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Group SFP – Unrealised profit and inventory in transit – ACCA Financial Reporting (FR)

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  2. Question (Goods in transit):

    P Group has an year end of December 31, 2020. on December 31,2020 P sold goods to S. These goods are still in transit as of January 1, 2021. As per the companies policy the control of goods is transferred to S only when S receives the goods.

    As per IFRS 15 revenue recognized upon transfer of in control of the customer (in this scenario to S).

    My question is if P will still recognize the revenue? If not what will be the entries and how will we deal with it during consolidation.

  3. Not part of this question , pls help me if any one knows how to account

    If S`s is constructing a building for P and S`s keeping 20% mark up on their actual money they spend including labor cost, material and other OH

  5. Question:

    (i) The fair value of the non-controlling interest in Smooth Co at 1 January 20X8 was deemed to be $3.4m. The retained earnings of Duke Co in its individual financial statements at 30 June 20X8 are $13.2m. Smooth Co made a profit for the year ended 30 June 20X8 of $7m. Duke Co incurred professional fees of $0.5m during the acquisition, which have been capitalised as an asset in the consolidated financial statements.

    (ii) The following issues are also relevant to the calculation of non-controlling interest and retained earnings:

    – At acquisition, Smooth Co鈥檚 net assets were equal to their carrying amount with the exception of a brand name which had a fair value of $3m but was not recognised in Smooth Co鈥檚 individual financial statements. It is estimated that the brand had a five-year life at 1 January 20X8.

    – On 30 June 20X8, Smooth Co sold land to Duke Co for $4m when it had a carrying amount of $2.5m.

    NCI 20%
    This question appeared in Sept/Dec 2018

    As per the ACCa answer,

    NCI at acquisition 3,400
    NCI % S’s Net Assets at Acquisition
    Profit 3,500
    FV dep (300)
    URP (1,500)
    340
    NCI 3,740

    My doubt is, why is URP taken as part of net assets at acquisition, shouldn’t it be included in S’s net assets on the reporting date?

  6. Question :

    (i) The fair value of the non-controlling interest in Smooth Co at 1 January 20X8 was deemed to be $3.4m. The retained earnings of Duke Co in its individual financial statements at 30 June 20X8 are $13.2m. Smooth Co made a profit for the year ended 30 June 20X8 of $7m. Duke Co incurred professional fees of $0.5m during the acquisition, which have been capitalised as an asset in the consolidated financial statements.

    (ii) The following issues are also relevant to the calculation of non-controlling interest and retained earnings:

    – At acquisition, Smooth Co鈥檚 net assets were equal to their carrying amount with the exception of a brand name which had a fair value of $3m but was not recognised in Smooth Co鈥檚 individual financial statements. It is estimated that the brand had a five-year life at 1 January 20X8.

    – On 30 June 20X8, Smooth Co sold land to Duke Co for $4m when it had a carrying amount of $2.5m.

    NCI % is 20%
    This question appeared in Sept/Dec 2018
    —

    As per ACCA Answer:

    NCI at acquisition

  10. Hello,

    can smb please explain the example 7, particularly :

    W2) Net Assets: PUP at reporting date in the amount of (10)

    Does PUP of (10) means the intra-group profit that included in the inventory which remain at the year-end (half of the goods)?

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