[14:28:09] --------------------------Home-------------------------- [14:28:14] --------------------------Paper P2-------------------------- [14:39:00] ysbq: tell me the year of question [14:39:03] mshaka: then how will u prfer to do socf [14:39:05] ysbq: and the name [14:39:21] mshaka: dec 06 [14:39:26] mshaka: andash [14:39:26] ysbq: lets go by past papers [14:39:40] ysbq: wait i guess i have it [14:39:48] mshaka: okk [14:40:23] ysbq: yes i have that question [14:40:29] mshaka: okk [14:40:34] mshaka: how we will do it [14:41:21] ysbq: well lets take 5 min to read the question and then, we will discuss the adjustments [14:41:32] mshaka: okk [14:41:35] ysbq: step-by step approach [14:41:41] mshaka: okkk [14:41:53] mshaka: i think first we need to draw proforma [14:42:07] mshaka: for cash flow [14:42:15] mshaka: this is the better approach [14:42:19] priyak: Hello [14:42:21] ysbq: yeah that i right [14:42:24] ysbq: {priyak} hi [14:42:41] ysbq: DEC-2006 Andash [14:42:56] ysbq: Consolidated statement of cash flows [14:43:10] priyak: is it the pilot paper? [14:43:30] ysbq: It is Paper of dec-2006 [14:43:43] priyak: downloadable? [14:43:47] ysbq: guys 5 min silence for reading the question [14:58:26] priyak: hello done? [14:58:52] priyak: or we work out individually then discuss [14:58:53] ysbq: yeah lets wait for mshaka [14:59:00] mshaka: yes [14:59:03] mshaka: start [14:59:20] ysbq: ok lets discuss the adjustmnets [14:59:23] ysbq: ADJ. 1 [14:59:26] priyak: k [14:59:48] mshaka: no disposal of ppe [14:59:59] ysbq: dep expense for the year = 260 [15:00:05] mshaka: yes [15:00:08] ysbq: so it is easy to calciate the additions [15:00:09] mshaka: add back it [15:00:14] ysbq: for the perod [15:00:26] mshaka: we will start with [15:00:28] mshaka: PBT [15:00:31] ysbq: k [15:00:35] mshaka: =400 [15:00:43] priyak: is there no adjustements to PBT [15:00:49] mshaka: add back depn 260 [15:01:01] mshaka: {priyak} these r the adjustments [15:01:09] priyak: ok [15:01:17] mshaka: in differt books [15:01:20] ysbq: there will be for unrealised profit on stock held [15:01:23] mshaka: ther is differnt approach [15:01:36] mshaka: but its easy to start with pbt [15:01:39] mshaka: make proforma [15:01:40] priyak: fine go ahead [15:01:53] mshaka: and read q and put figures in to that [15:02:05] mshaka: share options [15:02:10] mshaka: {ysbq} [15:02:11] ysbq: lets simply disucss the adjustmenst rite nonw [15:02:14] mshaka: wht about this [15:02:17] ysbq: {mshaka} yeah [15:02:26] ysbq: reduce the amount by 1 mi [15:02:37] mshaka: is this investing activity [15:02:40] priyak: yes [15:02:50] priyak: investing? [15:02:56] ysbq: no cash flow [15:03:00] ysbq: so no inclusion [15:03:17] mshaka: but they r buying plant [15:03:21] ysbq: the journal entry is [15:03:23] mshaka: 9 m [15:03:26] ysbq: PPE [15:03:36] ysbq: to Equity options [15:03:40] priyak: but they say it is used to account for plany and share options [15:03:58] priyak: means they recorded 10 or 9? [15:04:10] ysbq: means they have recorde at 10 [15:04:15] ysbq: see the SOCE [15:04:17] priyak: it was valued at 9 but the paid 10 [15:04:27] priyak: so minus 1 right? [15:04:32] ysbq: yeah [15:04:38] ysbq: {mshaka} u with me [15:04:45] mshaka: but 1 will go whr [15:04:57] priyak: from OBT itself [15:05:12] priyak: overstated profits [15:05:13] ysbq: u wil reduce 1 from PPE and 1 from other reserves [15:05:31] priyak: y reserves? [15:05:48] ysbq: because it is an equity transactions [15:06:11] ysbq: the share option issued in other reserves [15:06:15] priyak: it is during the yr transaction right [15:06:28] priyak: and where is the second effect goin to? [15:06:45] mshaka: start of y/r [15:07:04] priyak: 21 oct 2006 is y/e right [15:07:06] mshaka: ohh no [15:07:12] ysbq: PPE (debit ) and Other