[valentinat171]

Hello,

Sometimes the FV is the same as the recoverable value, but not always. For example, you have a car and its FV is 100.

Recoverable value is the highest of
NRV
and
VIU
So, if your car’s FV is 100, and the costs to sell this car is 3, then your NRV=100-3=97, you see the difference now?

VIU is the future value discounted to the present.

I hope this helps.
Valentina

[valentinat171]

@em69 said:
@valentinat171 do you prefer studying on skype?

I don’t mind: skype, phone, anything works for me. What country and time zone are you in?

[valentinat171]

@em69 said:
@valentinat171 do you prefer studying on skype?

I don’t mind: skype, phone, anything works for me. What country and time zone are you in?

[valentinat171]

Hi,
I am looking for a serious study partner for P2 INT.
I am in Sacramento, California, USA.
I work full-time.
Serious partners only please.
It’s best if you email me at Valentina_grant@yahoo.com (will reply faster)
Thanks 🙂

[valentinat171]

Thank you so much!

[valentinat171]

I don’t know as I am using a 2008 textbook and 2008 study kit…..
so, there were no changes since 2008 then?
The reason I am asking is because some fellow students mentioned it to me, so I wanted to confirm one way or another…

[valentinat171]

Thank you so much, and what about the totals on the balance sheet? Will I be penalised if I don’t do totals for liabilities and everything else?

[valentinat171]

I still don’t understand how profit on disposal is an adjustment for over or under depreciation from prior years? Can anyone explain it to me please?????

[valentinat171]

Yes, you are right. You revaluation gains does go to SOCIE, but it also goes to your statement of comprehensive income.

[valentinat171]

I thought you depreciate the asset over 6 years and depreciate the overhauls costs separately over 3 years, that’s how I understood Mike…..

When we capitalise the overhaul costs, what’s the other side of the double entry please?

Many thanks,
Valentina

[valentinat171]

Ops, I found the answer to my question on the internet, sorry.
For those who are interested: the standards prevail!!!!
See this link https://doc.baidu.com/view/cc42fb84b9d528ea81c7790c.html
see page 18, 3 (a)-good answer!
Valentina

[valentinat171]

Hi,

Just to be clear: so do we need to capitalise the overhaul costs of 300 and then depreciate it over 3 years?

When we capitalise the overhaul costs, what’s the other side of the double entry please?

Many thanks,
Valentina

[valentinat171]

Oh, I see now, thank you!!!!

[valentinat171]

Dear vedavyas,

I am sorry I’ve just seen your message. How do you sign in for a chat on this website? I’ve never used this function before… I would love to chat. Where are you based geographically? I am in California, 8 hours behind London.

Cheers!
Valentina

[valentinat171]

Dear Tutor,

Thank you for your reply 🙂

Profit on disposal is an adjustment for over or under DEPRECIATION from prior years???????? How so? And how do I know when to treat profit on disposal as depreciation and when not?

Thank you very much in advance for your clarification.
Have a wonderful day!
Valentina

[valentinat171]

Revising F3 would help, I think. At this level you want to have debits and credits to be your second nature, especially for Q2 of the exam.
Good luck with that!

[valentinat171]

P.S. You are so lucky your SFPs tally!!!!

[valentinat171]

Thank you, vedavyas!
Don’t you put gains on revaluation in the statement of comprehensive income?

Yes, I normally put profit on disposal somewhere in my income statement, but certainly not in the cost of sales!!! I don’t get it…..

[valentinat171]

Hi again,

Re: present value and liability

Please look at this example (BPP exam revision kit, Q56 Triangle, part (i).

I am simplifying here, ok?
so, a company bought a plant for 15 mln, 10 years of life. It is a legal requirement to decontaminate the area that plant started contaminating from day 1 of its operations. The present value of this decontamination is 5 mln at discount rate of 8%.

Answer:

1.
Plant (plant 15+decontamination costs 5) 20
Cash or AP (for plant) 15
Provision: decont.costs (non-cur.liab) 5 (at PV!!!)

