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What I did for Goodwill in Hampston was use 3 amounts for the FV of Consideration, the original amount Bidgeford paid for the 25% plus the increase in the fair value of that 25% holding which was from 200 to 225 so 25 is the increase in FV. Plus the 70% of what Lambley paid for H because it was L that paid for H. So 200+25+(70% of what L paid for H) . I think it was 70%. Then I put the increase in the FV of H as in the 25 to the retained earnings of B as it was a gain on disposal of an investment. It wasn’t Really a disposal but H was no longer an investment for B, it was now a sub sub at the year end.
I just see it as it is all Fair Value figures at the date of acquisition. So you have to bring in fair values for goodwill consideration and the net assets. Same as the equity tables, bring everything in at fair value. I screwed up on the fair value figures at acquisition for Lambley, it’s normally given so I just couldn’t remember how to figure it out myself. It’s over now, cannot change anything. So what will be will be in April. It’s a really tough paper to pass I think.
@hassandiamond said:
Yup! The difference between the 2 associate figures needed to be added to Ret Earnings because Bideford was still recording it at cost.If possible, can you guys remember what you did with the Inventory and provision? I think i worked out an inv write down of 3m and then with the provision, because it was an “onerous contract” you record a provision for the lower of the total payments in the contract or the cost to terminate. I think it was 3.5 off retained earnings and then added to Liabilities on the face of the SFP.
Exactly what I did on that Q
@determinedciara said:
What I did for Goodwill in Hampston was use 3 amounts for the FV of Consideration, the original amount Bidgeford paid for the 25% plus the increase in the fair value of that 25% holding which was from 200 to 225 so 25 is the increase in FV. Plus the 70% of what Lambley paid for H because it was L that paid for H. So 200+25+(70% of what L paid for H) . I think it was 70%. Then I put the increase in the FV of H as in the 25 to the retained earnings of B as it was a gain on disposal of an investment. It wasn’t Really a disposal but H was no longer an investment for B, it was now a sub sub at the year end.B owned 60% in L but im sure thats what you put in the exam. You did Exactly what i did, and is also consistent with past exam answers. It needed to be added to Ret Engs, because the qn said Bideford had kept Investments at cost (ie the 200)
Also, the difference between what L paid for H and the figure you entered in the goodwill consideration (ie 40 % of L’s investment in H) needed to be deducted from the NCI figure of Lamley to avoid double counting (Indirect holding adjustment).
There was also a sneaky bit about how B had included 5m of legalcosts associated with the purchase. That had to be removed and deducted from Ret engs.
This examiner must hate seeing people pass!
when ever it’s step acq or D shape acq its is easy and straight forward to calculate unless you in the stressing environment and lots of pressure and you are genuinely misread then … June
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Hassan’s answer is right.
it was not a direct purchase but the substance of that transaction needed to be considered rather than just a legal form……according to which the accounting boundary of 50% holding and control has been crossed… if i am not wrong it should be a step acquisition
@anam121 said:
it was not a direct purchase but the substance of that transaction needed to be considered rather than just a legal form……according to which the accounting boundary of 50% holding and control has been crossed… if i am not wrong it should be a step acquisitionTerminology is not important. As long as we both did the same thing, and we are both correct, then i don’t care if it’s called a Shotgun Acquisition LOL
RE q3 B store in liquidation for sale. My read on this was that the asset did not meet all criteria to transfer to ahfs. it was not available for sale in its current condition due to the ongoing liquidation sale.?????
As it was 8 marker, i saw it as a 50/50 split between Construction costs (IAS16 and IAS 23) and then the IFRS 5. I wrote that all the costs associated in getting the store ready for use should have been capitalised. As for HFS, I cant fully remember, but i think i listed the criteria for HFS, and i think i stated it would classify. I didn’t think Liquidation effected the classification as i didn’t see it as “Work to be done to get the asset ready for sale”. I reckon i could be wrong there.
I did say, that as the decision was made 3 months after the Year-end, it was a non-adjusting even under ias10. Though i really wasnt sure if that was right either.
How did you see the 3 deposit payments with the leases? I said with Op lease, it should be added to the total lease payments and recognized in the PNL on a straight line basis. For the 1st Finance one, i said it would reduce the effective rate of finance. The 2nd finance one, i said as it was interest free and to be returned at the end of the lease, i said it should include finance costs which equal the amount of interest that would have been occured under normal circumstances. Again though, it felt wrong when i was writing it. I dont recall learning this stuff during my studies!
I am so surprised how you remember all these details,
For some reason, i got a negative goodwill which i was surprised in the exam room, but hey under pressure, you do weird things…@francois988 said:
I am so surprised how you remember all these details,
For some reason, i got a negative goodwill which i was surprised in the exam room, but hey under pressure, you do weird things…I know it’s a bit late now. But i sometimes find clues in the notes. For example, in note 3 when they tell you that both subs had an impairment review. That’s a big clue that there shouldn’t be negative goodwill. You wouldn’t do an annual impairment review for negative goodwill as it cant ever be reversed.
