*** P2 December 2012 Exam *** Instant Poll and comments***

Hello Colleagues!!!!!

I’ve worked the question – CSoFP, Minny Group and I identifies the errors that we made under the dreadful exam pressure. The account balance is $3,539.

The items are: PP&E 1655 (920 +610+ FV Adj 89 B & 36 H);
Goodwill is nil; this is because of the impairement test that was carried out on the cash generating unit. Bower was impaired by 206, Heeny was not. Impairement losses MUST be first written off against Goodwill and the balance allocated proportionately – excluding current assets. The question specifically says, it relates to poor performance of Intangible assets; therefore the balance 16 (190 goodwill less 206) is allocated to other intangible assets.
Other Intangible – Patents is 174 (263 totals on sofp – 67 discon’t op (IFRS 5) – 2 marketing cost – 16 impairement allocation).
Investmt in Associate 55 (48 sofp + 2 divi + 30*30%*6/12).
Available for sale 30 (Must be stated at the lower of cv and fv) the question states; Current assets 1625 (totals of sofp).

OSC 920 (Minny sofp), Other componients of equity 71 (73 – 2 dividend rec’d); RE’s 791 (workings is showm below); NCI 372 (194 Bower & 178 Heeny – see working); NCL 711 (totals of sofp) and current liability 674.

WORKINGS:
Holding Bower Heeny
Direct 70% 56% (70%*80%)
NCI 30% 44% (100 – 56)
Totals 100 100

#2 Net Assets
Bower Heeny
@Rep Date @Acq’n date @Rep date @Acq’n
OSC 400 400 200 200
OCE 37 27 25 20
RE’s 442 319 139 106
FV adj 89 89 36 36
Totals 968 835 400 362
Profits 133 (sum at report date – Acq’n date) 38

#3 Goodwill Calculation:
Consideration 730 320
Less indirect holding (141) 320*44% (w(1)
Add FV NCI 295 161
Less NA’s @ Acq’n (w(2) (835) (362)
SoPP/ (RE’s) 190 (22)

#4 NCI (w(3) 295 161
Less indirect holding (w(3) (141)
Profit 133 (w(2)*30% 40 38 (w(2)*44% (w(1) 17
SoFP 194 178

#5 Impairement Test
CV as per SoFP 1130 595
FV Adj -Land 89 36
Totals 1219 631
Less Recover Amt (1425) (604)
(206) 27
Impairement MUST be first written-off against Goodwill and then proportionately to the cash generating unit. Heeny is not impaired; therefore assets should be carried at the higher of cv and recoverable amount.

#6 Group Retained Earnings (RE’s)
As per SoFP 895
Discount on Pur (w(3) 22
Share of Profit:
Bower 70% *133 (w(2) 93
Heeny 56% (w(1) *38 (w(2) 21
Impairement – Bower (w(5) (206)
Dividends rec’d 2
Marketing Cost (2)
IFRS 5 (Discont’d op 67 -3 -30) (34)
Profit from associ (30*30%*6/12) 4.5

In exam, the difference in SoFP as an accountant we should open a suspense account and record the difference. I wrote a note, stating that it will be investigated as time pressure do not allow me to fine-tune. Any question, I can be reach at green_452@yahoo.com.

Good luck everybody – we need to 50!!!!!

Let ALL ask JEHOVAH God for favour; Let the markers have mercy. Thank you LORD!!!!!!!!!! Give us your mercy and succeed all in our ACCA exams. We need you GOD!!!!!

Lolzzzz…cardine so funny…4 me…d paper look easy and scanty but happen 2 be a disater on a second look…all my eggs were in cashflow statement…am sure d examiner is aware he broke dem all…I pray for 50 pass mark…till Feb. Guyz. Merry Xmas.

cardine: mmm I found another correction for you:

to find impairment you compare CV to NBV= Net Assets + goodwill
that is: Bower CV 1174 – 251=1174 => no impairment
NBV 968+190=1158

Heeny CV 604-231 = 373 => impairment 50
NBV 400+23=423

you seem to include liabilities in NBV calculation which is not the formula. I konw it ‘as I did a past paper with goodwill impairment a few days ago…

Can anybody translate into plain English the phrase “The recoverable amount has been determined without consideration of liabilities which all relate to the financing of operations”?
Does it mean non-current or current liabilities? Usually the financing is shown in non-current liabilities. But operations usually mean day-by-day operations that is current liabilities.

