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I am hoping for the best on AAA, although i feel as though i’ve not made it.

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I am also awaiting results for AAA. Not sure if I did so well as I didn’t manage to complete the paper, so in my head I am planning for Sep 23 resit.

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Hi, I might be interested in a study buddy. Pm me.

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@kbourne said:
am sure it said when the MD realised that the gearing ratio was 51%….he revalued the property to 22m. ignoring the financial reporting standards. I got 49 using the provided figures too.

maybe i made a mistake in reading it.
I thought it was included at 28m, because if it was included at 22m and the gearing ratio came out at 49%, then there wouldn’t be an issue. 49% is less than 50%.

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@kbourne said:
it wouldn’t. the valuation of 28m affected the ratio as it would have increased equity and reduced gearing. I just double checked on ifrs.org and actually think I am wrong about the long term lease. I think this would result in property being classified as owner occupied under IAS16…and not IAS40. wish I hadn’t looked!

Didn’t we have to work out the gearing ration using the figures listed above. There was like a balance sheet extract?
Why else would they have put these figures in for? I worked it out at 49% using the figures above, but assumed it included the $28m and when we reduced it down to $22m, it affected the equity by reducing the value, which tipped the ratio into 52% region.

The only long term debt item was the bank loan at $50k.
Then the equity came in at something like $10k+$70k+$20k ish.

Then if that equity included the $6m revaluation gain in OCE and we removed it, then the equity figure reduced down to less than $100k and the gearing ratio was at 52%.

I probably totally made that up, but seemed to make sense to me in the moment.

Anybody else recall their answer?

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@kbourne said:
Hi guys. think we are all in the same boat here unfortunately. Very hard paper and lots of curveballs. Q4 was a killer. can anyone please advise on how the fair value of the coal would have been accounted for? I talked about fair values level 1 2 and 3 but wasn’t sure if I am honest. Could they have met the criteria of a Derivitive? HORRID paper

I’d like to know the answer to this as well.
What on earth do you do with the inventory, if you know its going to lose 20% of its value in 3 years time.
I didn’t know what to write, so assumed it must be similar to CGU type of units, where you class the different grades of coal and measure them as individual groups at NRV, and if you know the price will drop then take out a futures contract.

Didn’t have a clue on this.

Also, I know i went wrong on the control element vs business combination stuff. Totally through me in that.
I said the company should treat the Coal mine as a subsidiary if they purchase the additional 24% as they would have 52% in total, and any decision to be made requires 72% at least. So if every decision requires the parent company’s approval, then it is basically a sub.

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@kbourne said:
The lease comes into play because you can recognise an Investment property under IAS40 if it is leased for the majority of its useful life. Think it was thrown in to try and veer people off

But what affect would a lease have on the gearing ratio?

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You are not the only one. I thought it was all about the investment property and the FV element and how it was going to affect the gearing ratio, as the £6m surplus would have gone to OCE part of the revaluation surplus account.

I assumed the $28m figure was included in the figures that were listed above, therefore if we reduced the Equity by $6m it would cause the gearing ratio to go past and beyond the 50% threshold, which in turn would make the bank loan repayable instantly.

I didn’t even catch the fact about it being a lease, because what bearing does a lease have on the gearing ratio? This has really got me.

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I’d like to know as well.

Anjali, do you have the F7 study text in PDF file? Could you please send to me if you have at “acca1@live.co.uk”

Thanks.

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