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Hello Sir, For PYQ Mar/June 2017 Q1 part (c) Audit procedures,I would like to ask some clarification from you
1.for part(i) Impairment of Chico Brand, the 4th answer: “…whether it constitutes a separate line of business…”
Is it not more related to IFRS 5 HFS rather than impairment of goodwill? as even though it’s not HFS or discontinued operation, it will also subject to the impairment loss due to having been withdrawn from sale?
2.part(ii),1st answer “…to understand the rationale for the acquisition…”
How the understanding of the rationale behind the acquisition will help to audit work?can give some example of it?
3.for 2nd answer :”Discuss with Group mgt the wat that control will be exercised over…”
Why we just can’t review the acquisition agreement that signed just after the year-end?
4.for the 4th answer :”Obtain any due diligence report which have been obtained by…”
How the due diligence report will help to identify items that related to IAS 10 and IFRS 3?as usually the DDR is done before the year-end and only verify the amt of acc.bal , disclosure ara e reasonable correct?(fact-finding)(limited assurance)
Thank you and appreciate it.
1. It would be sufficient to consider whether it is sufficiently significant to call for separate disclosure (for the last point) – you wouldn’t need “and whether … ” to get credit for this point.
2. Please see my answer to this Q on your earlier post https://opentuition.com/topic/ryder-group-cd/
3. Prior to S18 exam Qs were set in real time (now, where relevant, it is always “1 July 20X5). So this Q was the March 2017 Q because 31 May 2017 was in the future (“projected”). As the planned acquisition is 3 months away (“early June”) and DD is “taking place” there may not be even a draft agreement (yet).
4. DD for a business acquisition would look for contingent liabilities (for example – also intangible assets) as these would clearly have a bearing on the purchase price and FV of assets/liabilities acquired which determined goodwill (IFRS 3).4.How about for IAS 10?(How the due diligence report will help to identify items that related to IAS 10)
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