahoysam says

        I see! Apologies – It did not occur to me to check the notes, true, the answer there is correct. Anyway, am glad that it is cleared up now, I was concerned there is a point I have missed which led us to calculate the pup on a S.P. of 100.

        Thanks Mr little.

  14. avatar says

    Mike, at the end of the lecture you said it effects both w3 and w4. for working 4 obviously it effects the amount of retained earnings to be apportioned between P&S but does the additional $50 get added to the NCI value? i.e w4 would look like
    Value of NCI x
    & Share of S post acq profits 325
    do we then add on the $50 of dividend it is to recieve?


  15. avatar says

    On p.52 in Example 3 it says about depreciations: “… with a full year’s charge in the year of purchase and NON in the year of sale”. Shouldn’t the depreciation surplus be 50?

    • avatar says

      @ silvikss,. Yes, i noticed that one too. Its the same principles whether 90,000 or 100,000 i guess, just the pup should have been 10 not 20. the double entry used 20 so CS of FP will still balance. Cheers

  16. avatar says

    Dear Mr Mike Little,


    Is the answer in the course notes for example 3, chapter 8 correct (page 160)?
    I am asking due to the different approaches in your lecture and in the course notes in regards to the PUP and excess depreciation (Selling company / Buying company???).
    Shall we use the SELLING company ONLY in the exam, as mentioned in the answer to example 3???

    May I also ask you to always explain everything, as if all of us students wanted to achieve high marks. You mentioned in one of the earlier F7 lectures that certain figures could be written out as a Revaluation Reserve, but you did not go ahead in the end and proceeded with the figures in the W3 Cons. Ret. Ears calculation.. Since then I am wondering how to deal with the Revaluation Reserve.


    • Profile photo of MikeLittle says

      The pup on an intra-group asset transfer should be adjusted in the SELLING company NET of the depreciation on the profit. It may be that the above lecture does it the old way where some was adjusted in the selling company and some in the buying company.

      It is now the case that both profit AND depreciation are adjusted in the selling company

    • Profile photo of MikeLittle says

      “Goodwill Account” or the account in which you have recorded the acquisition – maybe an account called “Cost of Control Account” or “Cost of Acquiring Subsidiary Account”

    • Profile photo of MikeLittle says

      @annz2020, There really isn’t a song for working 2.

      However, the working 3 song goes as follows ( H is the holding company, more commonly called the parent company these days, and S is the subsidiary. )

      “H’s own plus

      H’s share of S post acq retained less

      Goodwill impaired since acquisition ( just our share )”

      If there’s an associate involved then we need to introduce two extra lines – line 3 and line 5

      “H’s own plus

      H’s share of S post acq retained plus

      H’s share of A post acq retained less

      Goodwill impaired since acquisition ( just our share ) less

      Impairment in A since acquisition”

  17. avatar says

    Thanks admin for providing the YouTube link! I watched the vedio till 8 minutes and 37seconds left (where tutor says:”I made the figures up”), and it won’t go on any further…

    I also noticed that the answer shown in the vedio is different from that in the notes. Which is correct then?

    • Profile photo of MikeLittle says

      @c0712, If I’ve said “I made the figures up” it’s because a student asked eg “Which page are we on?” or “Where are these figures from?”

      Now, before I started making the figures up, I will have said, for example “Say….” or “For example, if ….”

      …and that’s why the video is not consistent with the notes – it’s because I was making the figures up!

      • avatar says

        @MikeLittle, Thanks Mike, but I’m afraid I was misunderstood.

        I mean, for example 3 chapter 8, the answer you gave in the lecture is different from the answer given in the notes (December version).

      • Profile photo of MikeLittle says

        @c0712, Ah, maybe! I used to teach the accounting entries for pups on TNCA transfers as entries in both the buyer’s and the seller’s records and that’s the way it is probably dealt with in the video lectures. I DID change the notes in the Summer, but I haven’t re-recorded to appropriate lecture yet.


      • avatar says

        So during the exam should we adjust both seller’s and buyer’s (the way its done in the video) retained earnings or just the seller’s (the way its done in the notes)?

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