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Hi
Example: At 31st Dec, an entity A owns 10% equity shares of company B. Entity A carries the investment in A at $15,000 with gain in other comprehensive income of $5,000.
At 1st Jan A acquires 45% of B, making its holding in B 55%. A also got 50%+ voting rights which gave A control over B and thus B is A’s subsidiary from 1st Jan onwards.
A would fair value its existing holding in B at 1st Jan and recognize the gain / loss in P&L. Furthermore, A would reclassify the balance in other comprehensive income $5,000 to P&L.
The treatment of previously held equity interest is stated under IFRS 3 para 42, as follows:
“In a business combination achieved in stages, the acquirer shall remeasure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. In prior reporting periods, the acquirer may have recognised changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognised in other comprehensive income shall be recognised on the same basis as would be required if the acquirer had disposed directly of the previously held equity interest.”Hope this helps!
What you need is good hands on the accounting standards and to know the steps required for dealing with consolidation questions!
Watch the lectures on dealing with consolidation questions. Once you are through the notes on accounting standards, grab any of the revision kit and give it a go. (It does not matter which.. BPP / Kaplan).
Attempting as much questions as possible is vital. Make sure you practise good number of consolidation questions and the section 2 type questions.
You have plenty of Mock exams available. Use them.
After each of your attempts make note of the mistakes (when comparing with the model answers) then go on to the next.
All the best!
Hi
IAS 28, para 28 states the following:
“Gains and losses resulting from ‘upstream’ and ‘downstream’ transactions involving assets that do not constitute a business, as defined in IFRS 3, between an entity (including its consolidated subsidiaries) and its associate or joint venture are recognised in the entity’s financial statements only to the extent of unrelated investors’ interests in the associate or joint venture. ‘Upstream’ transactions are, for example, sales of assets from an associate or a joint venture to the investor. The entity’s share in the associate’s or the joint venture’s gains or losses resulting from these transactions is eliminated. ‘Downstream’ transactions are, for example, sales or contributions of assets from the investor to its associate or its joint venture.”So. In case of of transfer of fixed assets, say associate sells to parent at a gain, the parent will eliminate it’s share of gain made by associate from sale to the parent.
Say the associate makes profit of $100,000 in reporting period and parent’s share in associate is 20%. Parent would ideally recognize in the income statement $20,000. Now, say, the associate had sold to parent fixed assets at profit of $10,000 (already included in $100,000). In this case parent will eliminate it’s share of the gain made by associate ($10,000 X 20%). The share of associate’s profits would be finally recognized at $20,000 less $2,000 = $18,000 in parent’s P&L.
Depends on case to case!
One month could be sufficient for you if:
– You have knowledge of the standards
– You know the steps to be followed in consolidation
– All you need to do is practice questionsThis is what I believe. Hope you get more opinions.
All the best!
Refer to ACCA rule book Section 2.1 Affiliates’ obligation and rights
“(a) An affiliate shall not be entitled to describe himself as a member of the Association,
imply that he is a member, or use the Association’s designatory letters ACCA.”But no worries!. Membership is on your way. All the best!
Fair exam set. Of course not fair time-wise, as usual, but fair to gain a pass.
In my personal opinion, the 15 minutes reading time should always be spent solving the first question, specially when you see numerical like NPV calculation.
I found the first question on NPV a bit tricky but I had decided that I will not let the feeling of “Where am I going wrong?” ruin the exam. Once you set the plan of solving the answer in your 15 mins time, I believe, you should just keep moving. The important part is to attempt as much as you can as you race with time.
Hoping everyone the best
Hello there
Firstly there seems to be a typo in the expression (1/1/3), which I believe should be (1/1.3)
Moving on…
In WACC calculation, the cost of equity or Ke has to be weighted based on the ratio of equity to (equity + debt) and cost of debt or Kd (post tax) based on the ratio of debt to (equity + debt) before adding both %s together. This will look like as follows:
WACC = [ (Ve/(Ve+Vd) X Ke ] + [ (Vd/(Ve+Vd) X Kd (1-T) ]
In your question,
Debt to Equity, given is 30% or 30/100 based on which:
Ve = 100 or 1
Vd = 30 or 0.3
Ve+Vd = 130 or 1.3Post tax Kd = 6.5% X (1-0.25)
Ke = 15.7%Applying the above formula,
WACC = [ (1 / 1.3 X 15.7% ) + (0.3 / 1.3 x (6.5% x 0.75) ]
WACC = 13.2%Answering your question..
As you may notice in the above formula and the application, [1 / 1.3] is actually the ratio of Equity (100% or 1) to Equity + Debt (100% + 30% or 1.3). Where as [0.3 / 1.3] is actually the ratio of debt (30% or 0.3) to Equity + Debt (100% + 30% or 1.3).