reserves (credit) by 10 is the actual entry [15:07:13] priyak: 31* [15:07:14] mshaka: end date of y/r [15:07:32] mshaka: {ysbq} u r missing above point man [15:07:42] mshaka: check the dates carefully [15:08:36] priyak: other reserves or retained earnings? [15:08:37] ysbq: both transaction are happening on 31-OCT [15:08:51] mshaka: yes [15:08:55] ysbq: see the statement of changes in equity [15:09:04] ysbq: the other reserves column [15:09:11] mshaka: i can see [15:09:20] ysbq: these are options not shares [15:09:28] mshaka: yes [15:09:50] ysbq: so they cannot affect the capital unless they are not exercised [15:09:59] priyak: hmmm ok [15:10:09] ysbq: hence at 31-oct they are in other reserves [15:10:17] ysbq: am i on track [15:10:24] mshaka: thts wht i m saying [15:10:33] mshaka: u r not realising options [15:10:44] mshaka: but u r realising asset on the date [15:10:50] mshaka: how come [15:10:55] mshaka: whr is matching [15:13:02] ysbq: they are issued under IFRS -2 so they are recorded at FV of goods and services recievded [15:13:15] priyak: ok [15:13:20] mshaka: okk [15:13:22] ysbq: option is an equity instrument [15:13:23] priyak: but instead they recorded at 10 [15:13:26] ysbq: yeah [15:13:31] mshaka: move on [15:13:35] ysbq: so reduce by 1 [15:13:48] ysbq: u wil reduce 1 from PPE and 1 from other reserves [15:13:57] ysbq: all agree [15:14:01] priyak: ok [15:14:07] mshaka: ok [15:14:12] ysbq: ADJUST. 2 [15:15:04] mshaka: this is associate [15:15:09] mshaka: is it [15:15:12] ysbq: first the adjustment of post acq profits [15:15:20] ysbq: yeah it is an associate [15:15:32] ysbq: reserves at acq are 20 m [15:15:41] ysbq: and at 31-Oct are 32 m [15:15:47] mshaka: yes [15:15:49] ysbq: difference is 12 m [15:15:55] ysbq: our share in 25% [15:15:57] ysbq: so [15:16:02] ysbq: what next [15:16:31] mshaka: inventory [15:17:17] mshaka: is ther any cash flow involved in this [15:17:19] ysbq: {mshaka} wht will be the adjustmen [15:17:25] mshaka: i don t thisnk so [15:17:39] priyak: unrealised profit??? [15:18:42] ysbq: ok u will take 25% of 12 m and it come up to 3 m [15:18:57] priyak: the diff of 8 would reflect in the changes in inventory? [15:19:07] ysbq: increase the reserves by 3,m and invest in asociate by 3m [15:19:20] ysbq: then reduce the profits by URP by 2 m [15:19:38] ysbq: reducing ur investory by 2 m [15:19:50] mshaka: i do get confused here [15:19:53] mshaka: {ysbq} [15:20:04] mshaka: why we do adjusmnts here again [15:20:06] priyak: {mshaka} same here confused [15:20:27] mshaka: if adjusmnts were done when we made consolidated statmnt [15:20:53] ysbq: hmmmm [15:21:06] mshaka: we supposed to pick figures directly from conlo. statent and look at cash flows in / out [15:21:18] ysbq: ok tell me wht will u do for ADJ. 2 [15:21:41] mshaka: i will not do any thing for inventory [15:21:58] mshaka: bcz i think tahts adjusted in consolidated statemnt [15:22:13] ysbq: u have go an unrecog profit from associate and URP on investory [15:22:21] mshaka: i will see just changes in inventory / recivable / payable [15:22:26] ysbq: well ur inventory in overstated by 1 m [15:22:32] ysbq: due to URP [15:22:45] ysbq: and this will impact the PBT [15:22:54] ysbq: if i am not mistaken [15:23:02] mshaka: but whr is the cash flow actual [15:23:12] mshaka: nothing actually happend [15:23:21] mshaka: why we call it sash flow statmnt [15:23:49] ysbq: well so i ur opinion we leave this adjust... [15:23:55] ysbq: :D [15:24:07] priyak: ok fine [15:24:23] mshaka: move on [15:24:55] ysbq: ok the adjust has been quarantined by future use .... Movin to ADJ, 3 [15:25:04] mshaka: okkk [15:25:13] priyak: ok [15:25:46] ysbq: no impairment since reoverable amount is more the caryin value [15:26:46] ysbq: that has a trick statement [15:27:03] ysbq: