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I see, okiee got it. How about the profit or loss part? Is it for the finance cost incurred?
I get confused because there are 2 method to find fv of nci at date of disposal under proportionate goodwill method.
First method is..
1. FV of NA @DOD x NCI%And
second method is …
FV of NCI @ DOA
Add : Sub’s post profit x nci %If the question states the dividend paid is $10000… why we dont take S’s post profit minus dividend? Why only profit after tax?
I see, meaning parent co cannot recognise dtl on undistributed profits by subs?
Fire plc is a US-based company that produces engineering equipment for the mining industry and has a year ending 30 September 20X2.
On 1 October 20X1 Fire acquired an investment in $3,000,000 8% loan stock at par. The investment meets the business model and contractual cash flows test and is therefore measured at amortised cost. The loan stock has an effective annual rate of interest of 10%. No cash repayments of interest were received in the year ended 30 September 20X2.
Fire made the following estimates:
(1) At 1 October 20X1 there was a 5% probability that the borrower would default on the loan during the year resulting in a 100% loss.
(2) At 30 September 20X2 there is a 2% probability that the borrower will default on the loan before 30 September 20X3 resulting in a 100% loss.Solution :
Solution:
Investment in loan stock
IFRS 9, Financial Instruments adopts an ‘expected loss’ model for impairment; in other words, credit losses are recognised when expected rather than when incurred.
On initial recognition (1 October 20X1), Fire has correctly recognised 12-month expected credit losses of 5% x $3,000,000 = $150,000, reflecting the 5% probability that the borrower would default on the loan with a 100% loss.
An impairment loss on a financial asset at amortised cost was correctly recognised in profit or loss, with a corresponding entry to an allowance account, which is offset against the carrying amount of the financial asset in the statement of financial position.1 October 20X1
DEBIT Profit or loss $150,000
CREDIT Impairment allowance $150,000
This will need to be adjusted for information available at the year end.Finance income for the year needs to be recorded:
30 September 20X2
DEBIT Financial asset (10% x $3m) $300,000
CREDIT Profit or loss $300,000
The gross carrying amount of the financial asset (before the allowance for credit losses) based on ACM is therefore $3,300,000.At 30 September 20X2, expected credit losses are re-assessed in accordance with IFRS 9, using the 2% probability that the borrower will default on the loan. The impairment allowance needed would be 2% x gross amount of $3,000,000 = $60,000.
There is also a finance cost, being the unwinding of the discount on the allowance at initial recognition, which is 8% x $150,000 = $12,000.I dont get it why unwinding of dicount on the allowance, we use 8% instead of 10 because the question is silent.
i see, so balance of payment deficit does not lead to an appreciation domestic currency right?
Sandra Co has recently announced after-tax profits of $12 million and has a market capitalisation of $60 million. The company expects profits to increase by 25% for the forthcoming year but then to increase at the much lower rate of 4% per year in subsequent years. The company will maintain a constant dividend cover of 1·5 times throughout.
Which ONE of the following is the predicted rate of return from the ordinary shares?
answer: 20.7%
Is this the same example like I explain or different?
Btw, i cannot seem to get it if i use div valuation model.
This is how i get
ke = (8m x 1.25)/60m + 4%is it correct? if yes, why g is different for both figure?
thank you sir, btw I want to ask. under dividend growth model, if there is 2 dividend growth, how to calculate ke?
example, the dividend growth is 4% per year is expected to be for the forthcoming year and the dividend growth is expected to be at a rate of 2% per year for the subsequent years.
So, it will be…
Lets say. d0 is 20 cents, P0 is $4.20.
so it will be(0.2(1+4%)/420)+2%
is my workings correct? if yes, why g is different?
I watched the free lectures but theres no explanation about this part. Im not sure whether im missing it out. (Sorry) I wil check it.
The buy then sell part I understood. Its just I cant seem to understand the sell-buy part.
Why we sell futures now when we dont have futures?
Would you mind to explain further?