HTH
Finance lease:
I think because of the specialised nature of the asset and in case of cancellation the lessee had to bear the costs@fard786 said:
Is it ok to get registered on the link u gave above .so i get notifications of any update in coming weeks as i have seen there is an option to get register for this thing.@ahmedmirza.You can register or subscribe to any such website and receive the updates as they happen, but my personal advice, based on my personal experience, is that if you have lot of other activities you are busy with and because of which you are not able to check your emails regularly, you may find bulk of unread emails from the website you have subscribed to. This might create a sense of boredom and guilt of not reading them and may eventually lead to losing interest on the subject.
I personally therefore recommend you to visit website at sometimes of week to get the grasp on what is going on. Alternatively, as and when you get interested in an accounting standard you may google on to see if there are any discussions going on regarding that.
HTH
Best of luck
And the question 4 may not be restricted to the updates in accounting standards. There was a question in Jun-15 session on IIRC framework.
The general advice given is not to attempt this question, in which case you will have to choose Q2 & Q3 out of the three options.
For preparing for this question you need to be acquainted with the ongoing discussions of the updates in the standards. You can refer to the tech articles and the IAS websites.
See for instance the below link
https://www.ifrs.org/Current-Projects/IASB-Projects/Pages/IASB-Work-Plan.aspxTry this website if what you are looking for is illustration for understanding
https://www.deloitteifrslearning.com/Hello Mike
I just googled this same question I had and reached at this place. Very helpful response. But I was also expecting to read something like.. “the examiner would appreciate the student attempting a question on topical issues”. Is that possible?
What I mean is, if we are familiar of the issue in the question we can firstly elaborate on the discussions going on, the fors and againsts, and then put forward our point of views somehow in ways to try adding up to 25 points or plus. Can we expect leniency in marking just because we are attempting question 4?
Thank you
Ahmed Mirza
Hi Jimpy
Thanks for your response
But what I am not able to understand is why, in the given example, impair the future income of 2 years that was not recorded until now (say as receivable)? Why not impair the 50k principal, which is receivable?
Regards
@rajani_kkr said:
hey can anyone tell me their balance of sofp in question no. 2… dat was the only question which i didnt hav been balanced otherwise consolidated sofp was balanced on 126300 and cash flow was also awsum 🙂I think, not so sure, it was something like 117,000…
@amandagray24 said:
Did anyone else account for an associate as the holding was 30% of shares in the final note of question one?Hello there..
I think the investment in Cube was given in the SoFP at value of $6m. What I did was accounted the share of profits of $600,000 ($2m (Post-acqusition R/E) X 30%)
Please let me know if any of you have a different idea.
@hanrahand said:
Only got Q1, Q4 and Q5 attempted completely, plus Q3 part 1. Never even got near Q2, Q1 SOFP didn’t balance, Q5 was ok but a lot of waffle, Q4 part (a) didnt refer specifically to CGU’s in discussing impairment.but again a lot of waffle there. Q3 (a) Cash Flow didn’t work out I was pretty sure on the cash flow of Q1 SOFP it was only something minor I was overlooking that I should spot and before I knew it time was running short. Overall difficult enough, although nothing really shocking. Time was the major problem for me. First time doing an ACCA paper and that’s the major lesson for me. I need to speed up. Expect to fail but hopefully not disgracefully.It is a paper that requires best planning techniques.. I also did not do so well, but what worked out to some extent was that in the 15 mins planning time I did not read the numerical questions, such as prep of SOFP, SOCI etc., instead I read the theoretical qs and outlined answers on the Question paper itself..
Hope that best should happen for you
@owais875 said:
KINDLY ANSWER THESE QUERIES
Q1
*what was the treatment of SALES TO SQUARE AND PURCHASES FROM PYRAMID??
*what was the treatment of last note of question regarding fv of other equity??Q5
*DIFFERENCE BETWEEN RULES AND PRINCILE APPROACH & WHICH APROACH IS MORE DESCRIPTIVE FOR IFRS??
*ADVANTAGES FOR BAXEN OF IMLEMENTING IFRS??i although calculated deferred consideration and included it in current liability,i forgot to include it in coi which resulted in nil goodwill and forgot to calculate unwind of discount
in my opinion,paper was lengthyHi Owais
The purchase and sales gave us an Idea that there was an Inventory that would had been found in Square’s inventory, had he received it by 31st March and not 2nd apr.
When we account for this in the books of Square.. It would be DR Inventory and CR Payables..
Then we eliminate the above balance in Payables ($1,500) and the given balance ($1,700) against receivables balance ($4,400).. The balance of ($1,200) should have been the settlement made by Square not received by Pyramid until year end, therefore we increase the bank balance by same..(Please let me know if any one of you has a different idea)
I was reading certain comments where ACCA was being suggested to show the marked papers to the students… Which accountancy body does that? Also, I think ACCA gives you an option of getting your paper re-checked… Is that not true?
@zeventien said:
Failed! I was 100% convinced I had passed this one, too! Does anyone know if you can get a copy of your paper with the marks given to find out where you went wrong?I think that is possible… you should check on ACCA Website… I think they will charge you some fee also..