anyone caught me [15:27:19] ysbq: guys......... [15:27:28] priyak: {ysbq} yes here [15:27:44] priyak: just getting confused tats all [15:27:47] mshaka: 240+90= [15:28:01] ysbq: {mshaka} yeah man u got it [15:28:16] ysbq: that is the carrying value [15:28:27] ysbq: 240+90=330 [15:28:36] mshaka: but in aswer they added impairmnt [15:28:40] ysbq: and recoverable amount s 260 [15:29:14] mshaka: they say 130 impairmnt [15:29:43] ysbq: the amount of imparimet is 330-260=70 here [15:30:13] mshaka: they say unrecognised nci [15:30:19] mshaka: is 60 [15:30:23] ysbq: wait................................... [15:30:28] ysbq: 90 is 60% [15:30:46] priyak: {ysbq} yeap [15:30:56] ysbq: that is grp share gross up [15:30:59] priyak: and they grossed it up [15:31:19] mshaka: bcz we r taliking about FV [15:31:29] mshaka: so incorporate nci too [15:32:33] mshaka: from whr they got nci =60 [15:32:52] priyak: nci is not 60 [15:33:08] priyak: andash is 60% owning broiler [15:33:17] ysbq: 60 % of good will of grp is 90m [15:33:24] mshaka: i know [15:33:34] mshaka: look working 4 [15:33:36] ysbq: so 100% will be 90m/0.60 [15:33:47] ysbq: = 150m [15:33:57] ysbq: that is the total g/w [15:34:04] priyak: yeap [15:34:15] priyak: then they added the net assets of 240 [15:34:26] mshaka: and for nci its 90* 40/ 60=60 [15:34:57] ysbq: now at the date of reporting the totat value of sub at CV is 240+150=390m [15:35:09] priyak: {ysbq} agree [15:35:13] ysbq: and the recoverable amount is 260m [15:35:20] priyak: of that they took of 260 [15:35:22] priyak: fine [15:35:25] ysbq: impairment of sub = 130m [15:35:40] mshaka: hmmm [15:35:41] ysbq: on total basis [15:35:59] priyak: yes and then we recognise only parents share of 60% [15:36:13] priyak: so 60% of 130 = 78 [15:36:16] ysbq: see the balance sheet column of 20x5 [15:36:40] ysbq: goodwill [15:36:47] mshaka: hmm [15:36:51] priyak: {ysbq} ya 130 [15:37:08] ysbq: has the consolidated statement of FP has recognised the total goodwill [15:37:17] ysbq: of group and nci [15:39:08] priyak: {ysbq} hmmm point to be noted. the acquisition is at 31 oct 2006 [15:39:28] priyak: tat is year end [15:40:05] priyak: but they dont have any NCI in thier B/S either [15:40:06] ysbq: ok guys lets keep the things simple [15:40:19] priyak: oh yes they do sorry [15:40:32] mshaka: move on [15:40:47] ysbq: since the answer assumes the Group only records G/w on proportionate basis [15:41:09] ysbq: so impairment will be 60% of 130 m [15:41:13] ysbq: - 78m [15:41:21] ysbq: to be in Cash flows [15:41:40] ysbq: all agree [15:41:57] ysbq: guys [15:42:02] priyak: ok [15:42:04] mshaka: yes [15:43:09] ysbq: ADJUST 4. [15:43:50] mshaka: diposed in mid of y/r [15:44:10] komalch: Hey guys wats on? [15:44:37] ysbq: {mshaka} yeah [15:44:39] priyak: {komalch} dec 2006 Andash [15:44:47] ysbq: and the G/w is 10 [15:45:02] priyak: recvd cash of 32 [15:45:25] ysbq: so the reduction in B/s of G/w account from 130 to 120 is due to this [15:45:27] komalch: {priyak} is it a cash flows question? ryt? [15:45:48] priyak: {komalch} yes [15:46:21] ysbq: cash 32 inflow less 5 cash balance of subs. forgone [15:46:37] ysbq: net cash inflow will be 32-5 = 27 [15:46:45] ysbq: in investin act. [15:46:48] ysbq: all agree [15:47:05] mshaka: 5 [15:47:07] priyak: ok [15:47:09] mshaka: is wt [15:47:15] mshaka: {ysbq} [15:47:31] ysbq: cash and cash equivalents of subs, sld [15:47:32] ysbq: sold [15:48:07] mshaka: why we - it [15:48:33] priyak: net effect of recving cash and gving cash [15:48:43] ysbq: ok lets take a real life example [15:48:43] mshaka: it was diposed mid of y/r [15:48:50] mshaka: not end date [15:49:29] priyak: but when disposed off fully then whole things is effected right? [15:49:30] ysbq: u have a money bank holding 5 dollars and u sell that money