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What section of the website did you find the 2002 past papers please? I can’t even find those?
Hi Mike / ACCA tutor, I have a question on some other parts of this past ACCA exam question.
As you mention above that you do not have the revision kit I have typed below the relevant detail to which my question is based on.
My first question is on the way the ACCA solution suggests we should treat the FX revaluation on the loan from the parent to the subsidiary and this loan being included on consolidation of the financial statements (part c of question detailed below). The loan is a non current liability for the subsidiary called Random. We are given the $ value of the loan and need to derive the FX revaluation on this item since we are told it is not yet repaid by the year end. The FX revaluation is favorable for Random (i.e a gain) as its (2.1-2.5) *$5m = -CR2m hence a 2m reduction of the non current liability in Randoms individual financial statement……… The solution does this quite rightly, however on consolidation this loan and the FX revaluation are not removed? Perhaps I am missing something here but I think this is an inter-group transaction so why is this loan not eliminated on consolidation? The loan was made on the acquisition date but we are not told it formed part of the consideration so I find this baffling that it is included?
My second question is on the treatment of the dividend. There is a working proforma that we are taught in ACCA studies to derive the overall Exchange Rate differences for the Other Comprehensive Income Statement. Within this working we deduct Retained Profit for the year from unrealised FX Gains / Losses (i.e usually the revaluation of Net Assets and Goodwill). As per section ‘g’ of the question detailed below should this dividend be deducted from profit for the year to get the retained profit for year? The ACCA solution does not do this?
Your answers / insight would be really really appreciated
Past ACCA Exam Question Extracts:
Memo, a public limited company, owns 75% of the ordinary share capital of Random, a public limited company which is situated in a foreign country. Memo acquired Random on 1 May 20X3 for 120 million crowns (CR) when the retained profits of Random were 80 million crowns. Random has not revalued its assets or issued any share capital since its acquisition by Memo.(c) Memo had made an interest free loan to Random of $5 million on 1 May 20X3. The loan was repaid on 30 May 20X4. Random had included the loan in non-current liabilities and had recorded it at the exchange rate at 1 May 20X3.
(e) The functional currency of Random is the Crown.
(f) The following exchange rates are relevant to the financial statements:
(g) Memo has paid a dividend of $8 million during the financial year and this is not included in profit or loss. It is the group’s policy to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary’s identifiable net assets.
Relevant Exchange Rates
Crowns to $
30 April/1 May 20X3 = 2.5
1 November 20X3 = 2.6
1 February 20X4 = 2·5
30 April 20X4 = 2.1
Average rate for year to 30 April 20X4 = 2·5My view from this paper is that by not covering the usual specific models and questions being in different format the exam actually appeared more difficult at first sight then it was. Once I stopped panicking and read the question requirements properly it wasn’t too bad – just very time consuming especially Q1. The calculations were straightforward as all info was there and no twists – just took soo long to do them!!!
Like most people say Q4 was ok. Just cost benefit analysis performance evaluation in terms of economy, efficiency and effectiveness (since public co) based on current systems vs proposed RFID system
Q3 wasn’t too bad either
Wasn’t really expecting the topics that came up but have long given up on predicting topics from ACCA exams – its just impossible & means we must suffer long hours of study to cover all topics and struggle to remember them in the exam
Will be interesting to read more of the comments that are posted
Hi,
Thanks for your response. I also posted this on the general F7 forum and there was actually a part of the solution to Llama that I overlooked. The balance on the revaluation reserve Is in the trial balance for $14M, so the $3M deficit is charged to that and shows in other comprehensive income.
ah, thanks sids for your help – I overlooked that.
thanks also drose.
very much appreciated!!
Hi gutsychyk,
Thank you for your post, however it doesn’t pin-point the answer to my question.
I think I understand the basic treatment of revaluations but am a bit unsure about the past exam questions where we are not given the balance of any prior revaluation reserve – like Llama Dec 2007 exam question – and yet the deficit is not charged to the income statement.
Do you know why this is?