*** P2 June 2014 Exam was.. Instant Poll and comments ***

Q1 a Income Statement (35 marks)

What happy enough seeing this plenty of adjustment and gave you a chance to pick up some easy marks with the goodwill calculation. The adjustments for the Disposing of interest in entities I am sure will make or break this question in terms of marks for the most of people.

b

What on IFRS and fair value model, hard to get 9 marks out of that but argued about how they give you an option on ia 16,40 etc to use the cost model or FV model so it was unfair for them to say that. Also business combination is always done at FVNA so I guess that was fair enough.

c

Ethics, not a whole lot again for 6 marks. He was wrong to lie on the loan about the finance lease assuming that it was actually i Finance Lease(i made that assumption). Mentioned fidicuary duty to shareholder….good faith etc.

2.

a

Functional Currency of new company. I said it was Dinars because they invested all there money in Dinar bonds which is the primary economic enviroment of the entity.

b

Deferred Tax Charge, didn’t FX this but just said the a deferred tax charge on OCI and provision on SOFP. They delibaretly mentioned Deferred tax charge as I initially thought it was a deductable as the carrying was lower than the tax base but just made it work. Also said why it wouldn’t have resulted in one had they stuck with normal historcial cost. That was basically IAS 12

c

Goodwill calc wasn’t huge issue for me

d

This wrecked my head and got me very worried. I discounted back to PV over the 2 years but ended higher than the original par amount of 50 million. Anyways I accounted for it and only copped the Interest part, especially as it said it was done at average rage so just took my PV of future c/f and multiplied it by 8%. Not sure I got it right but just praying to get 2 or 3

Q3

a

Talked about this company and various issue. recognize revenue, independence of the boards, construction costs, recognize the loan as they are the legal guarantor.

b

Didn’t have a clue, but coped the brand bit and waffled about IAS 38 but i said the fees would have to expensed to pl as they were basically marketing fees and nothing to do with development of a brand.

c

IFRS 5 i think this was. Talked about all the rules….where it would be shown, profit goes to pl . How you remove the assets and liabilities and show them as Seperately on SOFP. That it was in 12 months also

d

Leased property wasn’t it? mentioned something about Provision to return, contigent Liability for any costs. Capitalise the improvements and depreciate over the life and mentioned something about the roof and a assumption that it was part of the deal and hence brought it under ias 37 provision if it was already agreed he could charge them for it.

One thing was I was under massive pressure for time., i have to rush 2 and 3 and my writing was poor I think. Not enough time in that exam…but I got something down for everything thankfully.

Any views?, I spent ages on the PL and OCI and did it fully. I hope they take that into account the work I put into it!!!!

Who attempted question4?

not a good paper. specially adjustments 🙁

Q3 B.

About the 3 Year contract,

I wrote that the signing bonus of $20,000 should be expensed out in the PL this year, as the contract has already been signed.

And for $50,000 annual payments, as the company is locked in the contract to pay given that the tennis player plays the specified tournaments, the 50k this year is current year’s liability/contingent liability (contingent to the player attending the tournaments). and the remaining 100,000 (50k x 2) total for the next 2 years should be discounted down to present values and shown as non current liabilities/contingent on the SFP.

And for the 20% of tournament prize winnings, I said that no liability is created until she has actually won.

what say ?

“I thought 1b was asking about ifrs 13 fair value measurement?”

Yes it was about IFRS 13 Fair value, but I took it up as a question about the FV models more so that than actual FV as I think that has been asked recently before. Directors felt the IFRS were pushing the Fair Value model rather and as a result giving misleading company valuations etc.

I not saying I am right by any means but given the way the question was phrased I went into a ramble about FV models in the standards rather than quote level 1 2 3 thing.

“Q3 B.

About the 3 Year contract,

I wrote that the signing bonus of $20,000 should be expensed out in the PL this year, as the contract has already been signed.

And for $50,000 annual payments, as the company is locked in the contract to pay given that the tennis player plays the specified tournaments, the 50k this year is current year’s liability/contingent liability (contingent to the player attending the tournaments). and the remaining 100,000 (50k x 2) total for the next 2 years should be discounted down to present values and shown as non current liabilities/contingent on the SFP.

And for the 20% of tournament prize winnings, I said that no liability is created until she has actually won.

what say ?”

Damn forgot this was based over 3 years rather than one year and expensed it all rather than show a liability for 2 of the 3 years. GRRRRRR

Are fair values in the standards not determined by the rules underpinning IFRS13? I interpreted it as write about IFRS 13 and throw in a little commentary about if its any good or not.

I did 6 month sub and 6 month associate too. It mentioned that they now have significant influence which suggested an associate.

Q2 I decided that the functional currency was dollars as they make payments in dollars and the parent controlled all investments etc and their base was dollars. Not sure if that’s horribly wrong

Rest is a bit of a blur, I missed out the 7marks on part 3a as that was my weakest question and ran out of time. I have never not finished a paper until now!

Wow that was tough! Q3 was toughest by far. Question 4 I did instead of 2 and i interpreted as applying the term “liability” to the 2 different share types. One set of shares had a contractual obligation to give out cash and the other was just an equity swap. I don’t know about you guys but I’m confused by Q4?? the last 2 sittings have been weird and not at all about current issues.

The one that threw me was Q1 part b. The directors were on about “financial value” vs Fair Value. I thought financial value is the amount the company is worth in the market?? either way if people start valuing their companies any way then it will be open to manipulation right??

P2 is getting tougher no doubt, I’m hopeful to scrape through and never see it again!

I’m also sure that Q3 part 1 was to do with a joint venture/associate, but i’m noticing now they aren’t putting IFRS references to make it easier! The tennis player must have been recognised as an intangible as they do meet the criteria, and all the expenses will be expensed??

This exam is a total failure for me. I’ve lost too much time on Q1 a. Option the subsidiary was sold on 1st Oct. So I consolidated it its results for 6 months and the rest I accounted it as Share of profit from associates. Not sure about the pension anyway. The question was asking about the expense through OCI so I adjusted with only the actuarial loss. And then the effective hedge which was a lost, not sure about that either. Anyway I moved it to OCI
For the rest of attempted questions (2 and 3), I had not much time left to complete them. So I am pretty sure I will sit this exam again in dec.

what a paper!
q1) Question one was an p & l consolidation..
Am not sure about the goodwill… it was 15 then reduced by 3 (impairment) to 12 then revalued to “2 above the original value”
what was supposed to be done in this? I reversed the impairment previously realised.. got end goodwill figure of 17

q1b) to do with fair value.. i described the whole ifrs about what it says and explained that IFRS do not actually advovate for the use of fair value and gave an example of ias 38 in which intangible are not to be valued under FV if there have no active market.. hope to get some marks out of 9

q1c) ethics.. why hiding of finance lease is wrong..

q2a) asked about functional currency.. now facts first:-
– subsidiary was not independant
– profits were held by th parent (parents functional currency was dollars)
– the little expense it has was paid in dollars

true its capital was in dinars.. but i chose dollars as its functional currency. Is this right?

q2b to d) had other issues to do with foreign goodwill and foreign loan etc.. hope i got some marks

q3) overall was a proper killer..
a) to do with a property developer.. had some houses which he sells th rights to own to the general public.. I discussed IAS 16 IAS 40 and IAS 2. concluded should be treated as IAS 2 inventory since this is what the co deals with… God knows if I am right..
there was a revenue recognition aspect as well..

I felt really time pressured in this paper
Hope what i did will help me get a 50! Hope WE ALL PASS!

Now p1 tomorrow.. best of luck everyone!!!