2. One year later do depreciation as normal:
Depreciation expense (20/10) 2
Acc.depn-plant 2

So, do you agree that after you do this entry for 1o years, you will put the expense of 5 mln decontamination through your income statement?

3. Next, unwind your discount (remember, 5 mln is at PV at discount rate of 8%, so this liability that is now sitting in your books at 5 mln must be gradually increased every year to the future obligation, the one they will actually have to pay out in 10 years):

Finance cost (5 mln x 8%) 400K (goes to I/S)
Finance cost 400 (goes to provision)

So now, do you agree that your provision is 5,400?

So, next year we again unwind the discount, 5.400 X 8%=432 and so on, and eventually we bring our provision from 5 mln to the real future obligation amount.

Well, at least this is how I understand it…but I am not a tutor, I am fellow student who also gets confused all the time….

Re: your question about depreciation:
I am not 100% sure, but I think, according to IAS 16 PPE and the matching principle we must allocate the cost of the asset OVER ITS USEFUL LIFE irrespective of overhauls or not. Therefore, my answer would be 60/10=6.
The amount to be depreciated is normally either COST 60 or revalued amount. You don’t have the revalued amount yet. If the company does the revaluation in 3 years time and the asset is impaired due to 300 overhaul required, maybe then you use the revalued amount (60-300) for depreciation. I personally don’t see any other way around it, however, let’s wait for Mike, he knows everything!!! Thanks God 🙂

My advice to you: do a lot of exam questions, you will learn all these delicate little things via the exam questions as the book does not cover a lot of things or covers them, but too briefly.

Cheers!
Valentina

[valentinat171]

Dear vedavyas,

Here is what I’ve found on these questions as they concerned me too a little while ago:

-according to BPP textbook you SHOULD NOT provide for any overhaul costs at all because the requirement of OBLIGATION is not satisfied, it’s mere INTENTION and, like you said, the management can sell the asset before the overhaul is due.

-Environmental costs are capitalized in your balance sheet instead of being expensed as they are normally quite substantial, so the entry is:

Environmental clean-up costs (asset) 10
Environmental provision (non-cur liab) 10

Then you ‘depreciate’ these costs together with your main asset (oil rig etc) over the life of the oil rig. Your annual entries, say, are:

Environmental clean-up costs in I/S 1
Environmental clean-up costs in B/S 1

At the end of the life of your oil rig you will have expensed the entire 10 and got rid of the asset on the balance sheet, thus leaving you only with the provision, which is a liability. Once you settle this liability, you credit cash and debit liability, thus bring everything to zero.

That’s all I’ve got, I hope it helps.
Valentina

[valentinat171]

Dear pauliangenius,

Please don’t waste our tutor’s time by not understanding such simple things, being rude and even posting your comments.

We are so very appreciative of all the time this tutor puts into answering our questions FOR FREE just because he has a kind heart and wishes to help those of us who cannot afford the tuition one way or another.

It’s people like you who make nice, kind people not want to do nice things any more!!!!! Go away or behave!!!

Valentina

[valentinat171]

Thank you so much!
Have a wonderful day!

[valentinat171]

So, if it is not recoverable, I need to include it into ‘amounts due from customers’ and percentage of completion calculation, correct?

[valentinat171]

Hello from a fellow student!
I’ve just done this same very question a couple of days ago. I found that it is often the case when depreciation expense is a part of cost of sales. I think it’s quite normal. However, sometimes I see a note specifically requesting to do this, and sometimes not. I believe that if you don’t include it in the cost of sales, but deduct it together with other expenses, you won’t be penalised for that as there is no note asking to do that in this case with Winger.
Hope it helps 🙂

[valentinat171]

Oh, I see. I’ve just looked at it and this is what I think.
the PPE-carrying value working you are looking at starts with the opening balance of 940. This is at 30 September 20X5. The mine was purchased on 1 October 200X5, that’s why they added it.
hope it helps.
Valentina

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