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It’s from ACCA’s own June 2017 AA exam paper. Page 12:
It’s very strange because the marking guide even shows 2 marks being allocated specifically for making the point “Invoices not paid in line with suppliers’ terms”.
It seems to me that there’s an ambiguity that exists within the Control Deficiencies part of the syllabus that should be addressed by ACCA.
It was from the June 2017 paper. There are many other such examples from the Internal Controls section, but they are all also from many years ago.
Is business risk something that was previously examinable in the Audit and Assurance syllabus many years ago?
Not entirely, because even in the model answer the £25,916 (the discounted deferred cash) still sits in the liabilities section of the consolidated statements and we also adjust the group retained earnings for the unwinding of that discount in the year to 30th Sep 2015.
It’s almost as if we’re making the assumption that that £4,004 has already been included within Party’s retained earnings at acquisition, but why would it be if they hadn’t even done the discounting in the first place?
I find there’s a lot of conundrums like this in section C questions where they’re difficult not because they’re testing your knowledge in a fair way but because of ambiguity about what assumptions are being made in the scenario. These things always make perfect sense in retrospect when the answer has already been explained but when first presented with the question you’re essentially just guessing sometimes!
Hi Chris, I also have a question about this…question.
In Party’s individual SFP they listed the deferred consideration as £28,000, the full undiscounted amount, but of course this is incorrect so we have to discount it back 2 years at 8% giving us £23,996.
Should we not also have to credit the £4,004 difference to Party’s retained earnings?
This would of course effect the group retained earnings, but it seems strange that we make this adjustment without doing the opposing side of the double entry.
I thought discount factor would be 12650*(1-0.1**1) or 0.9. That’s the way I’ve seen it explained previously. Why is it 12650/1.1?
It certainly looks better, but since that there is no default £ formatting it means you have to create a custom format anew for every question, which given the time pressure we’re under seems like an enormous waste of time.
