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ACCA have amended on 18th May by adding the last paragraph to the article. (Link: https://www.accaglobal.com/in/en/student/exam-support-resources/professional-exams-study-resources/p4/technical-articles/toxic-assets.html)
Anyone who had seen this article before the 18th of May would not have seen this update. I’m starting to think it was added for a very good reason. Anyone reading this might want to take a look at the last paragraph on that article once, just to be sure you didn’t miss it.
John, am I right in understanding that the bank will not be recovering anything for the 15% that they have not securitised ? As all income is distributed to the tranche holders.
Extremely Sorry, I’m referencing the revision kit by BPP and it’s amended. Not sure if you have the BPP revision kit and it’s okay if you don’t, thanks anyway.
I noticed the small difference, but was still not sure if my method was right, Thank You for clearing my doubt.
It does make sense, I didn’t know we used an IRR approach for calculating the redemption yield. I think I missed that bit when I was studying, and just saw it in the Revision Kit.
Thank You John.
Sir I re-did my sum now I get a difference of only some $300 odd, made a mistake earlier ( in calculating the receivables days, I blindly omitted the wording of the question which says the new Average credit period)…
Thank You Sir… 🙂Sir my answer was 25000 benefit, and your answer is 33000 of benefit, i’ve rounded my caclulations to the 000’s so is this difference acceptable ?
And Sir I compare the cost of the two policies. For example.
When there is no discount:
Fin. Cost on Avg. Receivables
+ Admin Costs
+ bad Debts
= xxxx $
After discount:
Fin. Cost on Avg. Receivables
+Cost of Discount
+new bad debts
= xxxx2 $
Now the benefit will be xxxx2 – xxxx.
I hope I don’t need to do the incremental method ( self study has made me comfortable with only this method, it produces the same results on most occassions – Lets say 90% with small rounding off differences)
And Sir at what point do we start rounding our figures off ? I mean under what circumstances.I didn’t understand completely, but I think you wanted to know this.
Calculation of financing costs ( interest costs) if discount was given ?
I did this, but my answer was wrong, I did what BPP does:
Which is take (annual sales x new receivables days/365), the outcome of this into your Interest %, and subtract the outcome of this with what your finance cost was before the discount policy was introduced..
But according to Sir John you should do [Annual Sales – Discount x new receivables days/365].
Now even I’m confused. But when I do other sums with a discount policy in it, I still get the right answerHey Saad,
Thank you for your reply, but the normal calc doesn’t have a raised to the power of button. Nonetheless I got a way to do it, it’s a little long, but I guess I have to do it. Here’s the method, incase there is anyone seeing this, who has my predicament:1) Write the number on your calculator
2) Press the square root button 12 times
3) Subtract 1
4) Divide by n where n is the nth root. For example if you are finding the cube root of a number, n will be 3.
5) Add 1
6) Press “multiply button and then equal to button” 12 times i.e. multiplty equal to multiply equal to …..Looks like the same doubt I had.
Check out what Sir John said here.
My Doubt. It’s sorted now, read this to clear yours.Could you please specify the exact numbers given in your question ?
And if it’s in the BPP revision Kit or some ACCA paper, or basically some material which we can view online to verify what the question says and how they have solved it, we would be able to help you better. Right now it’s a little vague.Hey thanks, and one thing it doesn’t but a lot of different type of calculations for different things, gives different answers, all of which are correct. But this arithmetic method I illustrated is definitely wrong. One I just want to know what I can do now that I don’t have a scientific calculator, does anyone know how to do it on a basic calculator or whatelse could I possibly do…
Oh okay thank you Sir, that certainly cleared my head up and then i noticed a few more sums whcih did the same thing. Relief ! 😛
I had another doubt, could you please take a look at it here,
I wanted to ask one question, can I use the arithmetic growth rate instead of the Geometric Growth rate for calculating “g” with regards to Dividends ?
Because
1.) I don’t have a scientific calculator.
2.) I never used one ( scientific calculator) and I don’t really want to waste my time trying to learn how to use one.@cuteleo110 said:
@ antido
I would refer you please read the technical article bye Simon Finley published in Student Accountant in 09/2010 ” A matter of Opinion” for more knowledge !Could you please post the link ?
Yes they can be, you should contact ACCA directly about this. Please refer the ACCA site and do this as soon as possible as it is already too close to the exams starting.
But it was bought on dec 31st of 2002, so do we depreciate it for the whole year in that case ?
I haven’t done f6 yet, so I don’t know the provisions for tax on depreciation for Assests bought on the last day of the accounting year.
My point is how can we charge a full tax allowable depreciation for an asset which was used for only 1 day of the year ?I’m in too, this is my second attempt and I’m seeing a lot of people from the previous attempt. Bad times, so need help to pull through, we all do. See ya on the 24th one.
Valuation: An assertion made by management that each asset and liability is recorded at an appropriate carrying value.
Allocation: Distribution according to a plan. Depreciation, amortization, and depletion are methods to allocate costs to periods benefited.
According to me allocation is not an assertion on its own, the term is Valuation and Allocation, and they together form an Assertion.
Someone correct me if I’m wrong.
If you see by the definitions, Valuation is the process of finding out the correct values of items ( E.g: Buildings less accumulated depreciation = C.V of Buildings)
And Allocation is the means of assigning costs to those assets/ liabilities to increase/ decrease, it’s value. In short, you can’t get to a value, without allocating the costs to the item under consideration.Audit plan is what you do at the first stage of audit, checking the business environment, checking the areas that might be affected by risk, setting dates for audit procedures, assigning your staff to areas of audit, etc. It’s not substantive procedures, substantive procedures are procedures to check that the material areas of audit are not affected by any misstatement, due to poor internal controls or other circumstances, it’s a method for doing something through which we can find mistakes.
Definition : ” substantive audit procedure is a direct test of a financial statement balance designed to detect material misstatements at the assertion level. Substantive procedures comprise tests of details (classes of transactions, account balances, and disclosures), and substantive analytical procedures.”
To know such definitions and others in the audit syllabus, check this site, it’s very useful and has helped me a lot :Audit Terminology DictionaryI would really like to see the question and if possible help you as well, but the scan that you have taken is not clear, could you possibly get a better scanned copy ? I don’t remember seeing this question in any paper, or is it in the BPP Rev. Kit ?
Ohh okay okay . . . . Makes sense, now that I read my doubts I’m kind of embarassed at how silly most of them are, really sorry for all the trouble Sir. You’ve been very kind.