[Saimon]

Sir i didn’t get the answer i was looking for. May be i wasn’t clear enough

I wanted to know, can a company recognise provision for interest. I want to know the answer in “yes” or “no” and an explanation so that i can understand how it “meets” or “doesn’t meets” the criteria of provision.

It was not in any past exam..its a real life scenario and issue i m facing..

Remember :
Company normally settle loans before maturity date in that sense it seems logical to me that timing and amount is uncertain.

Is it possible to get your email address so that i can ask for your advice in any accounting standards related to real life issue that i face during audit.

Or you can sent me a mail in
saimon.islam.1996@gmail.com

[Saimon]

What if uk tax is charged on remittance?? Then how tax will be calculated

[Saimon]

If i get decimal figure say 2.5 in answer then what should i do in such case

[Saimon]

What should i do in case of FCFE?

(Meaning Should i consider interest for tax computation or should i ignore it???)

[Saimon]

No i have seen the examiner answer but i wasn’t sure “why inflation was already been adjusted as i don’t see any particular line that would indicate that inflation has already been adjusted.” that is why i m asking this question :

“the projections are in money/nominal terms”,does this line indicates that projection was already been adjusted with appropriate inflation rate in the case so i don’t have to adjust for the inflation????

and i am confused because in the case, in note section there were inflation rate of 2 countries why didn’t examiner used those

[Saimon]

Requirement c(iv)

To resolve the issue requirement in requirement (iv) can i suggest what i have written below

MV of Fodder Co is =$40095000
Premium that Persuit have to pay = ($40095000*0.90)*0.25=$9021375

Persuit Co would have to pay total =$(40095000+9021375)=$49116375

To resolve the issue of changes in capital structure Persuit need to raise finance from Debt and equity in 50:50 ratio after paying $20m from cash reserve of $49m. Therefore Persuit should raise debt finance of (($49116375-$20m)*0.50)=$14558187.5 and equity finance $14558187.5

[Saimon]

But sir in your lecture you have shown ,

Value of the option = (NPV with option available to us – NPV without option available to us)

this difference is value of the option but here you are adding instead of deducting. Can you explain me why???

But examiner calculated overall value, So does this overall value indicate value of the option???

[Saimon]

Actually question is related to delay the decision for 2 year

before delaying the decision Pa was $28m but after delaying for 2 year Pa was $23.128m or $23.13m

this is why i m confused, which one i should use when calculating intrinsic value??

(Note this was not part of the original requirement, i m just asking to clear my concept)

[Saimon]

In this question when calculating tax saving due to tax allowable depreciation why examiner didn’t calculate tax allowable depreciation as balancing figure in year 4
as follow

year 3 WDV $1856
TAD (balancing) $956 tax saving at 30% = ($956*30%)=$286.8

Realisable value
$(1500-600) $900

Bpp kit Mock 2 question 3 in solution what they did was

Year 4 TAD = $1856(yr 3 WDV)*25% = $464

Tax saving =$464*30%=$139

can you explain me why they did the calculation this way and
if i do it my way as i have show above will it be ok…???

[Saimon]

Sir,
Can you explain me following things

1) what is divestment ?

2) difference between sell-off and divestment ?

3) main reason for demerger ?

4) difference between spin-off and curve-out ?

[Saimon]

Sir,

you said in your last comment that whether we are expected to value the equity or the entire business depends on whether or not debt is being taken over

i m trying to confirm few things related to last comment of yours

1) what does taking over debt by acquiring company means?
i m thinking that it means acquiring company will repay debt of target company

2) If acquiring company takeover the debt of target company then we will have to calculate value of business as whole. As taking over debt means acquiring company will repay the target company’s debt. Then capital structure of target company will change and there will be 100% equity unless finance that were used to buy target company contain some debt. In Such case capital structure of target company will be how it was financed by acquired company after acquisition.

3) If acquiring company doesn’t takeover the debt of target company then we will calculate the value of equity as acquiring company will only pay for equity and debt will remain in capital structure of target company as it is.

