[arunotes]

Let’s say example:

Year 0
redundancy cost (5,000)
working capital (50,000)
machine cost (30,000)

Total CF in Year 0 (85,000)

transaction cost is 4% of the gross finance required.

discount rate= 10%

interest rate= 8%

tax rate=5%

The transaction cost will be only 80,000/96% x 4%= (3,333)

PV of tax saving on interest
= (80,000/96%) =83,333 x 8%=6,666

then use 6,666 and discount back to PV.

Basically, the transaction cost is only based on machine cost & working capital as per the example above?

Am I correct?

Thanks

[arunotes]

typo

[arunotes]

Hi sir, my query is to calculate the transaction cost and amount borrowed which needs to be used to calculate the pv of financing effects.

1.Do we need to include redundancy cost that is incurred in y0 to calculate the amount borrowed?
Because usually amount borrowed we will only include working capital, machine cost & assume transaction cost need to borrow as well.

2. Also, how about when calculate the transaction cost? Do we need to include redundancy cost in net investment required so as to gross up to find the pv of transaction cost?
Thanks sir

[arunotes]

Hi sir, Refer to question Crypto,

Original contract is to pay in euro

Revised contract is to pay in dollar

1. Is that means if pay in dollar, which is the functional currency of Crypto, so it is no longer need derivative to protect??? so have to derecognised?

2. If pay in currency other than its functional currency (dollar) like the original contract in euro, it may expose to foreign exchange risk, so has to use embedded derivative to avoid loss??

executory contract is under which accounting standard? IAS 37 or IFRS 15 or both? if both, in what way?

thank you sir

[arunotes]

How about if unredeemed even after expired date and the company is required to remit any unused fund to the unredeemed customer?

What is the accounting treatment?
thank you sir

[arunotes]

Okay sir thanks

[arunotes]

Okay gt it thanks a lot

[arunotes]

Okay thanks sir I got it.

[arunotes]

Refer to queries 1,

is that means if the vesting condition is market based, no matter we fulfill or not, we will just ignore and calculate the share based expense using FV at grant date over the vesting period based on number of employees that expect to leave?

Refer to queries 2,

for non-market based, if the vesting condition does not met, we have to reverse the entries that we made during the vesting period :

Dr Equity (OCE) Cr Share based expense (SOPL)

New queries:

Does this market based vs non-market based also applies to cash settled share based pymt question?

Thank you sir

[arunotes]

Anyone take ATX MYS here?

[arunotes]

I want it too

[arunotes]

Is that means discontinued operations also need to fulfill the conditions including available for immediate sale, highly probable, actively marketed at reasonable price?

Ok sir I will post it to a separate thread for the other question.

Thank you

[arunotes]

Sir, I have one more question. I would like to ask does it have financial liability for equity instrument? If yes, what are the model available for this?

Thanks sir

[arunotes]

Dear Sir,

Is that means both ways are acceptable in acca sbr exam either adjust or not adjust it? Which way is much recommended? because I saw the bpp workbook question has adjusted so I was wondering about it.

Thank you

[arunotes]

In this case, the contingent consideration is further 5m shares of Parent Co, so since shares is based on fair value at the acquisition date so there is no need to be adjusted.

May I knw what if the contingent consideration is cash consideration? do we need to discount it to present value? or actually, no matter what form of the contingent consideration, we also no need to adjust?

Tq

[arunotes]

Ok, sir
how about like water & electricity expense? Does it consider as one class of transaction? OR the total administration expense only consider as one class of transactions?

Thanks

[arunotes]

Is that means only the second question needs to disclose by notes? 1 and 3 no need?

Thanks

[arunotes]

So is that means the market value of XXX per $100 loan stock. The $100 is the nominal value. Am I correct?

$90 is just an example that I want to say if the nominal value is $90, Is that means the market value will become XXX per $90 loan stock.

[arunotes]

Ok sir understood.
How about the following queries

]
May I know how investment appraisal considers risk and uncertainty VS why investment appraisal considers risk and uncertainty. The question is different right?

How- referring to the method of investment appraisal- such as sensitivity analysis, risk-adjusted discount rate, probability analysis and capm
Why- referring to why we want to conduct all these methods such as because we want to avoid failure, to determine the required rate of return, etc.

Am I correct?

Thanks

[arunotes]

and How will it record in SOFP and Income statement?

because it mentions either converted into shares or redeem at par, so how do we know whether they gt convert or not??

Hence, in sofp and income statement, we assume it is converted already or not convert?

If not convert,

income statement: interest expense (use the market for similar- non-convertible bond 10%) + coupon payments (using the 6%)

SOFP includes

non-current liability
loan stock XXXX (liability components)

equity

equity components (without including conversion)

If convert,

in income statement, interest expense and coupon payments (still here)

in sofp, the non-current liability- loan stock is disappeared, while the equity part will need to eliminate the original equity components) and then add on the share capital for the conversion and share premium for the conversion.

We should do in which way?

Thanks sir

[arunotes]

is that means investment appraisal considers risk and uncertainty when conducting the sensitivity analysis, expected value and risk-adjusted discount rate??

1. May I know still gt one more is what? because I listen from the lecture video whereby it mentions that there are 4 approaches.

2. May I know how investment appraisal considers risk and uncertainty VS why investment appraisal considers risk and uncertainty. The question is different right?

How- referring to the method of investment appraisal- such as sensitivity analysis, risk-adjusted discount rate, profitability analysis
Why- referring to why we want to conduct all these methods such as because we want to avoid failure, to determine the required rate of return, etcs..

Am I correct?

Thanks sir

[arunotes]

if the company mentions that they will pay a minimum 40% of eps as dividend each year. This kinds of companies usually is adopting what dividend policy?
is tht means this kind of companies are aware of their customers prefer dividends rather than capital gain so most probably they are adopting the bird in hand theory?

May I knw cliente effect is considered as dividend relevance theory or irrelevant? OR it is in 2 ways can be relevant or irrelevant depending on the clients that the company is dealing with? for eg, if for big investors is irrelevant, but small investors is relevant since they have no other income.

How about signalling effect, is it also in 2 ways such as if the signal that the company give is reliable then it will be relevant, while if the company give wrong signal so it will be irrelevant since the investors cannot differentiate whether the company is good or bad?

thanks sir.

[arunotes]

1) As to under financial liabilities. there are 2 measurements which are fair value through P&L and amortised cost. How do we identify whether the item is FVTPL or amortised cost??
Is it follow the business model test and cash flow characteristics??

2) Do u mean under financial liabilities, it is also divided into debt instrument and equity instrument?

3) How do we differentiate whether the debt instrument and equity instrument are financial assets or financial liabilities?

Thanks

[arunotes]

usually will be Non-current OR current??? how to identify the deferred tax asset/liability is current OR non-current?
Thanks

[arunotes]

I am referring to liabilitiy item rather than asset item such as warranty expense

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