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in addition, when we speak of value of the company, is it the value of the entity or the value of the equity we mean?
Thanks, that’s great.
Would you help me please to find out how we account for it?
Do we revalue the merged entity’s assets and liabilities to fair value? How do we merge the equity?
If it is not a subsidiary I assume there is no goodwill but what do we do with the difference of the fair value and the book value?
What do we do with the owners of the merged entity that decided to keep on to their shares?
I am really sorry but it came up in a past case study and I couldn’t get a definite answer from the internet as there is a lot about merger accounting but it seems to me that it changed over the years and the info on the internet is still reflecting how it used to be.
I am really sorry for some reason the title of the question is wrong. I mean to type: share option fair value valuation
Thank you very much for your help!!!
I passed and I have no doubt that the Opentuition videos and your kind help was a major part of my success
Hello Cath. Did you get any feedback from cima?
My exam is soon and this type of q came up a few times in Kaplan mocks.
Also I am quite curious of the solution even if not in syl
Thank you Cath.
I copied the Q from another (student) forum so I don’t know whether the figures are misquoted or not. Providing they are misquoted and the second set of figures provide a valid target cost, what would be the answer to this Q? Is it possible to give a 1 figure answer?
On the other forum the students suggested it was a curveball question and was deliberately tricking students into thinking the answer can be anything else but the target cost you suggested.
Hello Chris,
No, IFRS9 is not in the syllabus, however I like understanding the bigger picture and not narrowly concentrate only on the syllabus,
However ias27 is in the syllabus and it is referring to IFRS9 and I just wanted to understand in which situations we account for an associate according to this.
This is the quote from IAS27:
When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either: [IAS 27(2011).10]
-at cost, or
– in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
-using the equity method as decribed in IAS 28 Investments in Associates and Joint Ventures. [See the amendment information below.]Thank you so much.
So when does the “cost” and “ifrs9” treatment that ias27 refers to is applicable?
Good Morning Mike,
I am confused about this, too.
The quote you pasted here is from IAS 28 is from the 2003 version,however the 2011 says this:
Separate financial statements
An investment in an associate or a joint venture shall be accounted for in the entity’s separate financial statements in accordance with IAS 27 Separate Financial Statements (as amended in 2011).
The relevant IAS 27 section says that the entity has 3 options, equity accounting being one of them:
When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either: [IAS 27(2011).10]
at cost, or
in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
using the equity method as decribed in IAS 28 Investments in Associates and Joint Ventures. [See the amendment information below.]If I follow this, my conclusion is that if an entity doesn’t have any subs but has an associate, they don’t have to account for the associate using equity method. However I must be wrong because whenever I see questions the answers indicate otherwise.
Hello,
I am still a bit confused about it, really sorry.
If an entity doesn’t have a sub, they are not to prepare consolidated accounts, therefore they only prepare individual accounts, is that right?
If so, IAS 27 rules for individual accounts seem to suggest that equity accounting is a choice:
When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either: [IAS 27(2011).10]
-at cost, or
– in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
-using the equity method as decribed in IAS 28 Investments in Associates and Joint Ventures. [See the amendment information below.]The “Markets and Hierarchies” theory is in the BPP E2 book under the transaction cost approach. I don’t tend to question the content of the book, just accept if it’s there it must be relevant.
It is explained there but I just don’t get it.
Good Morning Sir,
Thank you for your quick answer. I think I do get your point and under exam condition when IAS5 comes around I won’t assume an extended useful life unless the question explicitly says so.
However I have to add that even though the case study question didn’t say the useful life was extended, it didn’t say that it wasn’t either. So I had to make an assumption one way or other.
Obviously at work it wouldn’t be down to Accounts to decide whether the life of an asset has been extended or not. It would be based on discussion with the car experts.
I’ve passed it yesterday, first try.
I studied intensely over 7 weeks. Used BPP text book and BPP, Kaplan, Acorn, CIMAAptitude exam kits. On top of that I watched the Opentuition videos a couple of times and used the forum here. (Big Thanks to Opentuition).
I realise that everyone’s exam is different, depending on what the computer comes up with, but based on my experience my advise is to do the calculations but also have a very sound understanding of the theory and the meaning behind the calculated figures.
Hello Cath,
Thank you so much for putting so much effort into answering all questions!
I initially concluded the same, as this was the only Q in the kit and nothing in the book. But I started panicking when I did the Pearson Vue free exam practice and the very last question is exactly the same type:
The returns from a project are normally distributed with a mean of £220,000 and a standard deviation of £160,000. If the project loses more than £80,000 the company will be in financial difficulties. What is the probability of the project losing more than £80,000?
What do you think? Maybe it was part of the old exam and some of it were left in the practice kits by accident??
Hi,
It’s Q 205 on page 60.
Some standard deviation is covered in the opentuition cima p1 notes, but I couldn’t find anything that would help me solve this particular type of question.
I’m using the BPP text book and whilst it has some standard deviation, nothing to help me with this, though. I don’t even know how to start answering it. The kaplan exam kit does give an answer but I need to read a bit more / do more questions to actually get it.
Thanks a lot!!!
Hi Both,
Just when I thought I got my head around the sales mix variances, this topic now confused me again.
I thought that we compared the standard mix with the actual sales @ standard mix and multiplied it by the standard profit:
A (800 – 1500/12*8) * 6.5 = (800-1000)*6.5 = 1300 F
B (400 – 1500/12*4) * 2 = (400-500)* 2 = 200 F
together: 1500FWell, I’ve just got my provisional pass today. Over the moon.
I’ve studied from the BPP book and I went through both the Kaplan and PBB exam kit twice. I also went through the Acorn practice kit once. The videos on this site really helped. I found them when I just couldn’t get the pensions stuff , but Chris explained it so well that actually I hoped to get a question in the exam. Huge thanks to Opentuition and huge thanks to Chris who really explains stuff very well.
However – even though I actually enjoyed the subject I really struggled on the exam. And this is not because I wasn’t confident in my knowledge. I struggled because 60 question in 90 mins just doesn’t suit me. I like thinking questions over but this exam style doesn’t allow any thinking time. I was actually so nervous that I spent ages figuring out years/months in non-current asset questions, something that never happened when I studied or in real life. I went through a lot of past exam questions and the old exam style suits me much better.
Anyways, it’s over now, I will give it a week and I will get on with P1.
Thanks again Opentuition
Thank you very much for you help!!
Kaplan Q: CR is resident in Country X. CR makes a taxable profit of $750,000 and pays an equity dividend of $350,000. CR pays tax on profits at a rate of 25%. Equity shareholders pay tax on their dividend income at a rate of 30%. If CR and its equity shareholders pay a total of $205,000 tax between them, what method of corporate income tax is being used in country X?
BPP Q: P paid a dividend of $150,000 to its shareholders in the year ended 30 June x1. P is resident for tax purposes in Country X where the corporate rate of income tax is 25% and the personal rate of income tax is 30%on dividends received. Country X has an imputation system of tax. How much tax is payable on the dividend received by the shareholders of P?
It seems to me that the 2 Qs are exactly the same, Kaplan didn’t gross dividend up, BPP did. Kaplan even explained in solution that dividend is assumed to be gross from the text.
Hi Deepthie,
Good job, well done.
Did you use only the Kaplan practice kit? I am getting on with it fine, but I find that the Questions are very long winded and it takes aaaages sometimes to answer some of them. Did you find the exam questions the same in length and difficulty as the Kaplan kit?
2 weeks to go 🙂