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I have deducted contingent liability from S na in g/w calculation ( I assume it was found out by the parent company on acquisition and not yet included in S’s records)
Q2 I put loss from investment of 1300 in a separate line…
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@suni6419 said:
in ques 1, goodwill calculation, how to take contingent liability? is it taken as FV adjustment or is it added with cost of Investment calculation?? and what to do with the investments received from associate? did anyone get share of associate as (2000 x 40% = 800 )?I got this too. I assumed the 500 was interim dividend paid and 300 was final dividend. So total dividend $800. My Income statement (Q2) balanced. I got $171,400 but I am not so such about the answer. I messed up with the goodwill for Q1 (I did not adjust for contingent liability … so sad). I treated Q4 (Construction Contract) normally without any adjustment since it was an accounting estimate (progressively) and not an accounting policy change. Then for Q5 – (Financial Statement Extract – Environmental provision, Government Grant (this seems quite easy) I also said that the company should make provision for the air filter equipment since the legislation was passed during the year (1 April 2012). However, it should not decrease its environmental provisions because as at the end of the reporting period it is yet to acquire the air filter equipment. However, I just solved the ratios for Q3 and was about interpreting before time ran up. I quickly had to rush up the limitation to ratio analysis. I believe the company was overcapitalizing and isn’t do so badly was compared to industry (sector) average. However, it profitability ratios are poor when compared to sector average but it ROCE and Current ratio (which is 1.56:1) are either higher or close to sector average. For ROCE is shows that either the company has old assets that are not contributing to sales. I pray I get the required pass mark. Missing out on the Goodwill calculation hurts so bad.
@ justkency i am not sure about the contingent adjustment..lets hope for the best!!!
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@suni6419 said:
@ justkency i am not sure about the contingent adjustment..lets hope for the best!!!you have to take out the contingent liability to get the fair value of net assets on acquisition (that is the right thing to do). However, in the exam hall I didn’t notice. I am glad that it was just to get goodwill. If it was to produce CSFP I guess a whole lot would have gone wrone. From wrongly calculated goodwill carried into the CSFP. I don’t know if I would be enable to trace that out. Overall, I think Steve Scott was fair. Time allocation was the major issue I guess.
dan1 liy Rev.reserve to retained earnings… i am not sure what i have done is right or wrong.anyways will tell u what i did… new value of building – old value of building/ useful life i think i got 1000 after the whole calculation…. and add this 1000 to retained earnings and deduct from revaluation surplus… i am not sure..i would like if anyone else would clear this issue… i hope u did the same way.
associate profit 800, 300 goes to balance sheet (not required here) in the investment account and 500 went to P/L already booked, so I did not do anything with it, it is called equity method F3 stuff actually
suni419 – I was buffled here too, because it should be the difference of the old and the new depreciation, but I could not figure out the old depreciation charge (that would have been if not revalued), so I divided the revaluation amount with the useful life – not sure
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when do the answers come out?
what was the revaluation ? (50 million – 8 million acc depr.) 42 million to 60 million is 18 million, anyone got this? they tried to mess up with the land going up 2 million, but it does not make any difference, or I got messed up, some says it is 16 million
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suni6419, I did the same with realised surplus on depreciation, credit 1mil Retained earnings and debit Revaluation Surplus.
I see that a lot of people calculated goodwill of 6mil USD. I had 5.55mil USD. I believe, contingent liability should be disregarded. It does not have any effect on the balance sheet and this information should only be disclosed as a note to finanacial statements.
In general I think the exam was quite easy. I even managed to close the balance sheet and it has never happened during my preparation to the exam.
Hope we will all pass;-)
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Look, the contingent liability is not even a valid item of statements, it is a disclosure in the notes, and on the other hand, it is a liability, and you have to deduct the ASSETS against the consideration paid, and not liabilities. In that case, you should add the Cont Liab…. No?