Sir can you check whether i m thinking correctly regarding this three point. (Check whether it is correct or not. you don’t have to relate it to any math or question)

(Sir, i have watched your lecture i have no problem with topics, calculation. Problem that i mainly face is in understanding the requirement that what exactly i have to calculate. Once i figure that out its easy for me to do the whole thing. that is why i m troubling you so much and i m very sorry for that)

[Saimon]

Sir

1) Why cost of equity was used as rate for discounting factor instead of cost of capital ????

2) If question ask me to estimate the value of the business based upon the expected “free cash flow to firm methodology” or “free cash flow to equity methodology” , then does it mean that i have to calculate “value of equity” in both method and this will be the “value of business” that question requirement was asking for ????

( my confusion regarding such requirement is that i don’t understand whether “value of firm” is the “value of Business” or “value of equity” is the “value of business” )

[Saimon]

But if i invest in convertable debt instruments then can i use it???

[Saimon]

Sir you are right, in original exam question it was said that “MMC spend $7M at the start of the next 2 years to develop the game, and then spend $35M at the start of the 4 year sales period”

But in kaplan kit it was said that, “MMC will spend $12m immediately to develop the game, the gaming platform and to pay for the exclusive rights to develop and sell the game ”

there are some other changes standard deviation= 50%, Risk free rate =5%

I m sry i didn’t see the original question before i ask you my question…..

so now will you be able to solve this problem of mine ????

I just only want to know whether i can include $12m in investment when calculating NPV and Option price using black and scholes (meaning, in NPV calculation : Year 0 = investment $47m and in value of option (BSOP) calculation : P(e)= $47m). I have no other confusion and will be able to do the rest.

[Saimon]

Sir I have found this question in kaplan kit question no 43 MMC ( JUN 11 ADAPTED)

[Saimon]

December 2006 Tampem Inc, Requirement a

Sir,

In calculation of tax saving on tax allowable depreciation, in 4th year (which is last year) examiner have calculated TAD based on “applying 25% on WDV” but shouldn’t it be calculated by “deducting realisable value from WDV”

Can you please check this out and explain me the reason????

[Saimon]

Its clear now

[Saimon]

1st situation is in kaplan but 2nd one i actually made it up

[Saimon]

No sir i m watching your lecture and your way of teaching is more effective. I m just trying to understand the reason for difference in your way and examiner. As you told me that this was previous examiner style so now it all makes sense…

Thank you sir for your guidance

[Saimon]

So sir,
In the exam suppose i guess 2 rate and both of them give me positive NPV so do i have to guess another rate to get negative NPV and to get better approximation as you say…..

i want to know if such situation occur what i should do because in exam there will be time pressure

[Saimon]

Sir question has asked me to suggest two alternative.i don’t see any other alternative except “marginal cost plus pricing” and in the passage company used “cost plus pricing” which includes overhead using absorption cost.

[Saimon]

June 2013 consolidation question

subsidiaries retain earning in the statement of financial position,under equity section:

Retained earnings/(losses) – at 1 April 2012 $ (4,000)
– for year ended 31 March 2013 $ 8,000

At the date of acquisition, Strata produced a draft statement of profit or loss which showed it had made a net loss after tax of $2 million at that date. Paradigm accepted this figure as the basis for calculating the pre- and post-acquisition split of Strata’s profit for the year ended 31 March 2013.

Sir can u show me the pre and post acquisition retain earning?????its little bit confusing
and plz give explanation or reason so that i can understand it properly…….

[Saimon]

Sir, acquisition was at 01 oct 2015,but financial equity investment was valued at 01 april 2015

[Saimon]

June 2016 consolidation question

note 4 )

the financial asset equity investment of Zanda co and Medda Co are carried at their fair value at 1 april 2015.at 31 march 2016 these had fair value of $6.1 million and $1.8 million respectively,with the change in Medda co investment all occurring since the acquisition on 1 oct 2015

1) why didn’t we include the change in fair value of subsidiaries equity investmen in calculation of consolidated goodwill??????

2) How should i treat this note when,suppose parent acquired subsidiary company in 1 april 2015 instead of 1 oct 2015 (year end 31 march 2016)???????

[Saimon]

If there is a change in fair value of parents asset then will it always be included in the consolidated retain earning

[Author]

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