[dd92]

4b using PEST For a reward system I mentioned.

Economics factors such as wage will help to determine what an acceptable level of bonus is to encourage motivation. In cf low wage so even a slight bonus would be motivationAl

Economic again wI’ll help determine whether gains on property sales are a result of management skill/effot or simply economic trends

Legal lots of legislation so could incorporate this into the bond schemo to encourage the correct behaviour.

Social – how people view CSR and could a reward scheme encourage this to help staff achieve corporate vision of social responsability

Complete guess and involved thinking on my feet a touch.

[dd92]

@gdjay said:
I totally thought components required were the sales volumes, but meant by ROCE made no sense! I thought it was supposed to show a higher one for the old product, but mine didn’t!

Now I’m thinking number of impressions needs to divide into this!? Is that right? It really didn’t seem to make sense to me.

I made this exact mistake. I though they sold 100000 moulds and that gave me ROCE in the thousands. I realised my mistake after 15 mins and quickly recalculated. I’m confident I got it right n the end but the rest of the paper was ridiculously time pressured as a result.

What I did was 100k was required. 6% got rejected so 100/ 94 × 100 gives the total number of impressions needed. Divide this number by the average life span which gives the number of moulds required which gives you your sales volume ( I think 11 but can’t remember)

I came out with a ROCE of 13.7% for P but as this was lower than M said that they wouldn’t go for it especially as it was very close to the bonus figure, they might not want to risk it.

All in all I probably wasted 25 mins on those 11 marks which put my on the back foot for the rest of the exam but hopefully I did enough to get 10 marks which is a nice dent to put in the paper.

[dd92]

@divy32 said:
For the 4 material misstatement risks I put NCA (IAS 16), Borrowing Costs (IAS23), Fin Inst (Hedging) (IFRS 9) and Inventory (IAS 2). Anyone else get anything similar??

So glad someone else put borrowing costs in. I thought it was a stab in the dark.

I also put in about brand names because it said they were operating under three brands so I said they shouldn’t have capitalised if internally generated but I was really clutching at straws with that one.

I found this exam quite difficult. All the practice questions and mocks I’ve done have been fine but today i struggled to get enough info out of the scenarios for the marks available.

[dd92]

@tashkent said:
Maybe you are right. I don’t remember its main business now. Question 3 was selected only because of time constraint and it looked like about revenue and borrowing costs. Question 2 was almost 2 pages long.

As I know pension plan payment outs have no influence on CF. Only contributions paid to the plan are accounted as explained by Dec 2013 exam paper notes.

How the proceeds from the subsidiary disposal are correctly calculated? (1) Initial consideration – disposal loss or (2) NA dod + goodwill – NCI dod – disposal loss?

As the goodwill impairement of the disposed subsidiary was not included in the consolidated P&L no adjustment was required in the operating part of CF, except the goodwill of the disposed subsidary without impairement (c/f -b/f – disposed goodwill)?

According to new suggested IFRS explanations a 5 year lease for building (useful life 30 or 35 years) isn’t booked as the asset by the lessee?

agreed question 2 looked too long, i think it would have taken me too long to understand what the question was asking me. I had like 2 mins spare at the end of the exam so out of curiosity went to have a proper look at question 2 and still drew a blank.

I can’t remember what the pensions adjustment now but there’s something niggling me and i feel like i’ve missed a step. I ignored the bit that said the plan paid out £xmillion as i assumed it was a red herring but i feel like i was meant to do something with this.

[dd92]

the unwinding of the discount was for contingent consideration that had been discounted. The PV of the payable was 10million and you needed to unwind this one year so the payable was 11 million but they eventually only paid 7million so 4 million reduction in payables was non-cash.

The pension adjustment you were suppose to rework it and take into account the pension benefit paid out but i completely missed this.

The main business is not buying and selling players, the main business is putting on sporting events and earning revenue from crowds/competitions. To do this you buy assets, the asset is not the player but the contract for them to play for you and therefore intangible. I think i lost marks because i didn’t explain why it was an intangible i just said that it was one and told them how to account for it.

edit: I suppose you could argue that some players are inventory because you buy them young, train them up and then sell them on for a profit but as long as you can apply a standard to this and justify the answer i see no reason why you wouldn’t get some credit for it.

[dd92]

1) I was happy with any consolidation so the cashflow didn’t bother me. There were a few complicated adjustments but I think there was enough there to get 20+ considering all the practice ones i did were 27+.

I completely missed the pension adjustment but i managed to spot that profit before tax needed adjusting and also there was an unwinding of the payable discount. The disposal got me because i couldn’t see the consideration or the NCI so i knew you had to work it out but couldn’t figure out how, in the end i did a best guess and hopefully will pick up some method marks.

2) Looked at this and didn’t even understand what i was being asked so skipped

3) a) Borrowing costs – fairly straight forward, capitalise using weighted average as it is general borrowings. Stop capitalising if construction stops. Then for the cal just work out the interest each month and total it up

b) Player contracts was just Intangibles. Initially measure at cost plus all the fees, depreciate over the term of the contract. Fair value is hard to measure as each asset is unique. Contract extension was a change in accounting estimate (useful life) so capitlise any costs associated with this and depreciate over the new useful life. Selling is just recognising a gain/loss on carrying value. Injuries/removed from squad is impairment so i talked about impairment, again stated that FV may be difficult to reliably measure.

c) Struggled with this one. I said that the naming rights were internall generated intangibles and therefore couldn’t be recognised despite there being a valuation. I said that it could only be recognised if a sale took place. Mentioned that this was a related party. Not sure how much of it is right though

4) a) i) Explained the current treatment of leases and what makes it a finance lease. Criticised because operating leases meet the definition of an asset and liability and also it encourages manipulation as directors try and claim a finance lease is an operating lease aka off balance sheet financing

a) ii) type a and type b leases. Type A is boradly a finance lease and Type B is broadly an operating lease. Recognise a right to buy asset and corresponding lease liabiltiy for both. Leases less than 12 months can still be expenses as per an operating lease. I also said that it addresses many of the criticisms of IAS 17. I didn’t know much about the new system in too much detail so must have only picked up half marks.

b) Struggled with the claissification of these as unsure on the new standard in great detail so just threw some calcualtions down for the lease liability using the amortised cos thing – only worth 7 marks so hopefully picked up a couple of method marks to bump my grade up.

Fingers crossed i passed, I’m hoping that because this is generall viewed as a difficult paper that the marking may be a tad more generous.

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