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:)) Actually, I think it was not very fair, because, a time-pressured exam like this should not include items that require heavy thinking and dual-interpretation. For instance, now when I m home, I could figure out that discounting the deferred consideration for 9 months was a silly mistake, but I would not be able to do so in the exam room, in panic and hurry
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were we suppose to deduct impairment when calculating goodwill
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But do you deduct all liabilties, when calculating goodwill? I also do not think, that the company takes into consideration contingent liabilities or assets, when agreeing what should be paid. No one wants to pay for something, what is uncertain.
But I might be wrong, since I am in the minority..;)A contingent liability is always recognised in an acquisition, as long as there is a reliable estimate of amount. This wasn’t in the book, I found it in a previous exam question… which I got wrong!
A transfer of realisation of revaluation is just transferred from one to the other…through equity I think? Also not in the book (BPP).
obiora06 – the goodwill question was ‘on acquisition’ so no impairment was deducted for part A.
I couldn’t balance the Q2. I spent about 1/2 an hour just looking at the figures, couln’t work out how it was so wrong… Then realised I had put the Equity asset into equity (It’s an asset…. it should be with the assets), so I moved it but then ended up with a negative revaluation on financial assets through equity… then I ran out of time, but the SFP was only out by $1,500 then… Does anybody know the proper treatment for the Financial Asset? It’s gonna bug me 🙁
Seriously, this paper was so easy, especially question 3, calculate ratios, do an analysis and comment on the limitations. I was so happy with the paper i froze. 🙁 I am hoping i can get 50. But no surprises on the paper or anything. I couldn’t remember a lot of stuff that i really knew.
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I don’t think impairment was meant to be deducted as we were asked to calculate goodwill at acquisition and the impairment was in the post acquisition period
Well well…either this paper was too easy to be true or I missed out a lot of things I should have done cause I finished with 15mins to spare which I took back to question 2 cause I had run out of time for that q. I forgot the associate share of profit and couldn’t balance so “ratched” a fig. for retained earnings so that it balanced…softly chuckled to myself in the exam room cause of this. :p
“Done bun can’t be undone” so…
I am simply hoping for a pass!! 🙁- Topics: 0
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Did the split for impairment when calculating goodwill. 90% and 10%.
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Q1 I initially calculated by splitting 90% and 10%, after realising i was getting a negative goodwill for NCI, I didn’t want to confuse myself further, so did it again by combining them together, anw the question is asking for a consolidated goodwill. Took out the contingent liability in my opinion that a company shld be prudent. Answer was the same as what some mentioned 6000.
Q2 was driving me nuts especially the 1st adjustment. My mistake to spend so much time trying to find out the right Dr Cr. In the end i took out 600×3 years and the profit of 25% out of the sales and made a provision for servicing(i thought it was similar to warranty). Revaluation reserve was 18mil, of which 2 was for land. I also calculated depre based on the new F/V. Added a line in Statement of changes in equity to show the transfer from RR to retained earnings. not sure if this is what they want. didnt balance as usual.
Q3) was relatively easy, but i think i wasn’t well prepared. I did this question last.
Q4) construction contract, change is accounting estimate should be treated prospectively. so i used Rev method to calculate the percentage of completion, not sure if i did this right though…
Q5) first 2 parts on the I/S and SFP was too easy i couldn’t believe they are giving marks for free! didnt have time to finish the last 4 marks though 🙁
*cross fingers*
The goodwill answer should be before impairment, since they want g/w on acq. I think I got 8 and pointed this out in my answer, and then separately showed impairment. Otherwise I can’t think why else they were giving us the impairment amount.
Not sure if Q 5 was as easy as everyone says. Did you amortize the gov. grant?- Topics: 0
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@dan1liy said:
The goodwill answer should be before impairment, since they want g/w on acq. I think I got 8 and pointed this out in my answer, and then separately showed impairment. Otherwise I can’t think why else they were giving us the impairment amount.
Not sure if Q 5 was as easy as everyone says. Did you amortize the gov. grant?shouldn’t we be amortizing over the useful life of the asset? I think i got 1200 per year. Showed in my SOCI as grant amortised and in SFP the reduction.
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