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Netting off

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Netting off

  • This topic has 11 replies, 3 voices, and was last updated 10 years ago by John Moffat.
Viewing 12 posts - 1 through 12 (of 12 total)
  • Author
    Posts
  • November 15, 2014 at 1:29 am #210118
    jason91
    Member
    • Topics: 13
    • Replies: 26
    • ☆

    Good day sir,

    I am having a problem with part of a question in the BPP kit – (MJY 12/05).

    I do not grasp how the netting off is calculated in part (b).

    I understand that dollars and euros must be netted as far as possible. However,
    the calculations seem to baffle me. please assist me with this.

    In particular i dont understand how the $ hedged amount figure is derived ( 90+50+40+20+30-170-120-50 = $110,000 Receipt). Maybe i am reading the table given in the question incorrectly?

    November 15, 2014 at 12:41 pm #210193
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I think the easiest way to interpret the table is as follows:

    Remember we are only interested in receipts and payment outside of the group, so ignore any receipts/payments within the group.

    So…..dollar receipts by MJY and subsidiaries from the other 4 companies are: 90 + 40 + 20 + 30 = 180

    Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290

    So a net receipt of 290 – 180 = 110

    Hope that helps 🙂

    November 15, 2014 at 12:41 pm #210194
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I think the easiest way to interpret the table is as follows:

    Remember we are only interested in receipts and payment outside of the group, so ignore any receipts/payments within the group.

    So…..dollar receipts by MJY and subsidiaries from the other 4 companies are: 90 + 40 + 20 + 30 = 180

    Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290

    So a net receipt of 290 – 180 = 110

    Hope that helps 🙂

    November 16, 2014 at 1:38 am #210304
    jason91
    Member
    • Topics: 13
    • Replies: 26
    • ☆

    Thanks sir however i’m still a bit puzzled but not as much as before. Please see below;

    “Dollar payments by MJY and subsidiaries to the other 4 companies are 170 + 120 = 290”

    Why was the dollar payment of $50 made by Subsidiary 2 excluded in this computation?

    November 16, 2014 at 9:46 am #210377
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Because it was made within the group (it was from Subsidiary 2 to MJV).

    We are only looking at payments/receipts outside of the group.

    November 19, 2014 at 12:35 am #211147
    jason91
    Member
    • Topics: 13
    • Replies: 26
    • ☆

    Okay sir i understand.
    Thank you

    November 19, 2014 at 5:11 pm #211316
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

    May 16, 2015 at 12:12 pm #246353
    hanhvn
    Member
    • Topics: 9
    • Replies: 50
    • ☆☆

    Dear NR Moffat,

    You mentioned that only receipts/payments that are outside the group are interested. Is it because the payments/receipts within the group will be offset to nil, ie. total payments will equal total receipts?

    Thanks,

    Hanhvn

    May 16, 2015 at 12:14 pm #246354
    hanhvn
    Member
    • Topics: 9
    • Replies: 50
    • ☆☆

    I should have typed Mr Moffat, not “NR Moffat”. I am sorry about that, Mr Moffat.

    May 16, 2015 at 1:29 pm #246370
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Yes – payments and receipts within the group will offset to zero.

    May 18, 2015 at 2:16 am #246721
    hanhvn
    Member
    • Topics: 9
    • Replies: 50
    • ☆☆

    Thanks a lot.

    May 18, 2015 at 7:56 am #246754
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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