bank for 32 dollars [15:49:39] ysbq: what is u cash position [15:49:49] ysbq: got 32 dollars and lost 5 dollars [15:49:52] ysbq: :D [15:50:02] ysbq: does that make sense [15:50:18] priyak: i guess the time factor is wat mshaka is askign about [15:50:32] mshaka: hmmmm [15:50:34] priyak: y the whole of 5 when when had control for half a year [15:50:35] ysbq: cash flow statement is for the period [15:50:40] priyak: {mshaka} right? [15:50:40] ysbq: not at the date [15:50:45] mshaka: yes [15:50:56] mshaka: {priyak} [15:51:06] priyak: ysbq: cash flow statement is for the period [15:51:13] priyak: {mshaka} this is y [15:51:18] ysbq: so it is include all the changes during the year llike Profit and loss [15:51:34] ysbq: {priyak} that is what i said [15:51:43] mshaka: okkk [15:51:47] mshaka: wt next [15:51:48] priyak: i copy pasted ur line [15:52:31] mshaka: i will go back to book :( [15:52:54] ysbq: {mshaka} ??? [15:52:57] priyak: now 27 was the proceeds from disposal fallin into the investing activity [15:53:09] ysbq: read my money bank example [15:53:10] priyak: how about then profit or loss on disposal [15:53:40] mshaka: i understood ur exaplme [15:53:47] mshaka: okkk [15:53:54] mshaka: should we do part b now [15:54:09] ysbq: ok now replace the word money bank with subsidary it will do the trick [15:54:12] ysbq: PART b. [15:54:51] mshaka: cash flow give use ful info [15:54:56] mshaka: why and how [15:55:29] mshaka: bcz it shows clearly in / out of just cashflow during the y/r [15:56:04] ysbq: well it tells you the cash generated from operatons whihc reflects the cash generating abilit of organisation from operatoins [15:56:06] mshaka: it categories flows in invest / operting / finscing [15:56:14] ysbq: and then u have investing [15:56:27] ysbq: will tells ur capex for the period [15:56:46] mshaka: it just focuses on cash not on accounting profit [15:56:56] mshaka: it shows liquidity of company [15:56:58] ysbq: and the financing activities that tell u the changes in sources of fiannce [15:57:23] mshaka: it shows how quickly u can pay off loans [15:57:39] ysbq: i read a quote some where let me share it with u guys [15:57:53] mshaka: this info appreciates mangt hard works [15:58:17] ysbq: revenue is vanity , profit is sanity and cash flow is Reality [15:58:19] ysbq: :D [15:58:26] mshaka: good [15:58:38] priyak: cool [15:58:40] ysbq: ok Window dressin [15:58:47] ysbq: howw it can be done [15:58:58] mshaka: dude other part of b [15:59:10] ysbq: taking cheques from customer before year end [15:59:15] mshaka: ways of meassuring cashflow [15:59:31] mshaka: first finsih it off b [15:59:35] mshaka: {ysbq} [15:59:37] ysbq: k [15:59:57] mshaka: ways [16:00:05] mshaka: 1. cash flow stamnt [16:00:11] mshaka: liquidity ratios [16:00:22] ysbq: solvecy ratios [16:00:33] mshaka: wht r they [16:00:43] mshaka: curent ratio [16:00:47] mshaka: quick ratio [16:00:49] priyak: sorry to disturb but wat r u guys discussing now? [16:00:57] priyak: the part b was regardign framework right? [16:00:57] ysbq: liquidity is short term and solvency is long term [16:01:02] mshaka: working capital ratios [16:01:11] ysbq: solvecy is the debt and equity ratio [16:01:15] ysbq: {mshaka} y [16:01:19] ysbq: yeah [16:01:21] mshaka: {priyak} nooo [16:01:29] mshaka: yes [16:01:32] mshaka: {ysbq} [16:01:45] ysbq: operaitnf cycle period [16:01:52] ysbq: F9 stuff [16:01:53] priyak: {mshaka} for me the question is on framework [16:01:56] mshaka: yesss [16:02:03] mshaka: i duuunoooo [16:02:08] mshaka: wht r u looking [16:02:17] priyak: part b of the question [16:02:19] ysbq: ANDASH - DEC 2009 [16:02:36] priyak: i guess so yes [16:02:43] mshaka: part c is window dressing [16:02:48] priyak: and 2 situations given also [16:02:48] mshaka: {priyak} u agree [16:03:06] priyak: