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

I hate discussing the exam, yet i read through all of your comments, and i have some things that were similar to some of you i must say it is comforting,

Quick question thou, when there is a gain for bargain based on the FV of the NCI being lower than its share of net assets where do you take this amount, surely you should not net it off against the goodwill applicable to the parent? for this reason my Goodwill was 76 Mill and not 71mill i had a hard time convincing my self i did the right thing here so for the hell
of it please let me know if this treatment is wrong?

So then you cant have goodwill of 71 Mill in the sfp

@siyaj said:
So then you cant have goodwill of 71 Mill in the sfp

There were to subs, one had positive goodwill and one had negative goodwill

The one sub with the positive goodwill of 71 goes straight to SOFP

The other sub with the net figure doesn’t and goes to P/L instead

(That’s what I did anyway)

@jmmyjimmy said:
Does anyone remember workings in respect to the calculation of NCI? To my mind it was as follows:

– S1: FV of NCI
– S1: NCI share of loss
– S2: FV of NCI
– S2: NCI share of loss
– Increase in NCI (investment in Bude)

Is that all?

I also showed the NCI share of other components of equity in the NCI working so I had:

FV NCI
Share of profit/loss
Share of OCE
Increase in NCI (for the sub that had the adj)
NCI at year end

So pretty much the same, and no impairment since only impairment was of the parent for PPE directly

@nathan488 said:
I also showed the NCI share of other components of equity in the NCI working so I had:

FV NCI
Share of profit/loss
Share of OCE
Increase in NCI (for the sub that had the adj)
NCI at year end

So pretty much the same, and no impairment since only impairment was of the parent for PPE directly

Agree, I also included OCE!

What about group reserves?

– RE of parent
– S1: share of loss only
– S2: share of profit only
– Gain on bargain purchase
– Adjustment on the financial asset (profit to cash)
– [what else?]

OCE:

– OCE of parent
– movement in equity (investment in Bude)
– increase of FVTOCI
– S1 share of OCE
– S2 share of OCE
– ???

@mikutza said:
Q3 1) I wrote about revenue and lease because i thought i should discuss that nothing is for free (the question said they cahrged NiL) and there were 2 performance obligations, one the instrument and one for the equipment, and then discussed the lease. Not sure this is right did anyone talk ab revenue ?

I talked about both – my approach was that a lease is by definition the right to direct a specified asset for a period of time in return for consideration. In order to calculate the consideration you had to apply IFRS 15 as it wasn’t really free, just a separate performance obligation as part of the equipment sale contract.

@nathan488 said:
I ageee with all the above (although I stupidly put my NCI adj equity in RE (cri)

Off the top of my head I also had these adjustments in my retained earnings:
– FV movements
– 14m impairment loss of PPE
– I reversed the 2m financial asset coupon expense since you only ever charge the “EIR” rate to P/L
– as above, I charged the EIR rate
– negative goodwill

Can’t remember anything else currently 🙂

For FV adjustments – disagree (they should be included in working 2 and relevant SOFP components)
Impairment – agree (did the same)
Reversal – agree (Dr Cash; Dr RE)
Interest – agree (Dr FA; Cr RE)

@jmmyjimmy said:
For FV adjustments – disagree (they should be included in working 2 and relevant SOFP components)
Impairment – agree (did the same)
Reversal – agree (Dr Cash; Dr RE)
Interest – agree (Dr FA; Cr RE)

You should always put the movements of fair value through your RE

There was one FV excess due to PPE with a useful life of 10 years I think and the difference was 80m

So I took the 80 to goodwill (already included within FVNA so not really any change), the depreciation of (80/10 *1 year =(8) to my RE and lastly the net figure of 72 to my SOFP

Then for that adjustment where they had a fair value of land of 30 but sold half

I agree since it’s land there’s no depreciating movement but I did 30 to start, took off 15 since they’ve sold it and by year end actually have only 15m worth of land and so took 15 movement to RE and the net amount 15 to my SOFP

@jmmyjimmy said:
Can’t remember the inclusion of FV adjustments to the retained earnings. 🙁 But nevertheless, we are on the same page regarding most of the workings.

