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I don’t know I think sticking to donors and ignoring the rest is wise. Not sure a charity really has much more responsibility than to its donors and understanding and fulfilling their wishes. The argument that I would make to support this is that the wider group e.g. governments and local community may benefit from the charities actions but if they are not a direct stakeholder i.e. a donor then their claim on the charity is limited barring any harm/interference caused to their agency directly by the charities action. This is because if they are not donating to the cause of the charity it is something they are likely not prioritising in their own decision making and thus the charity really doesn’t have a responsibility to consider their wishes in most cases.
You needed to apply the 4 soft S’s in the McKinsey model to identify whether the two business had been successfully integrated. The case study showed that they definitely were not integrating on any level and so that was my conclusion. I used the four headings to describe how they were not.
I also got 443k.
I said that generally it was not fit for purpose because it would not be able to show that the business whether or not they are reaching their objectives. There was too much financial information in there for it to be fit for purpose. Further there were measurement issues in the report for example the market share showed 3% for most years however if you read the commentary it was 2.55% in 2014 and then 2.75% in 2015 and then was forecast to be 3.1% in 2016 but this was all shown as 3%. I noted that there were good aspects of it, such as an attempt, albeit an irrelevant one, to benchmark, use of internal and external info, the use of forecast and historical data and the use of commentary. I noted these practices should be kept however they would need to use more non-financial information and information that actually tells them whether or not they are meeting their business objectives for it to be fit for purpose.
Yeah agreed but I always bring ear plugs because I get distracted very easily. I did have people finishing at different times but because of the ear plugs I heard nothing.
I can’t really remember. There was an error message and the screen just stop and I had an error message but didn’t bother reading it. I just put my hand up and told them. They moved me to a new computer. I am not sure there is a character limit though so don’t worry. I am not sure how much you write for this but I reckon I write between 4,000-5,000 words based on my mocks which with counting characters would be much higher so I think you are going to be fine and they won’t be missing any of your work. I think also their back-up systems are pretty good. When they restarted another computer for me they had all my work and nothing was missing.
As long as it is logical and it makes sense it doesn’t really matter. Remember you don’t get any marks for just applying the model, it is how you write your answer. The model can obviously help you write a better answer through structure but it is not necessary.
I didn’t use PESTLE on the external environment question however I think it would have made sense to.
I structured mine by risk headings for example; expectation gap between public and charity services; young people giving less; regulatory changes and risks etc. It made more sense to me to do it that way.
Yes my computer stopped working after about 3.3 hours and they had to put me on another one. They re-started it before I got to the computer so I lost time because of it.
I also had the charity question which referred to the org BCO a wildlife charity. Generally the questions were pretty easy and the information wasn’t too much to read in the allocated time. It was a good balance. However, I spent too much time on some questions particularly the risk register. I also wanted to apply VFM model for the performance analysis of the org but couldn’t make the info work which lost me a bit of time and made me feel a bit disappointed because I figured out how to do it after leaving the exam hall. Managed to complete all questions with some being answered better than others.
I said they could potentially use the micro entity if they qualify, which I noted they likely don’t given the size of their assets and the need for substance over form. Therefore I recommend FRS 102 because it is based on IFRS SMEs so it seems like a good stepping stone to full IFRS.
I should add as well that the intangible asset of 5m should be added. Forgot about that 🙂 I did add that. So goodwill will be a bit higher.
I should add that a joint venture is when there is unanimous decision making and both have a share of net assets. I don’t think the relationship describe in Q3 met this criteria
I agree with one of the posts that said that negative goodwill is very rare and therefore unlikely to be the answer. Indeed IFRS requires that management recalculate their workings if negative goodwill is found because it more likely due to an error rather than it being a bargain purchase. I did not get negative goodwill but it threw me off when they mentioned it in the exam because it seemed to suggest that it would be. I think they do that on purpose to trigger your biases when answering questions, you assume that because they mention it and that is unusual they are hinting at the answer. Cheeky but definitively getting the response they want which is to test how much you really know the information and are able to apply it objectively.
I found goodwill in my calculation, not negative goodwill. The first adjustments that I made were to the fair values of the assets. I think it was land that was originally 65 but by the date of consolidation it was 60. Then current assets had increased by around 57m. Therefore you needed to adjust the net assets of the subsidiary by adding 57m and removing 5m. While also reducing this with the corresponding tax liability from the fair value increase so 57m * 0.2 = 11.4m and then a reversal of a tax liability based on the reduction of fair value of 5m*0.2 = 1m. You have the original net assets of ~348 and you add 57m – 11.4m – 5m + 1m = 389.6. Remember that consolidate must always happen at fair value.
The next part is to work out the NCI and that is the proportionate method so you take 52% of 389.6 = ~203.
Then you have the consideration paid for the 18% which was 66m and then the fair value of existing interest which was 127 I believe.
Therefore your goodwill calc should be 127+66+203 – ~390 = 6m
These are the numbers that I remember and by no means if you don’t have the same numbers you are going to fail. You can still pass this exam if you don’t get this part exactly right so I wouldn’t worry too much as it is Christmas ? I just wanted to provide a different narrative to the one on negative goodwill which seems to be the main theme in this forum.
Q2 think this is straight forward. I left it till the end because it was the easiest. It was rushed and not my best piece of work but it will have to do.
Regarding Q3 and joint venture. I think they asked whether Ibex had control or not, not whether they had joint control. For joint control to occur unanimous decisions have to be made and it doesn’t appear to be the case from the case study so I don’t think a joint venture is the correct way of looking at it. It was again looking at control but from FRS’s perspective which is slightly different to IFRS’s. I can’t be sure about this but that is how I read it. I’d say that generally Q3 was my weakest part because I just didn’t have time to write everything and my mind blanked a bit on the application of impairment to the scenario but I look back on it and realise it wasn’t too bad, just need to state the standard principles and apply to the scenario! The question on why Ibex should account for Pomex as debt baffled me at first and I settled on the answer that they don’t have a proportion of net assets and so can’t be considered an equity holder.
Q4 this was messy for me as I didn’t plan the answer properly. I don’t think I did terribly here but didn’t do as well as I could have. The first question regarding whether the distributor should be agent or principle threw me because the materials I was using didn’t cover this in much detail so I just used instinct here and went agent, explanation was weak but it was there. I noted that the license should be recognised as an asset for the distributor because it meets the definition can’t remember if I said it should be intangible asset or not. Regarding the difference in effect on the KPIs of whether it was as an asset purchase or business combination. Unfortunately my answer was messy and could have been better.
Overall I thought the exam was fair. It was tough given the time constraints but that is what differentiates most of us normal people from those that score really highly. That additional bit of discipline to maintain composure in the exam to not go hell for leather and write like a mad person when you get into a flow. I always say to myself I won’t do next time but I always do!