ok i guess u have the modified version of the question then [16:03:11] ysbq: {priyak} ok [16:03:17] mshaka: yaa may be [16:03:21] ysbq: lets discuss the window dresing [16:03:25] mshaka: {priyak} u have kaplan kit [16:03:33] priyak: nope infact didnt get one yet [16:03:46] mshaka: when u will buy................lol [16:03:47] priyak: have the old BPP 2009 version borrowed from a frnd [16:03:57] mshaka: don t use old versions [16:04:06] mshaka: p2 is sensitve [16:04:08] priyak: wont get till the mid of this month [16:04:19] priyak: ok [16:04:20] mshaka: every y/r updates [16:04:24] mshaka: use updated [16:04:29] priyak: anyways u guys continue [16:04:33] priyak: i will watch [16:04:33] mshaka: okkkk [16:05:05] mshaka: window dressing is kind of accounting manipulation to make profit better than it is [16:05:06] ysbq: {mshaka} k window dressing [16:05:22] ysbq: cash flows window dressing [16:05:46] mshaka: i think u can talk all around [16:05:52] mshaka: not just cash flows [16:05:57] ysbq: like accpeting cheques for customers before year end that are not subsequently cleared and bounced back [16:06:10] mshaka: yessss [16:06:21] ysbq: what else [16:06:24] mshaka: increased sales on credit [16:06:49] mshaka: when creditors could be bank cruupt [16:07:02] mshaka: no provisioning for bad debts [16:07:13] ysbq: k [16:07:25] mshaka: less admin expenses [16:07:45] mshaka: manipulate fair value of g/w [16:07:53] ysbq: k [16:07:58] mshaka: so no impairment [16:08:05] mshaka: and increased profit [16:08:08] ysbq: yeah [16:08:23] mshaka: u know fair value calcuation is a big loophole [16:08:26] mshaka: in accountin [16:08:32] mshaka: bcz thats subjective [16:08:34] ysbq: yeah [16:08:48] mshaka: i think done [16:08:51] ysbq: i guess that sums up the session for today [16:09:05] mshaka: last part of c [16:09:09] mshaka: is it ethical [16:09:11] ysbq: but we have to retrive the quarantines item [16:09:18] ysbq: of adjustement we left [16:09:32] mshaka: yes do that by ur own [16:09:40] mshaka: we can t write everything here [16:09:47] ysbq: yeah [16:10:00] mshaka: okkk [16:10:03] mshaka: give answer [16:10:17] ysbq: give answer to what [16:10:19] ysbq: ? [16:10:28] mshaka: of last sentence of part c [16:11:31] ysbq: no it is not ehical to window dress since it effects the descion making of users of financia info in adverse manner and it is against the priniciple of accountign profession [16:11:46] priyak: so guys when is the next session? [16:11:59] mshaka: wht the ethical priciples [16:12:00] ysbq: that proclaims to with hold integrity and honesty and ibjectivity in actions [16:12:14] mshaka: to give true and fair value [16:12:25] mshaka: professional competence and due care [16:12:29] ysbq: yeah true and fair is on [16:12:45] mshaka: integrity................honest and straight forward [16:12:56] ysbq: yeah [16:12:58] mshaka: all this applies to mangt [16:13:03] ysbq: yes [16:13:18] mshaka: and abide by iasb rules [16:13:24] ysbq: i guess that sums up all [16:13:26] mshaka: matching prudence [16:13:31] mshaka: substance over form [16:13:40] ysbq: but see the solution for adjustment to assoicates profit [16:13:45] ysbq: k [16:13:53] ysbq: i guess that is enough [16:14:00] mshaka: yes [16:14:06] mshaka: tomw same time [16:14:08] ysbq: {mshaka} ok if u wanna [16:14:08] mshaka: can we [16:14:14] ysbq: brb [16:14:32] priyak: i have not probes [16:14:42] mshaka: i m off on sat / sunday [16:14:44] priyak: wats the topic for tomorrow [16:14:53] mshaka: same cashflow [16:14:57] priyak: ques? [16:14:59] mshaka: another q [16:15:06] ysbq: {ysbq} i cannot commit but post the session on forum [16:15:06] mshaka: just random q [16:15:09] mshaka: like exam [16:15:25] priyak: name a ques [16:15:51] mshaka: warrbut [16:15:56] mshaka: dec 08