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Ashanti question BPP Revised 2017

Forums › ACCA Forums › ACCA SBR Strategic Business Reporting Forums › Ashanti question BPP Revised 2017

  • This topic has 0 replies, 1 voice, and was last updated 7 years ago by Sandeep.
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  • August 2, 2017 at 9:02 pm #400079
    Sandeep
    Member
    • Topics: 1
    • Replies: 5
    • ☆

    Hello Sir,

    I have a query regarding the Ashanti question in BPP Revised one in 2017 where there is a figure of 10.31 million in Finance income in SOPL with a reference to the below adjustment:

    Included in Ashanti’s trade receivables is an amount due from its customer Kumasi of $128.85m. This relates to a sale which took place on 1 May 20X4, payable in three annual instalments of $50m commencing 30 April 20X5 discounted at a market rate of interest adjusted to reflect the risks of Kumasi of 8%. Based on previous sales where consideration has been received in annual instalments, the directors of Kumasi estimate a lifetime expected credit loss in relation to this receivable of $75.288m. The probability of default over next twelve months is estimated at 25%. For trade receivables containing a significant financing component, Ashanti chooses to follow the three stage approach for impairments (rather than always measuring the loss allowance at an amount equal to lifetime credit losses). The $128.85m was recorded in receivables and revenue, but no other accounting entries have been made.

    How is the finance income derived? Or is it a error in referencing?

    Kindly give the solution to the problem.

    Thank You
    Sandeep Pai

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