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Gearing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Gearing

  • This topic has 5 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • November 6, 2021 at 6:50 am #640036
    Nikitagarwal
    Participant
    • Topics: 153
    • Replies: 146
    • ☆☆☆

    Hi Sir,
    Can you please help me understand how selling an asset under sale and leasing it back agreement reduces the gearing ratio?

    November 7, 2021 at 8:52 am #640115
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    Hi,

    It would depend on if the transfer is a sale or not.

    If the transfer is not a sale then there will be a financial liability recognised for the proceeds received, so gearing would increase as the level of debt has increased.

    If the transfer is a sale and the part of the asset is derecognised then it would all depend on the level of the rights retained as to what would happen with the gearing.

    Where have you seen this scenario specifically? Let me know and I can look at it further.

    Thanks

    November 7, 2021 at 12:08 pm #640152
    Nikitagarwal
    Participant
    • Topics: 153
    • Replies: 146
    • ☆☆☆

    It is at true/false in BPP kit.

    And as per your above explaination for 1st scenario it will increase the gearing ratio and not decrease, but as per answer provided it was decreased, could you please explain a bit further

    November 13, 2021 at 8:12 am #640522
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    There are lots of questions in the BPP kit. Which one is it?

    November 15, 2021 at 11:10 am #640687
    Nikitagarwal
    Participant
    • Topics: 153
    • Replies: 146
    • ☆☆☆

    its an MCQ question :
    Starts with Creative accounting measures ..
    and in this the last one

    November 20, 2021 at 9:53 am #641141
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    Sorry, I still can’t find it.

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
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