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The question asked to prepare the finance costs extract from Bycomb’s consolidated statement of profit or loss for the year ended 31 March 2015.
I note from the ACCA solution that ‘unwinding of deferred consideration’ forms part of the answer.
I see where the figures come from. The $13,440,000 is the deferred consideration from the goodwill calculation in part (a). 10% is Bycomb’s cost of capital per annum. 9/12 is the post-acquisition period.
What I don’t understand is how a cash payment due 30 June 2015 can impact on the statement of profit or loss for year ended 31 March 2015. However I do understand how the same payment impacts on the calculation of goodwill for year ended 31 March 2015. So I’m missing some basic understanding here.
Basically, what is this ‘unwinding’?
Thanks
“Unwinding” is the subject of many a previous post and the technique and principles are both fully illustrated in both F7 and F3 course notes and in F3 lectures.
You say that you can’t understand how a payment in the future can affect a statement of profit or loss today! Surely that’s the situation with ANY simple accrual!
Our last payment for electricity was made in December (December year end) and that payment was in respect of the quarter ended 31 October. Ok, so make an accrual for two months’ electricity usage.
Now, let me ask you, is the payment for this two months not a payment in the future in respect of an expense incurred today? Of course it is!
Better?
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