Preparing to sit June ….best of luck to all of u …. Am surprise how you can remember so much details from the exams
i passed P2 at last attempt dec 15,i only attempted 80% but passed it.
Don’t worry,if u did 70-80% but right(according to examiner ),u will get pass…I too did it as step acquisition.. I was really shocked to know it was D shaped.. Hope it wasn’t DAT.
What did people do in respect of 4a and the practical considerations of moving to a new IFRS?
I just stated the obvious e.g audit risk, governance, new systems, expertise/consultation and a few others … I’m banking on that being correct as I messed up a large proportion of the exam up, with consolidation being the worst (I did however move straight on after 1.5 hours).#
Also, with IFRS 13 I just mentioned the 3 level hierarchy and then worked out that B was the market to calculate the Fair Value as it had the highest volume. I ignored market A as the estimation given by the farmer needed more evidence to support this (I have a feeling this was incorrect?)
Finally (1a), when calculating whether to issue a provision for the materials that were used in the product (that made a loss) … were we supposed to calculate the cost of selling the product? I calculated this at around a $2.5m loss with was significantly less than the $3/$3.5m fine(?)
I’m hoping the above is right, as I need all 3 of them to provide me with shed loads of marks and then the majority of the professional marks to help push it up 🙁
@ryansm05 said:
What did people do in respect of 4a and the practical considerations of moving to a new IFRS?I just stated the obvious e.g audit risk, governance, new systems, expertise/consultation and a few others … I’m banking on that being correct as I messed up a large proportion of the exam up, with consolidation being the worst (I did however move straight on after 1.5 hours).#
Also, with IFRS 13 I just mentioned the 3 level hierarchy and then worked out that B was the market to calculate the Fair Value as it had the highest volume. I ignored market A as the estimation given by the farmer needed more evidence to support this (I have a feeling this was incorrect?)
Finally (1a), when calculating whether to issue a provision for the materials that were used in the product (that made a loss) … were we supposed to calculate the cost of selling the product? I calculated this at around a $2.5m loss with was significantly less than the $3/$3.5m fine(?)
I’m hoping the above is right, as I need all 3 of them to provide me with shed loads of marks and then the majority of the professional marks to help push it up 🙁
For adoption of IFRS 1 i mentioned alot of the IFRS 1 main headings; EG Recognition of Items permitted under IFRS which weren’t before. Derecognition of items that aren’t permitted by IFRS that were before. Measuring items in accordance with IFRS. Reclassifying items in accordance with IFRS. Transition date and how it must go back 2 years in order to provide a comparison year. Also importantly, the Gains/Losses have to go direct to Retained earnings and not PNL. Then spouted a little about audit risk/ethical challenges of moving to a principles based model.
I’m a little confused about your other qn? I remember a provision to settle an onerous contract. And also an Inventory write down, because the NRV had fallen below the Cost?
@hassandiamond said:
For adoption of IFRS 1 i mentioned alot of the IFRS 1 main headings; EG Recognition of Items permitted under IFRS which weren’t before. Derecognition of items that aren’t permitted by IFRS that were before. Measuring items in accordance with IFRS. Reclassifying items in accordance with IFRS. Transition date and how it must go back 2 years in order to provide a comparison year. Also importantly, the Gains/Losses have to go direct to Retained earnings and not PNL. Then spouted a little about audit risk/ethical challenges of moving to a principles based model.I’m a little confused about your other qn? I remember a provision to settle an onerous contract. And also an Inventory write down, because the NRV had fallen below the Cost?
When I mention the provision, it’s probably easier to look at at Shriq’s comment. It was cheaper to manufacture the inventory and sell it, rather than settle the ‘onerous’ contract for the direct materials.
I wish that I used the IFRS 1 headings that you mention.
However, I’m clutching a little in that these are pretty technical aspects whilst the question asked for practical considerations.
@ryansm05 said:
When I mention the provision, it’s probably easier to look at at Shriq’s comment. It was cheaper to manufacture the inventory and sell it, rather than settle the ‘onerous’ contract for the direct materials.I wish that I used the IFRS 1 headings that you mention.
However, I’m clutching a little in that these are pretty technical aspects whilst the question asked for practical considerations.
I think it asked for a bit of both, technical and practical, cause i remember the phrase “as well as”.
As for the onerous, i cant actually remember what the contract/provision was for, but i;m almost certain, the option was to stay as normal, and pay 5M or to settle and pay 3.5M. I know Martyn also did this, so maybe he can add his opinion as my memory is fading a little now!
The inventory question i remember was, that due to some change, the selling price had halved. So my NRV figure was now approx 7.8 and cost was 10.8. They said they were currently valuing at cost, so i subtracted 3 from inventory on the face of the SFP and deduced 3 from group reserves.
@sharique123 said:
Hi.My friends plz give me your comments on this:
* In consolidation question, following are my concerns:
– In fair value adjustment of plant I gross up the carrying value of plant at acquisition date and then compared with the fair value because carrying value of plant was given on later date and fair value adjustment required on acquisition date. I still remember that fair value adjustment comes as 10 and incremental depreciation was 4.
