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Hello Teacher,
in Some questions like Eagle Group in Kaplan Exam Kit. The Materiality is asked to be set on Profitability hence it’s calculated. However, when discussing and evaluations of Audit Risk on elements for example: ” Purchase of Lynx. Co – Subsidiary rendered goodwill $ 100 million – it is material to the group and represents 2.9% of the Group Assets”
My confusion is: Do we have to compare with profitability and the balance sheet benchmarks i-e Total Assets ( since goodwill is a part of Asset) or only stating that the amount of goodwill is material as compared to materiality calculated on profit before tax.
Hey Everyone.
I need guidance on how to account for materiality. In Some examples of Exam Kit of Kaplan, I saw that they calculated Materiality upper and lower limited and selected the exact middle value for the materiality. I don’t know if it’s correct.
anyone can please guide on how to mention and write materiality section in Section A of the exam where you are briefing to the Audit Partner and the partner states to calculate the Materiality on benchmark.
Measurement of financial liabilities
Where a company has a financial liability that is measured at FVTPL, the fair value of the liability can depend on the credit worthiness of the company.
As a result, where the credit worthiness of a company deteriorates the fair value of the liability will typically reduce, resulting in a fair value gain. ( HOW? ) What’s the rationale behind this?
And where the credit worthiness of a company improves the fair value of the liability will typically increase, resulting in a fair value loss( HOW? )!
MY QUESTION IS:
Teacher, I don’t get this. How does a worse credit worthiness reduces the fair value of the bonds, and instead of recording it as a a low in demand bond in the market – as a loss. we are recording it as a GAIN in the OCI. and Vice versa.