Forum Replies Created
- Posts
Hi Iyndsaymc, Is your Q1 Joshua & Fraser Co? I think the pre acquisition value is obviously given (the question did highlight the MV of Equity, so do not need to specifically calculate that one). That only need to work out the post acquisition value of the combined co.
Somehow i feel like in the question 4 bi, is related to IAS 19 and IAS 37. Firstly, It says define benefit liability arising due to the current cost expected to be deliver as per the promised term and condition if the employees remain with the company.
IAS 37 says there are 3 criteria for recognition, cost, probable outflow and past event and these three criteria have actually met. It was probable 75% of the employees will be remain with the company, 3% increase in remuneration each year from 2013. As such, the cost can be reliably measured.
Therefore, 1% should be taken up as a current cost to PL and the other corresponding entry by increase each respective years defined obligations these cost meet the liabilities/provision as per IAS37.
The closure of 6 stores should take into account for impairment because the scenario did states that many other stores similar to the the entity operate were closed. Means there are uncertainties surrounding and should conduct impairment test as there are indication (from externally ie market).
The scenario also mention that the stores was closed , essentially it should be classify and non current asset held for sale and discontinued operation. IFRS 5 requires reclassification and disclosure if its happened in the financial year.
My opinion about that question is IFRS 5 and IAS36 and IAS 37 can be relevant.
IFRS 5 apply because the store is already closed during the financial year. Despite the director is unwilling to classify for that nor he is willing to disclose. But the standard still requires the company to reclassify as per IFRS5 and disclose as discontinued operation.
Before reclassification, it needs to conduct impairment test and recognise at the lower of CV and FVLCTS (more relevant as no more operation means no future economic benefit, VIU less relevant) because uncertainties surrounding the situation.
IAS37 provision should be consider if there’s any constructive / legal obligation arising from those closure ie compensation to those affected employees/other cost incurred (but not future cost).
I think those self interest, advocacy is applicable and can bring in for discussion. As i remember, the scenario did mentioned that the customer is approaching the chief accountant and offer him a good employment post. I think from practical view, he actually has two option either to accept the offer, or to consult with someone like his superior/management. Since it is not good to turn down the offer from business point of view, but assessment of the customer credit risk would be needed since the scenario did tell customer are in bad credit rating ie cash flow tight.
Another issue is something like block chain technology that the company are promoting. I think technical competence and due care, professional behavior, integrity might be relevent as the chief accountant aware himself do not have the knowledge yet he promise the management that he can handle the project. He should have been be honest, not to discretion the profession. He is recently qualified as ACCA member.
But most importantly is what action he could do as the requirement specifically asked for that. So might need conclude with that to gain the professional marks. I guess…
I did the same as yours. T account is the most efficient way as we dont have much time to drag there.
I think just follow the requirement as it asked whether the brand should be subsumed in within goodwill or be separate accounted for. IAS38 states that if the IA is not separable it should be subsumed in within goodwill. It has to be legally or contractually separated either to sell it or use it.
The last part was about indefinite life / definite life of the two new acquisition brand. The directors intended to recognised the brand as indefinite useful life. My opinion was, the first one have long track records, it has good past experience to produce economic benefit for the entity. It should be alright be treated as indefinite useful life. However, assessment would be made each year for the if there is any indication of declining future cash in flow from the continuing use of the asset. Impairment test each year is required by comparing the carrying amount against the recoverable amount.
In respect of the 2nd brand i think not acceptable to be treated as indefinite useful life because it is new.
