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Hi sir regarding this question requirement number 3 about the impairment of goodwill,why does the answer take 40% of the 167 remaining impairment for NCI?i thought we only TAKE some of the impairment for nci if we use the fair value of NCI method?in this question we were told to use the proportionate net asset method to vAlue NCI
Yes, but that’s for goodwill. The entire goodwill impairment goes against the parent but the excess impairment is allocated 60 / 40
OK?
Oh okay so it doesnt matter if you use the fairvalue or proportionate net asset method to value NCI you must always charge the remaining impairment to NCI and other Assets after charging a % to goodwill
Hi sir
I don’t understand why the gain on the existing investment (310-280) have to be reversed in the group profits
I thought it was supposed to be a credit not a debit
Will appreciate your helpIs that reversal not simply reversing out a dab entry so that now we are in the position where we can put through the correct entry?
Thanks
Yes it could be a reversal of the previous gain in the revaluation of the original investment of 14%
My problem though is that the revaluation of the original investment to fair value seems to occur in the current year when the control is achieved so it is confusing on how the gain has to be reversed in the group’s profits
but thanks will read some moreHello Sir ,
I have same problem plz explain i do not understand the reversalWe any company puts through an entry into the accounting records and it later appears that that entry was incorrect, then it needs to be corrected.
There are two ways of tackling this.
By far the easier way is simply to reverse the bad entry and then put through the correct one.
The more difficult way is to work out what HAS happened, what SHOULD HAVE happened and the put through the entries necessary to get from bad to good
Ok?
Dear sir, I’d like to ask about requirement no.4, the giving of loan to charity organisation as financial assets.
As far as I see it’s not mentioned in the question that they are using the FVTPL / FVTOCI to record the loan, and Trailer will likely be holding it til the end plus there will only be principal & interest cashflow.
Shouldn’t it be accounted for using the amortised cost instead of the FV method used in the model answer?Thank you sir.
Yes sir, requirement no.4.
Oh dear, I think I’ve missed out something, the initial measurement of all financial assets should be at FV, so the model answer was correct.
Sorry sir, my mistake.
Dear Sir I have question on how we evaluate the first investment in Caller. When calculating goodwill, the cash consideration is used as fairvalue of the first investment. However as I understand, the first investment should be recognised as cash consideration plus share of profit after the day Trailer made the first investment.
Thanks in advance
Without the question in front of me, do I not remember the question actually giving you the fair value of that initial investment as at the date of the second investment?
Dear sir, pls help me where is my misunderstanding in reversal of impairment in quest 1 June 2013-Trailer.
I learnt that the asset can not be revalued to carrying amount that is higher than its value would have been if asset had not been impaired originally.
In the part 5, the total impairment recorded is $12, the revaluation gain calculated base on new value is $32.58. I think that the maximum impairment reversed is $12 give the carrying amount of the asset as at YE2013 is $86 rather than the new value of $105.
Tks so much.Sure, we can reverse an impairment, but that reversal is only good up to the point where the asset would have been had we not impaired it.
But are we not then able to revalue this unimpaired asset?
Does that do it for you?
Means that we then revaluate the unimpairment asset from $86 to$105? And record entry dr NCA/cr reserve (105 – 86)?
I confuse it because the asset was purchased at $90, and then after 2 years in use it’s revalued at $105? Is it reasonable?
Why not? And besides, whoever told you that P2 questions were reasonable? Take the classic example of a group of companies with aggregate $500,000,000 revenue and a share issue on the acquisition of a new subsidiary where the chief accountant doesn’t know how to deal with it. He / she is asking your advice.
Is that reasonable? Realistic?
Of course not – but the examiner has to set you questions that will test your knowledge and, invariably, that will involve resolving accounting issues that apparently lie beyond the competencies of CFOs in substantial companies
Your’s not to reason why. Your’s just to do, or try!
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