*** ACCA Paper SBR December 2019 Exam was.. Instant Poll and comments ***

I got control too as ibex had power to direct the use of Pompex‘s resources and affect the return on them through its level of involvement?

I also got negative goodwil in Q1!
But Q1 was hard for me I spent so much time on it! I think 1 h. Then spent too much time on Q2 instead of 40 min max that I allocated to it I spent an hour because I wrote too much. My negative goodwill was -1.8m but I’m sure it is not correct, can someone tell me what their goodwill was In q1?

Q3 was a disaster to me because I didn’t have time to remember properly GAAP! I was confused with questions regarding difference in impairment between FRS2 and IAS16! Can someone tell me rules for impairment reviews in FRS2 I couldn’t even find it in my book!
Then obviously I couldn’t do the calculation for impairment in part 2 of Q3!
I was glad not the whole question was on GAAP. I managed to answer question about Joint venture.

Q4 it was a prepayment asset for a licence and then charged to profit and loss on straight line basis for 12 months.
I said it was a principal because agent usually takes a fee . Not amazing explanation to be honest I can’t remember what else I wrote to convince it was principal.
Also I forgot to calculate kpi stuff.. but I did manage to calculate goodwill, then contingent consideration discount was unwound and charged to p&l. I think it was 1.5m fin cost which increased contingent consideration liability by 1.5 m which resulted in 6.5 m of contingent consideration liability at year end

I’m so annoyed!! I had 1.4m negative goodwill for my answer, then went back and changed it for some stupid reason taking out the deffered tax liability of 16m!!

I still got negative goodwill of around 8 so will pick up marks for describing how to treat it.

If you cross something out but it’s still visible do you get marks for it? 🙂

Q1
A (ii) How do we calculate ‘investment in associate’ after acquiring a further 30% equity share?

I thought it was actually a contract liability rather than asset? Just coz they’d received the money but hadn’t completed their part of the performance obligation of allowing the other company to market their product for a year for payments? I could be wrong though, it’s quite confusing.

In the ethics question I started mentioning insider dealing but thinking about it I’m not sure it even qualified as that and I prob should have just looked at it in terms of acca code of ethics

@xanpech said:
In the ethics question I started mentioning insider dealing but thinking about it I’m not sure it even qualified as that and I prob should have just looked at it in terms of acca code of ethics

That’s what it was amounting to. I’m sure you’ll get credit for that. I also mentioned the illegal activity of trading using MNPI which would also lack integrity and professional behaviour. By holding the shares, he was threatening his own objectivity from the start.

The 1m direct cost is to be expense according to the revised IFRS 3.

The contingent consideration (Fair value) is to be included as the disclosure criteria in IAS 37 does not affect it.

I think the deferred tax is on the 10million difference between the 2 years and should be used to reduce the identifiable net asset (i.e. goodwill increased).

No. 3 was a big issue as it was difficult to even crack the question.

@bg12321 said:
Yep so part a) equity method, i.e. the CSI method in the SOFP (SPLOCI wasn’t examined).

Part b) consolidation using step acquisition technique

Wasn’t part a) primarily discussion around significant influence vs control?

It was only a couple of hours ago and my mind has already gone to mush haha

Yeah
part A (i) asked why was it accounted for as an associate and not a sub/control or something

and

(ii) was to equity account for the extra 18% (30% to 48%) it since it was correctly accounted for as an associate. My mind went blank on this one. Did we have to calculate investment in associate and if yes what was the working?

Part B (i)(ii)
If i remeber correclty was assume control has taken place calculate the goodwill, net assets and explain why they have control (share options, key management personnel, majority shareholding etc)

@thatgirl said:
I think the more you say the better (unless you are overspending time on the question) I mentioned front running as well as integrity

I also said that selling shares not only breach of ethical principles but also an illegal activity

@thatgirl said:
In part A ii) yes you are right this part was confusing but if you looked at the date in this question they asked position on 31.03.20×6 whereas in the scenario text they mentioned that additional 18% was bought on 01.04.20×6! Therefore this question was to account using equity accounting.

I was also confused so I had to reread and look at the dates more attentively

I see so we were only meant to equity account for the 30%?

Disagree with this. IBEX had control of the cast and distribution, also The subsidiary company had to contract all work to IBEX subsidiaries.

Also the income wasn’t split evenly, if the ticket sales where terrible the other company wouldn’t get much it said that in q.

I think they tried to trick people into joint venture but it was control but I could be wrong 🙁

Hmmmmm……here are my thoughts on the exam:

Q1) I stupidly calculated positive goodwill, hate reading all of the comments and knowing I messed up 🙁 but I gave a lot of explanations around how the original shares would be equity accounted for using CSI in (i), and wrote out the associate-to-subsidiary step acquisition process in words (extra consideration transferred + FV of remaining share [with P/L implication on $27m gain] + NCI at proportionate share of net assets – FV of net assets). Hopefully writing it all out will still get me some marks?!

Q2) I actually thought this question was very fair. It was just a challenge not to waste too much time on it at the expense of other questions! For (i) I mentioned how Mr Topper and Ms Tiger are both ACCA-affiliated and so have to adhere to ACCA Code of Conduct. I then split out different fundamental areas (focusing on integrity, confidentiality and professional behaviour), and explained where the risks were: Mr Topper with his shares affecting objectivity and integrity (also brought up insider trading and potential fines/ prison), Ms Tiger with the intimidation threat of concealing the COO’s fraud and self-interest at concealing in order to progress her career, something else about the final paragraph that I can’t remember…for (ii) I spoke about PPE needing to be revalued across the entire class if revaluation model is chosen under IAS 16, and how too much depreciation may have been charged as a result of failing to do so. I also spoke about excessive aggregation of information re: ships obscuring the understandability of the financial statements for users etc etc. Think this was probably my strongest section, shame it’s only for 20 marks though…

Q3) I barely remember to be honest! I think I brought up IAS 2 for the first asset as it is developed with the intention of selling, said some bits about IAS 38 for one of them too. For the second part, I said that the investment should be viewed under IFRS 11 (Joint Arrangements) as Ibex had control over activities, but the other entity had majority of shares and 3 directors vs Ibex’s 2 directors. As a result they are effectively ‘locked’ in a joint arrangement as decisions have to be made unanimously between the companies. This may have been completely the wrong route to go down, but I saw joint ops-related data and decided to roll with it! At least I might get some explanatory marks, even if my final decisions were wrong…

Q4) BIZARRE. I just did a load of workings/ explanations, some of which may or may not be right, all of which resulted in negative adjusted EPS for both assumptions but I just stuck to my guns as they can’t mark you down twice for the same thing, right?! I also remember bringing up how IFRS 3 supercedes IAS 37 when talking about the contingent liability (directors think it’s only possible, but should still be included in FS on acquisition).

All-in-all I can’t say it was super hard (no intense financial instruments, no FEX stuff, virtually no discounting, not even any current issues from what I could gather?!). But it was still very strange, and it’s hard to gauge how well I’ve done.

Sorry for the rambling, I just needed to get my thoughts down on (virtual) paper, especially after reading everyone talking about negative goodwill! I’ll try not to worry about the results over the holiday period, I’m just glad to have some time back to myself 🙂