Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › finance cost (continue)
- This topic has 1 reply, 2 voices, and was last updated 7 years ago by MikeLittle.
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- February 19, 2017 at 2:22 pm #373156
is that means if the loan note is directly new issue from the subsidiary we should minus the intergroup interest 1st from the subsidiary finance cost in p/loss only time apportion?
If it is acquired from other ppl which means that the parent is buy from other people who gt hold the loan note of subsidiary, so we need to straight away time apportionment thn only minus the intergroup interest? for the below part that u mention just nowIn the June 2003 question Hillusion (it would have helped if you had given me the name of the question!) Skeptik issued those 10% loan before Hillusion acquired control of Skeptik
We can see that because the finance cost in the Skeptik statement of profit or loss shows an expense of $200 and that is clearly 10% of $2,000
This is the only loan note outstanding in Skeptik, $200 is interest for a full year, and Hillusion received only $75 for the 9 months’ ownership
So when Hillusion ‘acquired 50% of the Skeptik 10% loan notes at par’ as per the question, it must have done so by buying these notes from other people rather from the issue of those notes by Skeptik
We are able therefore to time apportion the finance costs and see that the post-acquisition element is 9/12 x $200 = $150 and 50% of that amount is paid to Hillusion
In the question Pandar from December 2009 ‘Pandar invested $50 million in an 8% loan note from Salva’
The expression ‘invested’ is used in this question rather than ‘acquired’ that is used in Hillusion and suggests that the loan note purchased by Pandar is a new loan note issued by Salva shortly after the take-over by Pandar
However, what we DO know for certain is that, within the Salva finance costs is $2,000 loan interest paid to Pandar and that that $2,000 is entirely post acquisition
Thanks
February 19, 2017 at 2:47 pm #373159In answer to the question in your first paragraph, yes, that’s correct
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