*** ACCA P2 June 2018 Exam was.. Instant Poll and comments ***

@mumbaikar said:
There shouldnt be any gain/loss on disposal because the parent still owns plymouth only the shareholders are changing. No change in control

I think I definitely did something wrong with the disposal I even looked after the exam still no idea
Heads fried

Maybe not a gain on disposal but a change in equity
I put the 9m through W5 so who knows

Hopefully scrape 20 on the Q1A

@yenchu said:
Hi nathan588, may be I have remembered it wrong but the Contingent liability is settled in May 2018 (Not Mar 2018) as such 14 months, not within 12 months. That’s why I didn’t adjust FV for CL at year end. However, I may probably look at the wrong date. May and Mar …

Please anyone confirm?

Haha oh god, it might’ve been! Yes can anyone confirm?

Hi LC in the house

Q1
a) consolidated balance sheet
b)Plymouth 60% subsidary or 40% associate
c)IAS 24 related party loan guarantee

Q3
a)IFRS 15 revenue recognition
b)IAS 37 provision legal battle
c)IAS 38 research costs (expensed)

Q4
a)historical cost vs current cost
b)single measure vs mixed measurement of assets and liability
c)IFRS 16 operating lease
IAS 20 $500,000 goverment grant
IAS 40 investment property
IAS 2 inventory

Why was ppe impaired?

As far as i remember, the liability was settled on 31 May 2018 amd the year end was 31 march 2018, which figure should be taken ?

Hi nathan i hear u

Q3 a)
At first I too was going to write about IFRS 16 leases. But then i realised there are two parts of this contract one with the sale of medical equipment and one with leased speacialised equipment so with these two performance obligations i went with Revenue.

Q3 c)
I choose IAS 38 since CUT provide information on the developement of products. IAS 38 states that research costs which are cost that do not meet recognition criteria should be expensed. It did not meet recognition criteria since it was not probable that there would be an inflow of economic benefits.

But ur treatment of deferred income and expense is how i treated it so the end result is the same i guess.

I’m interested in what you guys said about the 9 marker on Q3 about adaption costs and provisions

For the adaption costs I said it shouldn’t be capitalised under patent rights but should be capitalised under IAS 16 since it’s in relation to the actual machine (or whatever they were producing) and since it can’t be sold without it, is a directly attributable cost

For the legal cases:

I said both are contingent liabilities since:

1) the lawyer said it’s not probable they’ll have to pay out and under IAS 37 if it’s not probable then no full provision

2) the suing for lost profits I said is not a present obligation, I said the claim for this is entirely down to the entity suing. Because we don’t know if there’s a valid obligation yet, we will have to wait for the court case, and thus it’s a possible obligation

Ultimately I said disclose both as contingent liabilities at their respective amounts given

I disagree with stating it at the “average” stated by the entity

I wrote that $7M is a provision cause there is a constructive duty and the company would probably pay it as it was its suggestion to settle both legal cases. The rest amount of $6M (5+8-7) is a contingent liability.

@craighughes88 said:
I wrote no provision as there is no legal or constructive obligation, the lawyer said they may not have to pay so points towards no obligation but I am not sure this is right.

I got this from IAS 37 guidelines:

A constructive obligation arises if past practice creates a valid expectation on the part of a third party, for example, a retail store that has a long-standing policy of allowing customers to return merchandise within, say, a 30-day period. [IAS 37.10]

Using this, I don’t believe there is a constructive obligation since there was no past occurrence, were just told they’re “willing” to settle it in case

I’d go with the lawyer saying it’s not probable and thus no provision

This is what I mean though, these questions are so subjective

@nathan488 said:
I got this from IAS 37 guidelines:

A constructive obligation arises if past practice creates a valid expectation on the part of a third party, for example, a retail store that has a long-standing policy of allowing customers to return merchandise within, say, a 30-day period. [IAS 37.10]

Using this, I don’t believe there is a constructive obligation since there was no past occurrence, were just told they’re “willing” to settle it in case

I’d go with the lawyer saying it’s not probable and thus no provision

This is what I mean though, these questions are so subjective

Exactly, they are willing but that don’t mean anything , they may just be crazy and uninformed and offering 7m when there is no need.

Yes good point, I’ve read there is no negative marking on p2 , probably how I managed to get 39 on previous failure when I felt like I had about 20.

So there is likely many ways to get the marks with reasonable knowledge applied

I thought the exam was fairly ok.

Bargin Purchase 28m
Goodwill 71m
FV adj of 75 (I deducted 5m for the contingent liability not provided for) and either 36 or 30
Value of the share received (180 %10 /3)*2 =12 by $4 =48, I think the 10% share was worth 51 or 53 so loss on disposal.

I also did question 2 & 3
I discussed ethic and the over stating of the profits in both
The Gas contract should not be held as an assets as it no longer gives rise to future benefits and should be re-classed as a liability at its NPV
I provided for the 7m as by offering the settlement they created a constructive liability
The 50k to bring each item to sale I expensed as these are inventory not non current asset

@jmmyjimmy said:
Guys, what do you remember about government grants?

I wrote that there has been a prepayment, which is subsequently reduced against spl.

The grant can be of income nature or capital nature. Hence it can be recognised either as other income, or against the prepayment?

Is it possible to recognised the grant as follows:

Dr Cash
Cr Prepayment

?

The question said right at the end that it’s not accounted or recognised under IAS 20 grants :/

But your actual accounting seems okay.

I wrote for the £4m non refundable fee TO the other entity that they need to defer the expense (deferred expense) until it’s at that date, since they’ve paid for it but haven’t yet consumed the “benefit” of these trials

Then for the other free of £2m being received, I think I said to defer it as deferred income again for the similar reasons

I also waffled a bit about IFRS 15 and performance obligations.

At that point I had gone through an answer booklet and was just glad to have finished in time :’)