[accalmz]

hi Ben thanks for your suggestion! I’ve just bought one text book from Bras Brasa secondhand book store. It was published by Kaplan but unfortunately in 2013. I also bought a brand new revision kit from London school of business and finance, and this is for this year. I have been using the Kaplan study text for a few days and found the 2012 budget is mentioned very frequently. I’m not sure what’s the implication of studying with this outdated text.

Liming

[accalmz]

59, passed, thanks a lot, Mike 🙂 !! Your detailed and patient explanations really helped me a lot in clearing some of the confusing concepts.

Lm

[accalmz]

Dear sir,

Is it correct to say that NCI will be charged their share of the subsidiary’s finance cost on loans from parent, although at the same time, the entire finance cost & income will be eliminated on consolidated group account ?

thanks for your clarification!

Lm

[accalmz]

if cos increases, profit decreases.
I think the question says the COS has accounted for the DECREASE in provision, meaning
-(-2400), which then increases profit ??

thanks
Lm

[accalmz]

so that means, because the decrease of 2400 has been included in cost of sales in the question, which effectively translates into an increase of 2400 in profit before tax. When preparing cash flow, because this 2400 is a non cash item, 2400 should be deducted from the profit before tax.
sir, is my way of thinking correct?
thanks

Lm

[accalmz]

dear sir,

When accounting for the unrealised profit with associates,

My understanding is that on the consolidated statement of financial position for the parent: on the asset side, corresponding to the lower RE can only be a lower inventory or investment in associate.
1) upstream sales means parent inventory is overstated, so need to reduce inventory.
2) downstream sales: parent does not consolidate associate’s inventory, so parent can only reduce investment in associate to maintain the balance on the balance sheet.

Am I correct to interpret the unrealized profit situation in the above two ways?

Thank you very much in advance!

Regards
Lm

[accalmz]

After a bit research, I found out that the 1300 in point 2) could be a factoring cost. If this is correct, I don’t understand why factoring cost is reversed above. can you help thanks!

Lm

[accalmz]

thank you sir, just still a bit puzzled about the receivable part (sorry, it must be a very stupid question from me …) I thought tax base is about what is taxable in the future, not the current tax year. so in the above scenario, 10k is indeed not taxable this year but is taxable in the future when cash is collected, following this logic, I thought the tax base is 10k… 😛

Lm

[accalmz]

just realized that the format of what I typed is lost, so just to clarify the answer to point3, the provided answer has it:
Interest receivable (=55-45)
carrying amount (10)
Tax base (0)
Temporary difference (10)

thanks
Lm

[accalmz]

dear sir,

Please find below the full question and the answer provided by BPP which I typed by hands. I was referring to point 3.
thanks

Lm

53. Preparation question: Julian

Julian recognized a deferred tax liabiity for the year end 31 Dec 20×3 which related solely to accelerated tax depreciation on PP&E at a rate 30%. The net book vlaue of the PP&E at that date was $310,000 and the tax written down value was $230,000.
The following date relates to the year ended 31 Dec 20×4:
1) At the end of the year the carrying value of PP&E was $460,000 and their tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian operates revaluations of asset do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

2) Julian began development of a new product during the year and capitalised $60,000 in accordance with IAS38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortized by the year end.

3) Julian’s statement of profit or loss showed interest income receivable of $55,000, but only $45,000 of this had been received by the year end. Interest income is taxed on receipts basis.

4) During the year, Julian made a provision of $40,000 to cover an obligation to clean up some damage caused by an environmental accident. None of the provision had been used by the year end. The expenditure will be tax deductible when paid.

The corporate income tax rate recently enacted for the following year is 30% (unchanged from the previous year).
The current tax charge was calculated for the year as $45,000.
Current tax is settled on a net basis with the national tax authority.

Required:
a) Prepare a table showing the carrying values, tax bases and temporary differences for each for the items above at 31 Dec 20×4.
b) Prepare the statement of Profit or loss and statement of financial position notes to the financial statements relating to deferred tax for the year ended 31 Dec 20×4.

ANSWER:
a) carrying amount($’000) Tax base($’000) Temporary difference
PP&E 460 270 190
Development expenditure 60 60
Interest receivable (55-45) 10 10
Provision (40) (40)
———-
220

b) Note to the statement of financial position
Deferred tax liability $’000
At 1 Jan 20×4 [(310-230)*30%] 24
Amount charged to Profit or loss (balancing figure) 15
Amount charged to equity (90*30%) 27
——
At 31 Dec 20×4 (20*30%) 66

Note to the statement of profit or loss
income tax expense
$’000
current tax 45
Deferred tax 15
—-
60

[accalmz]

oh sorry, but I was actually referring to a practice question in the BPP revision kit, so I’m not sure if it would be helpful to give you the reference number? Also, I couldn’t copy the text of the question into this forum. sorry. but do you feel something is wrong with that as well?
If needed, I can try to type the question by hands…

cheers
Lm

[accalmz]

thanks, then would there be any impact on Allowances for receivables ?

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