– In IAS 37 I did not selected value for provision as higher of two instead I selected higher of 3 – that is the cost of cancellation of contract 3.5, cost of purchase – scrap and cost of purchase and make the product (the loss in this third case was the lower so I recognized the provision for this – the cost to purchase and make the product)
– In Investment property, I split between 2 and 3 floor and then accounted for all the fair value adjustments. I still remember the total value for Investment property in balance sheet was 30.4.* In Q2 and Q3 – following are my concerns:
– In one part in which fair value of land was required I wrote that land must be valued using the principal of HIGHEST AND BEST USE and I also included the tax credit value in the fair value of land and then compared the value with the other one after deducting all the given cost and discounted also the risk amount. In case of Intangibles wrote that Intangible must be valued at the amount of direct benefits and also must be tested for impairment as indirect benefits was higher.
– In one part I only wrote that since IFRS 05 criteria not met therefore asset can be classified as HELD FOR SALE but I wrote that it can be classified as Discontinued Operations.
– In one part (which was about factoring) I wrote that since there was a continuing involvement therefore the financial asset must not be derecognised and the entry must be reversed but I heard that the correct answer was to record a loan.– In one part in which fair value was required and market volumes were given I only wrote that Market with highest volume must be selected for valuing and transport cost must be deducted and transaction cost must be ignored.
– In one part in which mutual fund acquired the shares, I wrote that shares must be valued using the 3 level hierarchy given in IFRS 13.
– In one part in which provision matrix was asked. I only wrote that use of provision matrix is appropriate and the calculated the lifetime losses because Trade receivables and Contract Assets (IFRS 15) case requires to record the lifetime losses but question was on the appropriateness of use of provision matrix in respect of which I only wrote that use of matrix is appropriate.
– In respect of one question with respect to leases I wrote that in case of finance lease the amount paid must be capitalized in the cost of asset as IAS 17 requires that initial direct cost must be capitalized and in case of operating lease the cost must go in PNL directly.FVA:
I cant remember exact numbers, but it sounds familiar. 2 years of depn right?? Did you also have a provision FV (9 at acq and 3 at y-end i think) and a Land reval of 193?
Provision on onerous contract:
I still believe it was 3.5 settlement, but who knows!
Inv Property:
Sounds familiar too. Did you include the Initial revaluation to 70 in OCI according to IAS 16?
Factoring with recourse:
Yes i think the correcting journal approx:
Dr Receivable 4 (added back to face of SFP)
Cr Loan 3.6 (Added to Liabilities in face of SFP)
Cr PNL (Group Reserves) 0.4 (W5)Lifetime Expected Credit Loss:
I calculated the weighted Expected total (Lifetime) loss using the Matrix and got a figure of approx 83. The existing Provision was for 50, i mentioned that it should be increased by the difference of 33 (approx).
Leases:
I really struggled with this, but i do know that the Op lease payments including lump sum deposits, must be recognised in the PNL on a straight line basis.
@sharique123 said:
Thank you so much hassan.
– I didn’t get your first point which was about provision FV? What do you mean by this?
– What about finance lease payment, I treated it as initial direct cost and included the payment in the cost of asset and also suggested to depreciate over lease term Is it correct?
With respect to Inv property, I included in OCI
In factoring is it necessary to record a loan, will it be more appropriate to not just derecognise the asset as there is a continuing involvement. I did not wrote about recording a loan but I only wrote that asset must not be derecognised as there is continuing involvement.
With respect to lifetime credit losses, the question was not about to calculate the loss, instead it was about to comment on the appropriateness of the use of provision matrix. Is it correct to calculate the loss only?
With respect to Inv property, also tell me that the split was required to be in the ratio of 50/50 or as the the floors means 2/3. I applied 2/3.
Will be really thankful if you could please provide your comments on the following remaining which I asked:
– Land IFRS 13 part in which tax credit was also discussed + Intangibles (direct and indirect benefits)
– Stores construction – IFRS 05 part.
– Part in which market volumes were given to calculate the fair value.
– Part in which mutual fund acquired shares and gained control.Thanks once again hassan for your comments.
I didnt do q2, i did 3 and 4.
Note 1/2 gave a preliminary net assets figure of L and said that they wanted to include a provision with a FV of 9. I included it, by reducing the Net asset at acq figure by 9. Then i think by YE it was at 3 or 6, so i included that in Liabilities and Group reserves.
The lease i’m not sure so cant really add anything.
I did the same with the investment. Revaled it up from approx 30 to 70 in OCI. Then split the 5 floors 3/2. Depreciated the PPE but not the Inv property as it doesnt get depreciated.
For the Credit loss, i think discussion and numbers was needed. They wouldnt give you numbers if they didnt want you to do something with them.
Factoring, definitely needs to be recorded as a loan and the receivable has to be re-recognised. Otherwise, what would the cr entry be to the receipt of cash from the bank?
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Q1 was demanding. some tricky notes.
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hey. cannot even comment. i do not know what to say and. certainly hope i managed to pass
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