In relation to IFRS 5 adjustment, I understood from the wording that no adjustments had been made in relation to this yet and so I recorded the 30m as NCA HFS and I credited the PPE and Inventory with the 49 and 18 as I thought they were still included..ANd I recorded the relevant impairment in RE

@sharkell said:
Can anybody translate into plain English the phrase “The recoverable amount has been determined without consideration of liabilities which all relate to the financing of operations”?
Does it mean non-current or current liabilities? Usually the financing is shown in non-current liabilities. But operations usually mean day-by-day operations that is current liabilities.

I took it to mean that only assets had been included in the recoverable amounts given in the question and that all liabilities – current and non current – had to be taken into account to get the true recoverable amount.

Financing of day-to-day operations will usually have some sort of non current liability underlying it, such as a long term loans, or finance leases, both of which give rise to current and non current liabilities in the balance sheet. The question itself didn’t give any breakdown of what any of the liabilities were made up of, but the note did say they all related to the financing of both Bower & Heeny’s operations, so it seemed reasonable to me to deduct all liabilites from the given recoverable amounts to arrive at the true recoverable amounts.

@fidget said:
@Magnolia123

I expensed the $7 extra research & $2m marketing costs as well – taking them off intangible assets (since they were accounted for in there per the question) and expensed via group retained earnings.

I’m with you on the goodwill thing as well. According to my study text, impairment is expensed first to assets it can be related to… but then, in the test your understanding bit, seems to contradict itself by applying the whole impairment to goodwill first and *then* anything leftover applied to assets it can be directly related to. So it’s a bit confusing since it could be that purchased goodwill is directly attributed to a certain asset which remains unaffected by the impairment of other assets.

Thank you for the response fidget. i got the impairment wrong, i didn’t minus the liabilities from recoverable amount and i included nci in the carrying value hence i ended up with impairment for bower and not heeney. I did jot down what i believe are the rules for writing off impairment (assets directly attributable first etc)

@hamdi90 said:
can anybody tell me was that a P2 paper or some theoretical paper 🙁 totally shocked that no question on any major ias just hope would get pass ….
can u guyz tell me how to calculate the impairment of bower and heeny???

You need to look at the paper carefully, it is detailed tested on major IAS/IFRS. You did not attempt the other questions – 1,3 or 4. The questions you must tell the examiner what you know by answering the questions – telling him what to do in each situation.
We should know by now that the paper is what you know about presenting publish accounts correctly according to standards.

Hope for a pass. Good luck everyone.

Hey, bear me, a favor by commenting on my following career plan. I’m in Pakistan and would be pursuing the ACCA and the associated BSc degree from OBU. After clearing all the papers, as an ACCA affiliate I would apply for a Masters Program on the basis of my BSc in UK or European country. After the Masters I could avail the opportunity of getting a post graduation work permit and could settle abroad. Feasible or long shot?

@cardine said:
Yes collegues!!!!!!!! I could not rest my brain with I clarify the difference that I got in the exam – CSoFP for Minny Group. It’s clear now; balance correctly 3725 and you can checked your answer too by working the question.

PPE 1655 (920 +610 + 125 FV Adj); Goodwill 163 (190 +23 – 50 Impaired Heeny); Patents 197 (263 – 2 market cost – 64 CV of AFS); Investment in Associates 55 (48 + 2 Divi + 5 profit (6/12*30*30%)); AFS 30 and CA’s 1625.

The Equity and Liability are: OSC 920, OCE 73 & RE’s 952 (895 – 28 share of impairement of sub-sub 56%, + share of profit – B 93; H 21; Divi rec’d 2; profit from associ 5; – Marketing cost 2 – patents impairement 34 (49 + 18 – 3 -30 preceived value stated in question); NCI 395 (239 + 178 – 22 (Heeny share of impairement)); NCL 711 and CL 674 (totals of parent and subsidaries on SoFP.

I hope this helps to clarify that we ALL pass the paper. If you’re in doubts, ask the almighty God for favour and will grant accordingly to his will.
Happy holiday everyone, and thanks for sharing your thoughts on OpenTuition!!!

Great attempt Cardine. But I noticed a few more adjustments required.

1) I believe the journal for Note 6 should be something like this …

Dr .. Group reserve 34
Current liabilities 3
Available for sale 30
Cr .. PPE 49
Inventory 18

………respective figures to be deducted from PPE, Inventory and Current liabilities and not Patent ( the information in Note 3 does not apply here)

2) Also, research cost of $7 in note 5 (incurred at the investigative stage) should be written off from Intangible assets as well as group reserve.

Anyway, quite easy to see outside the exam hall! But, the important thing is to have made a reasonable attempt by showing your workings.

Wish every one out there success.