[desperatedan]

Thank you. Why is the relevent date of transaction used the date the loan is taken out? isnt it the loan repayment date that we’re hedging for?

[desperatedan]

Thankyou John.

Your video made much more sense than the text book.

BPP are saying choose the future with an end date that most closely matches the end date of the loan. Doesn’t that contradict ACCA’s answer?

BPP also says that there is no basis risk (same thing as unexpired basis?) when a
contract is held to maturity. Doesnt that also contradict the ACCA answer given that there is an unexpired basis calculated despite the future closing before the loan end date?

Thank you,

Dan

[desperatedan]

Hi John,

Thank you very much for your patience! 🙂 Yes I got confused because investments are at the start of years and the positive cash flows occur at the end of years. I think the below breakdown is now correct, thank you!

Stu

start of Year 1 (time 0) – Year 1 investment
start of Year 2 (time 1) – Year 2 investment
start of Year 3 (time 2) – Year 3 investment
start of Year 4 (time 3)
end of Year 4 (time 4) – Operating cashflow commences and last for 15 years

[desperatedan]

Hi John,

Sorry I’m still confused because I think the years are offset in the quesiton (i.e. Year 1 = time 0, Year 2 = time 1 etc):

Year 1 (time 0)
Year 2 (time 1)
Year 3 (time 2)
Year 4 (time 3) Operating cashflow commences and last for 15 years

If the cashflows start in Year 4 (time 3) then doesn’t the annuity calculation takes us back to Year 3 (time 2), and then 2 (as opposed ot 3) more years of discounting takes us back to Year 1 (time 0)?

Thanks ,

DesperateDan

[desperatedan]

Hi John,

I’ve just re-read this line in the question:
“PDur05 project’s annual operating cash flows commence at the end of year four and last for a period of 15 years”

Does this mean there are no cash flows in year four? And first cash flow is in year 5?

Therefore the annuity factor discounts to year 4, then a further 3 year discount takes us back to year 1 (now)

Does this sound right?

Thanks,

DesperateDan

[desperatedan]

Hi John,

Sorry I’m confused, why are both time 4 and time 3, three years later?

DD

[desperatedan]

Great, thanks accaforall 🙂

[desperatedan]

Thank you Mike,

Sorry I’m not sure I understand why comprehensive income doesn’t affect “earnings available for equity” – isn’t a gain on a leasehold value realisable by the equity holders if they sell the leasehold?

[desperatedan]

sorry please could you tell me the difference between a delivery date and a goods received date?

[desperatedan]

Quote:

But when it comes to inventory, the pup is included within the cost price so far as the buying company is concerned.

Thank you, that’s great. sorry does pup = unrealised profit?

[desperatedan]

Thank you Mike

[desperatedan]

Thank you Mike,

Is it correct to say that even though the extra $1m of will have reduced the equity of Square this is not reflected in the consolidated statement of financial position in the equity section because pre-acquisition equity of the subsidiary is not used directly in the calculation of equity for the group?

Many Thanks,

Dan

[desperatedan]

sorry it was a subsidiary not an associate, I should have written:

Quote:

In the ACCA answers for q1 of june 2012 the consolidated retained earnings are calculated. But there is no adjustment made for the unrecorded tax liability of $1 million in the subsidiary company, please could you tell me why this is?

Within the liabilities section of the balance sheet the deferred tax is increased by $1million, but I don’t see a matching entry in equity – should there be one?

Thanks,

Dan

[desperatedan]

Quote:

Why would the broker subcontract the work to an insurance company? I can’t get beyond that! I’m really sorry – but your hypothetical broker sub-contracting to the likes of Scottish Widows just makes no sense at all

OK I’ll try this again with a different situation. I have a contract with a builder to build my extension. He then subcontracts the building of a wall to a bricklayer. The wall is of such bad quality that it’s dangerous and I have to pay another bricklayer imediately to fix it.

Is it correct that I would have to sue the builder for compensation? (and whether or not the builder wants to sue the bricklayer in turn is irrelevant to me?)

Thanks,

Dan

[desperatedan]

Thank you Mike!

Sorry please may I ask 2 more questions?

1. Can I pay the money to the broker and they pay the insurance company on my behalf? (but still keeping the contract between me and the insurance company?). Or must I pay the insurance company directly?

2. Is it correct to say that if Company A (previously the broker) subcontracts the work to the insurance company then my contract would then be with Company A and I would have to sue Company A? (And then Company A would would sue the subcontracter in turn)

Many thanks,

Dan

p.s. don’t don’t worry, this is a hypothetical car crash! 🙂

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