[hits123]

Did anyone else get a negative EVA?

[hits123]

i did not adjust the capital employed for the marketing as we are using the b/f capital employed.

[hits123]

i got something like $(330) for EVA

NOPAT
operating profit
less: tax benefit on interest
less: cash tax
less: provision (as it was a reduction)
add: marketing

Capital employed
add: b/f provision

[hits123]

In regard to the sale leaseback of the property I don’t necessarily agree with the accounting treatment as in my opinion it should not have accounted for as a sale under IFRS 15 albeit that they were only leasing the asset for 10 years with its useful life being estimated beyond 50 years. This is because the entity still bears the risks and rewards for the property regardless of the lease period and therefore the entity should not have derecognised the asset and instead recognised a right of use asset and a lease liability as well as depreciating the asset over the shorter of its lease term and useful economic life and in this case it would have been the lease term of 10 years.

[hits123]

I thought the audit risk question only referred to disclosures in regards to the group restructuring and therefore everything else was a legitimate audit risk? For example the license should be classified as a intangible asset and amortised, the disposal of the burger company should have been classified as held for sale and so forth?

[hits123]

RoMM Q – did anyone mention anything in regards to the intangible asset (broadcasting license) not being amortised based on it being renewed indefinitely? They should have amortised over the 5 years irrespective of whether it was renewed indefinitely as even in this case intangible assets should be reviewed annually for impairment? I think it was material to the FS also.

[hits123]

Time requirements in this particular exam was genuinely the hardest I have faced in any ACCA exam to date

With regards to Q2/b for reports to those charged with governance did anyone mention modifications to audit reports/opinions and that if revaluations as well as the capitalisation of renovation costs were not adjusted in financial statements and because of materiality would require in isolation a modification/qualification to the audit report/opinion. If the case were that if both were not adjusted for in the financial statements could pose a material and pervasive hence adverse opinion?

[hits123]

I didn’t have qs on conflict of interest or substantive procedures for a not for profit

Do ppl get diff qs?

[hits123]

yes i did too. hope it was correct!

[hits123]

Tough paper

Did anyone have a question in regards to impact on audit report if £80k of research expenditure was capitalised and mgmt did not adj financial statements?

i wrote it was material as it was 11% of profit before tax and a modified audit report with qualified opinion?

[hits123]

In my opinion it would not make sense to appraise the project further than 4 years, as they specifically mentioned the company appraise projects over 4 years.

In reality, yes it would make sense to appraise the project over 10 years as this would look at the entire project life. But for appraisal purpose 4 years makes sense as this was their policy. In addition, the depreciation allowance was 50m/10*25% = 1,250 per year

And the reason why I think 4 years make sense is because at 4 years, you get a positive NPV therefore they would accept the project. And therefore at 10 years, they would also get a positive NVP, so working out up to 10 years seems redundant.

[hits123]

For the WACC calc the cost of debt was redeemable so essentially what I did was

Time 0 – Po
Time 1 – 8 I(1-T) discount at annuity
Time 8 – RV discount at present value

And then discount at two discount factors (lower and higher) and then work out the IRR = Kd (cost of debt)

[hits123]

Are you talking about the market value of equity? If so isn’t it no of shares x PO?

[hits123]

MCQs for this paper were difficult in comparison to the LFQs in my opinion!

[hits123]

I’m the section C question of working out the WACC I only remember have to work the the cost of equity as well as the convertible debt.

There was no other loan note or irredeemable debt, or was there?….

[hits123]

And also, even more frustrating when you do practice questions they quote the share price as ex-div which is what you need for the questions. Whereas in this paper they decided to quote in cum div? I assume you just minus the dividend to be paid from the share price to get the ex-div? Anyone else do this

[hits123]

Nice of them to put in the general rate of inflation of 4% to try and throw us off! Spent ages trying to figure out if i should adjust the discount factors. But didn’t.

[hits123]

I doubt they would discredit you for writing incorrect currencies, doesn’t matter as long as the value is correct i assume

[hits123]

So for the nominal cash flows, i assumed you had to adjust for the inflation (contribution and fixed costs) and discount at 10%? I remember getting a NPV of 2.294m?

Then for the real cash flows, i assumed we didn’t adjust for inflation and use the discount factor of 6%? I think i got a NPV of 970k?

Also for the WACC did anyone get 12%?

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