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Thank you so much for your post. I am really motivated by your posts. I am sitting for paper P4 this June. I shall try to apply your techniques and pass the paper in one go…….. Thank you once again………
I would suggest that you first need to run through all the potentially important areas of the chapters and form some ideas and then look at at least 5 different past papers. I think this might help you.
I am sitting for Paper P7 for the first time on this September 2017.
However, hopefully my advice would help you a little.
As I have known that P7 is a real time exam question paper which means we have to answer in a very practical manner thus not simply sticking to the letter of the text books.
Though the questions seem easier at its first sight, they demand much more than what we normally think they are.
What I believe is we need to build more confidence and sharpen our understanding of the auditing issues hovering around the world.
0.5-1% of Revenue
5-10% of PBT
1-2% of AssetsAnything above the upper limit- material
Anything below the lower limit – immaterial
Anything between- matter of judgement.This materiality test is ‘by size’ only. There is however another parameter ‘by nature’ where materiality is checked not by numbers but by looking at its substance.
Hopefully it would help your understanding.
There is no logical base in between the differences of the formula being used to calculate reduction or increase in NCI.
It’s just what the examiner does. There are many other areas where examiner has not followed the usual mathematical concepts.
I hope this answer might help you.
(1) “Chive has a firm commitment to buy an item of machinery for CU 2m on 31 March 20×2. The Directors are worried about the risk of exchange rate fluctuations……….”
This is a question from Kaplan Text and in the answer it says this is a Fair Value Hedge.
(2) “In January, Grayton, whose functional currency is the dollar ($), decided that it was highly probable that it would buy an item of plant in one year’s time for KR 200,000. As a result of being risk averse, it wished to hedge the risk that the cost of buying KRs would rise and so entered into a forward rate agreement to buy KR 200,000 in one year’s time for the fixed sum of $100,000……………….”
This is another question from Kaplan Text and in the answer it says it is a Cash Flow Hedge.
Now my question is in both the questions, the entity is thinking of buying an asset in the future and is accordingly exposed to the risk of FOREX. I don’t see any difference between the two, but how come the (1) is Fair Value Hedge and the (2) is Cash Flow Hedge??
Please sir help me out……..
