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BPP-Comprehensive income

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › BPP-Comprehensive income

  • This topic has 9 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • November 30, 2015 at 12:26 pm #286409
    samh
    Member
    • Topics: 15
    • Replies: 42
    • ☆☆

    Sir,I am little confused by ‘fair value’ when it’s shown in a question for many times and I don’t know how to deal with it, like this one below.

    W required 80%of C on 1Jan2008. At the date of acquisition C had a building which had a fair value $22m and a carrying amount of $20m. The remaining useful life was 20yrs. At the year end date of 30 Jun 2008 the fair value of the building was $23m.

    I do know that FV adjustment should be made- deduct depreciation (22-20)/20 from C’s profit.

    but what about $23m? should I deduct (23-22)/19 ?

    November 30, 2015 at 6:18 pm #286509
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    The increase from $20,900,000 ($22,000,000 less half a year depreciation of $1,100,000) to $23,000,000 ie an increase of $2,100,000 should be credited to revaluation reserve

    Ok?

    November 30, 2015 at 7:45 pm #286533
    samh
    Member
    • Topics: 15
    • Replies: 42
    • ☆☆

    say the profit in post-acquisition is $1.6m, then the total comprehensive income should be $1.6m-($22m-$20m)/20yrs+$2.1m-$1.1m
    am I right?

    and

    your working:$20,900,000 ($22,000,000 less half a year depreciation of $1,100,000)

    why the depreciation of $1,100,000 occurred?
    Is it because we are going to sell the building at the end of this year? (remaining life of 19yrs is not considered.)

    November 30, 2015 at 7:50 pm #286537
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    No, and

    For half a year the revalued asset was $22,000,000 and depreciation over 20 years for half a year is $1,100,000

    And 19 years doesn’t come into this. At the end of the year there’s still 19.5 years of estimated useful life, not 19

    November 30, 2015 at 11:29 pm #286578
    samh
    Member
    • Topics: 15
    • Replies: 42
    • ☆☆

    ><shouldn’t depreciation be half of $1100000?

    (btw, did I calculate comprehensive income correctly?)

    November 30, 2015 at 11:41 pm #286579
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    You’re correct – it should be half of $1,100,000! Thank heavens I wrote it down correctly in the workings – that would mean that I wouldn’t lose a mark in the exam from a stupid calculation error!

    Without the question in front of me …… your comprehensive income calculation looks ok

    December 1, 2015 at 2:52 am #286595
    samh
    Member
    • Topics: 15
    • Replies: 42
    • ☆☆

    The question actually is :W required 80%of C on 1Jan20X8. At the date of acquisition C had a building which had a fair value $22m and a carrying amount of $20m. The remaining useful life was 20yrs. At the year end date of 30 Jun 20X8 the fair value of the building was $23m..
    C’s profit for the year to 30June 20X8 was $1.6m which accrued evenly throughout the year.
    W measures non-controlling interest at fair value. At June 20X8 it estimated that goodwill in C was impaired by $500,000.

    workings in the answer page include $1m, which it says to be revaluation gain. This $1m must be ($2.1m-$1.1m) ,right?

    December 1, 2015 at 8:41 am #286640
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    It looks to me like the answer hasn’t depreciated the building for the half year ended 30 June 2008

    In my head I have a revaluation gain at the end of June of $23,000,000 – $21,450,000 = $1,550,000

    I don’t see where $2.1 – $1.1 comes in

    Where’s the question from? I don’t recognise it as an ACCA question

    December 3, 2015 at 7:05 am #287124
    samh
    Member
    • Topics: 15
    • Replies: 42
    • ☆☆

    Oh, I’ve been silly…..
    $1.55m is revaluation surplus,
    But the answer added $1m instead of $1.55m.
    I assume that there is no depreciation charge according to the question and the answer…….
    ?
    It did happen in BPP revision kit…
    Probably the answer is more beautiful if $1m is used.
    ?
    Hope the exam won’t make me crazy like that..

    December 3, 2015 at 8:30 am #287163
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22699
    • ☆☆☆☆☆

    You’re fine! Stop panicking 🙂

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