*** ACCA P2 September 2017 Exam was.. Instant Poll and comments ***

I have found the answer. This question refers to Directive 2013/34/EU. This Directive came into force 4 years ago on 19.07.2013 and rules apply from 20.07 2015. Here is the link

https://ec.europa.eu/info/law/accounting-rules-directive-2013-34-eu_en

Can anybody confirm whether the word ‘recent’ preceded ‘EU Directive’ in the question?

Thank you.

@ muhammad Well done you gave everything your best attempt and didn’t give up any part of the questions. I think because we gave everything our best and didn’t panic or give up we’ve a 50/50 chance of passing.

Q3 (C) was IFRS 13 fair value measurement and more specifically the part of the standard that talks about land and research and development projects. That was my take. A difficult enough question as was the part B of Q3.

I thought the car leases was very tricky in part b of Q4 but the bikes were easy if you came across the exemption for leases under IFRS 16. The fact you still attempted it is important as if you leave any parts blank you lose the professional marks. So not attempting it would not just sacrifice 7 marks but possibly 9.

It was a difficult exam but let’s hope for the best in October.

@olliebalboa said:
I notice some people saying that the bicycles qualified for an exemption under IFRS 16 and should be expensed to the P/L as they are of low value? Low value is $5k or less from most readings I have found…

My logic was 100 bicycles at $600 each = $60,000 and this would qualify as a lease if the 12 month lease period was extended

Did anyone else come to the same conclusion?

I hope I haven’t thrown marks away :/

Having read the technical article the examiner uploaded on the 2nd of August about IFRS 16 I am confident I judged the bikes correctly given their term was 12 months or less and they are typically a low value item like tablets and telephones would be. The fact they were unlikely to extend the lease term was important.

Don’t stress over it though you only lost 3 marks max if you got that part wrong I bet. Plenty of other areas you could have made up for it.

@tayyabom said:
You are making me scared now, Q3 (C) was IFRS 13? I don’t remember attempting IFRS 13 at all during the whole exam, can you provide little more detail about this? I’m too nervous now, it was 7 marks I believe.

Ha! Don’t worry. Even if you attempted and said anything reasonable you may still score a mark or two. I wouldn’t stress over it.

However IFRS 13 does mention the measurement of non-finanicial assets and the examples given in my Kaplan book were Land and Research and Development projects. That’s why that stood out to me in the question as they bought land and were using it to test their project of developing more energy efficient wind turbines. There was other issues to score marks on other than it, such as the sale of renewable energy, or even if you mention that any development cost for developing their new prototype can be capitalized as part the cost of the wind turbine asset if/when completed that could even be valid point possibly.

Or who knows maybe I am completely off trail altogether and misjudged the question.

@tayyabom said:
oh Ok, I remember now. Thanks.

There were two issues here:

1) Capitalization of research costs, they had just got permission from regulatory authority to test/prototype the turbines and they had a dead end with some development. Commercial production had not been started yet.

I mentioned the criteria of IAS 38, and mentioned something that since the testing under harsh conditions is not completed yet and they have doubts about the commercial production they shouldn’t capitalize the testing expenses.

2) They were supplying the energy back to govt and this part was about recognition of revenue, the question was whether to recognize it?

I mentioned that, if a contract exists as per IFRS 15 and company expects receipt of payment then they should recognize the revenue immediately at the time of delivery. Because when energy is transmitted to the national grid, risks and rewards are immediately transferred.

Yeah what you said makes sense, too. I personalty judged it as IFRS 13 and talked about the highest and best use and it being legally permissible, financially feasible, etc. Who knows. We both gave it our best judgement and attempt anyway that’s all we can do. Here’s hoping we both pass that and every other part of the exam we attempted anyway.

I also said to recognize the sale as revenue and any remaining energy left at the year end to treat as inventory.

These changes may affect loan covenants, credit ratings and borrowing costs, and could result in other behavioural
changes. These impacts may compel many organisations to reassess certain ‘lease versus buy’ decisions.

Balance sheets will grow, gearing ratios will increase, and capital ratios will decrease. There will also be a change to
both the expense character (rent expenses replaced with depreciation and interest expense) and recognition pattern
(acceleration of lease expense relative to the recognition pattern for operating leases today).

@tayyabom said:
My approach was similar to rogman228.

