Comments

  1. 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

    Chris

  2. avatar 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?

  3. avatar 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?

  4. avatar says

    Hi!
    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)

      OK?

      • avatar says

        PUP = Provision for Unrealised Profits :D

        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.

        Thanks!

  5. 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.

  6. 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

  7. 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

      Hi

      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

      OK?

      • 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

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