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Bpp-Qn 17 ted

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Bpp-Qn 17 ted

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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  • April 13, 2021 at 2:15 pm #617414
    gayathree1234
    • Topics: 36
    • Replies: 1
    • ☆

    Hi sir,

    There is fall in value in investment portfolio.When expense increases,the profit should be understated.And the total assets should be understated too since value is reduced by $2m .But the question stated the profit and asset overstated.May I know the reason for this.

    Thank you.:)

    April 13, 2021 at 2:30 pm #617421
    Kim Smith
    Keymaster
    • Topics: 87
    • Replies: 6089
    • ☆☆☆☆☆

    If the expense IS increased, profit will be reduced. But if the adjustment for recognition of impairment loss is NOT made – expense will not be increased (as it should have been) and profit will not be reduced (as it should have been) – therefore the misstatement (“error”) means that profit is overstated (and similarly assets).

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