Exactly, it’s nothijg to be worried about my friend 🙂

For example, I took my NCI adj to RE accidentally instead of OCE, I probably did the wrong DR/CR to RE on the financial asset amount

But as long as you’ve done all your workings showing what the figure should be etc, you’ll only ever be penalised a very few marks for things like that

All these things were on about will probably only cost a few marks tops

I’m pretty confident you get at least 20/35 if you just do the consolidation (no adjustments) and for example folllkw through your workings etc

Then even more marks for specific adjustments and what not, I think we’ve done just fine 🙂 it’s reassuring to see on this forum though, think Q1 has definitely (hopefully) saved me

Just out of curiosity, did you take the parents Share of RE/OCE at 70 or 60%? (Since they disposed the 10% at year end and I couldn’t remember the rule on this) I went with 60% since were doing a SOFP and so show the year end result

@jmmyjimmy said:
Hah, will hope for the best!

Regarding the financial asset, I did three adjustments (two in RE and 1 in OCE). But I don’t remember the figures.

As for the percentage, I used 70%, as the disposal took place in the last day.

Damn just looked up a similar question with a disposal/acquisition on last day and they used the previous figure :/ ah well hopefully just a mark lost since I was consistent and used the same percentage at least

And yeah I did too!
The OCE one was a gain or loss of revaluing up to the 49m at year end

Then the two RE’s adjustments were to reverse the coupon rate posting and then to correctly the post the EIR one or something like that

I did a whole working so that should be fine

@sajkhan786 said:
criteria for recognising the the provision has not been fulfilled.
reason being
there was uncertainty regarding the amount to be recognised ,
and probability of this happening was also reduced as lawyer has indicated that other entity
has no chance to win the case
so the only valid answer is the disclose this as possible obligation in disclouser note is FS

That was exactly my rationale. Think the forum is split here between:

– an indepdent lawyer stated they won’t win the case and under IAS 37 that’s ground NOT for a provision

-we were willing to pay £7m to settle both possible charges and so seem to have induced a constructive obligation

But as I mentioned yesterday, IAS 37 defines a constructive obligation as one resulting from a past experience

A lawyer overrides the entity view in my opinion and hence I said continent liabilities

For Q1: unfortunately I had a difference of $4m

-I was unsure about how to treat the $2m on the Investment Property
-It wasnt clear to me what the NCI in Sub 2 (forget name!) was at the end of the period (i.e. 60% or 70%) as the parent owned Sub2 for the full year so NCI share of post acq profit was only 30% but clearly there is then a sale at the end – just didnt know how to treat it…
-For the provision at acq I took the expected value, and at the end of year I took the paid settled amount at it was within 12 months of year end – was bluffing on this
-For the 10% share swap I had: carrying value of the Sub 2 (goodwill of 71 + FV of 375 = 446m) * 10% = 44.6m meaning increase in the swap of $48m – $44.6m = $3.4m to Retained earnings

The rest of the paper was difficult as required application of specific principles which I didnt understand to be fair. I attempted Q2 and Q4 but forget my answers on those now.

@granal03 said:
Anyone doing Question 2?

The deferred tax part C bit, did anyone write about the company appearing to struggle continue its trading operations and therefore a deferred tax asset couldnt be recognised becase you cant right off tax losses when there isnt an underlying asset?

Also question 2 part A did people just write that it was a lease and so you recognise a right of of use asset ?

Was confused by the loan being paid in preference shares, I wrote essentially their model changed because they were no longer just receiving cash flows, thye were exchanging financial assets for one another. Also what they did was essentially purchase a hedge, where they exchanged the loss on the loan for pref shares that could triple in value covering the loss?

I did mate , said that you need to have evidence of likely future incomes in order to recognise the deferred tax asset.

With the ifrs9 stuff I said they are valuing it 3 times the offered amount which had no interest in effect trying to cover the fact they have a big impairment, also they can not go away from amortized cost now as once you decide that’s it so they should impair the value and measure at amortized cost.

I feel like I’ve written a load of good points but also made some cock ups like saying the investment property had to go on current assets (confused with held for sale)

But hopefully the examiner isn’t too harsh I think generally there is no negative marking so should still get the figure marks for investment property