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Hi Sir,
It’s question no 32 of BPP kit I am quoting herePort has many investments, but before 20X4 none of these investments met the criteria for cons as a subsidiary. One of these older investments was a $2.3m 12% loan to Alfred which was made 15 years ago and is due to be repaid in 12 yrs time.
My Question is that at the time of cons finance cost of three yrs should be deducted according to me but here in this ques’s sol they have deducted $46 ($276/12= 23+23)? They have just deducted for 2 yrs.
Or are they just taking 2 months out of 12?
One thing more to ask u is:
In question no 33We have already taken 6 of 12 Months while calculating the interest but again at the time of goodwill’s working we are again time apportioning that .
The statemnt was
Immediately after it’s acq of salva. Pandar invested $50m in an 8%loan note from salva. All interests accruing to 30 sep 20X9 had been accounted for by both companies. Salva also has other loans in issue at 30 sep 20X9.The sol. is like this
Interest on loan note is $2m ($50m*8%*6/12). This is in salva’s post acq profit. Thus salva’s profit of $21m has a spirit of 11.5m pre acq (21m+2m interest )*6/12 and 9.5m post acq.This looks like the elimination of two months’ worth of intra-group loan interest expense in Alfred and investment income in Port
At what stage this year did Alfred satisfy the criteria for treatment as a subsidiary?
“Unless otherwise indicated, all incomes and expenses may be deemed to accrue evenly throughout the year” is a common sentence to be found in accounting questions
In Salva’s case, we are told that the loan interest did NOT accrue evenly because that loan interest only became an expense when Pandar invested and that was post acquisition
Do you need further explanation or can you work it out from here?
“On 1st November 20th Alfred was acquired by port.” – So?? I need to know the accounting date!
Loan interest was paid / payable by Salva only since the date of Pandar’s acquisition so only $2 million was paid during the full year because the loan was only outstanding for 6 months
The profit BEFORE deducting that $2 million must have been $23 million so that’s $11.5 million for each 6 month period
That is $11.5 million pre-acquisition and $11.5 million post-acquisition
But there’s $2 million loan interest to deduct from that $11.5 million post-acquisition leaving only $9.5 million post-acquisition profits
So, even though the acquisition by Pandar was exactly half way through the year, the profit split is NOT 50% / 50%
Instead it’s $11.5 million pre and $9.5 million post
Better?
On 1st Nov 20X4 Alfred satisfied the criteria of being subsidiary. Our year end is 31st Dec 20X4.
I have one more Question to ask.
If we have to make only the CSOPL then do we have to deduct the impairment of Goodwill from Admin expense always?
Or even if we have to make the CSOFP then also we must deduct impairment of goodwill from Admin exp?
Re the question about goodwill impairments …. in both situations the goodwill impairment will be ADDED to Administrative Expenses, not deducted
In paragraph 1, “do we have to deduct goodwill impairment from administrative expenses ALWAYS?” – it is not unusual for there to be no impairment of goodwill, so the answer to your question is “No” you will include any impairment as an additional expense where the examiner has indicated that goodwill is to be impaired THIS YEAR
In paragraph 2, if the question asks you for the consolidated statement of financial position without also asking for consolidated statement of profit or loss, then the impairment of goodwill will be included as a deduction in arriving at consolidated retained earnings. But, in this situation, the impairment will be the cumulative impairment since the subsidiary was acquired and the amount deducted in working W3 consolidated retained earnings will be JUST OUR SHARE of that cumulative impairment.
In working W4A, the calculation of the nci for the statement of financial position figure, their share of the cumulative impairment will be included as a deduction from their (investment at date of acquisition plus their share of subsidiary post-acquisition retained earnings)
Ok?
Working W4B is to calculate the value of the nci share of this year’s subsidiary profits and we calculate it so we can put in that little note at the foot of the consolidated statement of profit or loss “Of this amount $xxx is attributable to the nci”
OK?
Is it compulsory to show that?
Is it just the profit shown on p/L before any adjustment’s share?Ema, there aren’t that many! Besides, it is in your best interests to watch all of the videos!
If you feel that you don’t have time, look for the video in the list with a title about Consolidated Statements of Profit or Loss or the video covering chapter 10
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