3) about revenue question, I deducted 0.8 from 3.6 million to recognize using “at” and 0.8 over a period of 10 years because warranty and service contract cannot be further unbundled. and service contract length was 10 years.

The revenue question for IFRS 15, does the 3.6m include the 2 years warranty + 10 years maintenance?I cannot recall the question & the breakdown. I remember a figure is given for the prd+2 years warranty but it does not include the 10 years maintenance

@sakuraf4 said:
The revenue question for IFRS 15, does the 3.6m include the 2 years warranty + 10 years maintenance?I cannot recall the question & the breakdown. I remember a figure is given for the prd+2 years warranty but it does not include the 10 years maintenance

Hi,

There were three components:

1) Turbine $2.8m
2) 2 Years warranty + 10 service contract $0.9m, this was one item, remember there is difference between warranty and service contract
3) 10 years extended warranty (this didn’t have service contract element). $0.8m

This is as far as my memory goes, $0.9m and $0.8m might be interchangeable but I’m reasonably certain that it was 2 Years Warranty + 10 Years Service contract as one item.

@rogman228 said:
Having read the technical article the examiner uploaded on the 2nd of August about IFRS 16 I am confident I judged the bikes correctly given their term was 12 months or less and they are typically a low value item like tablets and telephones would be. The fact they were unlikely to extend the lease term was important.

Don’t stress over it though you only lost 3 marks max if you got that part wrong I bet. Plenty of other areas you could have made up for it.

@rogman228 said:
Having read the technical article the examiner uploaded on the 2nd of August about IFRS 16 I am confident I judged the bikes correctly given their term was 12 months or less and they are typically a low value item like tablets and telephones would be. The fact they were unlikely to extend the lease term was important.

Don’t stress over it though you only lost 3 marks max if you got that part wrong I bet. Plenty of other areas you could have made up for it.

Hi.
I explained that the lease term was expected to end after 12 months and that if it was to be extended, then it would no longer meet the lease term exemption criteria – I’m very confident I explained the lease term exemption well 🙂

I’m very concerned about the asset value exemption though, I mentioned that the total cost of $60,000 and a 12 month lease term would not qualify as a lease under IFRS 16 but that if the lease term was extended beyond the existing 12 months, then it would qualify as $60,000 exceeds the low asset threshold value?

I’m really hoping I scored full marks (or close to) for Q4 as my Cash flow question was a disaster.

Why do we put ourselves through this 🙂

Good luck to everyone. I just want to forget Tuesday ever happened and start prep for Dec.

Regarding the lease exemption the examiner’s article says:

3.4 A simplified approach for short-term or low-value leases
A short-term lease is a lease that, at the date of commencement, has a term of 12 months or less. A lease that contains a purchase option cannot be a short-term lease. Lessees can elect to treat short-term leases by recognising the lease rentals as an expense over the lease term rather than recognising a ‘right of use asset’ and a lease liability. The election needs to be made for relevant leased assets on a ‘class-by-class’ basis. A similar election – on a lease-by-lease basis – can be made in respect of ‘low value assets’.

The assessment of whether an underlying asset is of low value is performed on an absolute basis. Leases of low-value assets qualify for the simplified accounting treatment explained above regardless of whether those leases are material to the lessee. The assessment is not affected by the size, nature or circumstances of the lessee. Accordingly, different lessees are expected to reach the same conclusions about whether a particular underlying asset is of low value.

@rogman228 said:
I might have been blind and not spotted something but did anyone see the value of the dividend paid by Mirror in Q1? What did I fail to spot/do?

Very surprised there was no SOCE that was the first thing I looked for when I saw dividends but there was none.

FWIW I did take some shot of it. I know dividends are paid from retained earning so done a retained earnings working and dividends paid was my balancing figure ha! Probably an epic fail but ah well hopefully I got enough to scrape a pass in the cash flow.

There a few items that make me confuse in the Cash Flow too
Not sure if it is enough for me to pass 🙁
In 1 of the note, the company paid a cash & issued a note of nominal value 46 & fair value of 48 to Glass. Do we take the fair value or nominal value to calculate the consideration paid?

i think i was 19 away from the net decrease in cash answer…i calculated the dividends paid to the nci but why do i recall being given a dividend for the parent. must be my mind playing tricks… anybody was able to calculate the deffered tax liability to use when finding the goodwill of the sub? mine was 1.6 and 2 for the deferred tax liabilities arising from the fv adjustments