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Thank you! You help me a lot. Several days I has been struggled at this and tried to understand why there is the case that the 2nd tax period may not have any accounting period (which is impossible if the period is <= 12 months)
Dear sir,
Thank for your reply. In this case the depreciation is lower than tax depreciation, I knew that it would be d.t.liability. However, the question adds some complications when both depreciation and tax deprecation causes losses which are carried forward by tax law (deprecation is still less than tax depreciation of course). Then may we have a d.t.asset here?
Dear sir,
Assuming that we already did the service, everything has been done (say, we finished cleaning the office). The customer just has not signed an acceptance for us which indicates that he/she agrees with the services received (for example, he/she is going somewhere abroad). So, can we recognize revenue without such acceptance?
Provision: existed liability. You must pay it for sure even if you like it or not, just not knowing when and how much. Say: warranty of sold goods, you have to cover the cost of warranty for sure because you sold them but you cannot know exactly when and how many goods will be defective.
C.L:
– Possible liability: you think you may have to pay but not sure. Say: normally your warranty period is 2 yrs but there is news that the future ‘in-debate’ law may require you to extend the period to 3 yrs. Then, the extra 1 year cost of warranty is C.L. The 1yr extra cost becomes your existed liability or not would depend on the future law which is not confirmed yet.
or
– Existed liability but it is not likely that you have to pay something. Say: warranty of goods but most of the buyers have gone bankrupt.That how I understand, may not be correct, if so, sorry 🙂
Thank you Mr John,
Could you suggest some text books which discuss deeper about this matter, especially the effects of tax to discount rate and project appraisal? Maybe after completion of all exams, I would spend time to do research about this area of corporate finance.
# I have just known that you are having holidays. I will wait until you get back home! Have nice trips, Mr John!
Dear Mr Tutor,
In case of purchase new tangible asset (says, a car) in January, the company still holds it in store and does not intend to use it in next several months (until July, for example). So it is available to use at Jan, we will depreciate it from January?
Thank you for 1st part explanation.
For the 2nd part, as the event of amendment is out of scope of IAS 10, so how we treat this amendment in FS of 20X5 and/or 20X6?
PS: Text book in English is quite tough for me to get all the ideas so that’s why I sometimes refers to IAS/IFRS books written in my mother language 🙂
For the 1st part, I am sorry for my bad English. I translated wrongly the question which is written in local language. It is agency ( separate entity ) not agent. So it is still IAS 37?
For the 2nd part, could you clarify circumstances you mentioned and applicable treatment?
Thank wesbyss!
I understand the working for profit/loss on disposal but what makes me confused is I thought this working belongs to consolidation process only. Whereas, the question seems to suggest us that the gain on disposal is a transaction on individual statements of parent.
Now thank to you, I realized that actually we don’t have to make complex workings to get the $10 (P/L on disposal + shares of profit before disposal happens). We just take the proceed less the carrying value of investment on the individual F/S of parent. The result is the SAME. It means that we even don’t need the F/S of subsidiary!
Dear Mr Mike,
Sorry for disturbing, but what is the meaning of “but that’s not what HERMINE was going on about”? Refers to teeboyz reply, is it mean that in your opinion, fraud still can be included in KAM?
Thank you Mr Mike and teeboyz, so it is clear now that as auditors we may have to withdraw audit opinion (prevent public from using audit report, right?). How about the management side? I mean is there any accounting standard for adjusting events BUT happen after financial statements have been issued (which is not in the scope of IAS 10)?
Dear Mr Mike,
Refer to badala’s question, please correct me if I understand wrong:
If the question requires us to identify and explain risk of material misstatements (12 marks), then:
– We need 6 ideas (6 risks).
– Each risk, we need to write at least 2-3 sentences (1 for identify, 1-2 for explain).
Hence, 1 mark will be awarded for identify sentence, 1 mark for explain sentences.
– In total, we still write at least 12 sentences to get full marks, 2 sentences for each risk.Thank you for your reply!
As your question, I just feel that if a firm joins a tender, it is similar to flirting a girl and saying that “I love you”. But, at the end, after wining the tender (“the heart of this girl”), the firm (“boy”) now says that I could not accept the engagement (“we will not marry each other”). So, it is somehow….ridiculous for the firm image. The client now must contact next candidate, and it takes time!
To sum up, after wining the tender, the audit firm still must do some procedures relating to acceptance the engagement (procedures which are pointed out in ISQC1). After this, the firm may accept or not. Is it correct, Mr Mike?
“You can’t use the equity method you mention as that is for an associate where we have influence.”
But IAS 27 (amended 2014) says we could apply it in individual (separate) financial statement, sir? (The last paragraph of 1st page of IAS 27).
“You can use the other methods but it is much more likely that it would be FVTOCI and not FVTPL as the investment in the subsidiary is not held for trading purposes.”
It’s ok to me for FVTPL. But FVTOCI must satisfy business model which indicates contractual cash flows on specified dates. Investment in sub of course does not give us any date, so how can it be accounted as FVTOCI. I see some past question (especially Q1) uses FVTOCI. I am not sure if these questions followed old IAS 39.
Thank you for your reply.
How about my question in the second post? I would like to know which are allowable methods for investment in sub in separate F/S of parent.
# Update to my question:
I’ve read notes about Financial Instrument and IAS 27. IAS 27 states that in separate F/S investment in subsidiary could be accounted either of 3 method: cost; IFRS 9 or equity method. So:
+ Cost method: it means historical method? I usually see it on past questions.
+ Accordance to IFRS 9: I currently understand that investment in sub is satisfied as financial asset. However, as investment in sub does not have specified date of payment so is it correct if I conclude that FVTPL is only choice for parent when preparing their separate F/S? FVTOCI is prohibited, not able to use as I used to think in above question?
+ Equity method: does it mean that investment in sub now can be accounted as: Initial value + % holding x change in net assets of sub (from acquisition date)?
So, in the separate F/S of Marchant in this question, the examiner has already removed the P/L on the sale recognized in individual account? Because if he/she has not, as you explained, we must somehow calculate this P/L and remove it when consolidating (an extra working, of course).
Moreover, if in a question, P/L of disposal on separate F/S is provided (for example when a subsidiary sells minor % shares in a sub-subsidiary), then this “removed P/L” would be reduced to both parent and NCI, right?
I just would like ACCA to remove articles which are no longer valid (or leave some notes saying that this article refers to old standards, very easy to do so). We, students, tend to read all the articles available then a mixed of “valid” and “expired” articles sometimes makes us confused.
By the way, I am looking forward the news from you! I also did not expect that mistake from examiner. Thank you sir!