*** P7 December 2015 Exam was.. Instant Poll and comments ***

Hello to everyone and good luck!

Can someone debrief abour wip treatmnet (ias2, ias 16 or something else e.g. ias 11)?

@weechee said:
Hi

Although i did not attempt this question I am not entirely sure IAS 28 applies.

It seems that IAS 28 Investments in Associates, will only apply once the shareholding is between 20-50% and there is exercise of significant influence of the operations of the Associate.

10% shareholding does not seem to qualify here, unless the substance of the transaction is such that significant influence appears to be exercised in the absence of other increased shareholding.

It is likely that this transaction will be treated as a Financial Asset, subjected to FVTPL or FVTOCI, and should probably be governed by IFRS 7 & 9 which has to do with Financial Instruments & its Disclosures.

yeah…
Q1 was lengthy but i used the layout from the ACCA P7 video for exam technique in order to grab as much of the 4 professional marks as possible…

the Audit Risks were for 18marks…
so if 1.5 to 2 marks each, that means about 9 to 12 juicy sentences/paragraphs..
(from past papers, one can see that usually such a question has way more info and data than needed to get the full mark allotment)
i put in stuff like;
-couple points on Management Bias due to pressure from listing and bonus;
-couple points on FX issues;
-Rev Recognition due to advance payments;
-Inventory issues due to WIP and also the generic stuff lying around; -Sharebased payment not being recognised at grant date at fair value; -Revaluation exercise -reason for it? as it bumps up the asset value of company;
-couple points on Government Grant cos need to be sure that work is in deprived area and also that Deferred Income will not need to be returned seeing that the conditions need to remain over the next 5 years;
-potential lack of Provision for warranty terms etc…

then added in for the further info required (5marks);
-reasons for Revalue exercise; more info on Gov Grant criteria and deprived area definition fulfilment; plus Provision for warranty calcs; plus Sharebased payment stuff etcetc…

WIP (4 marks) =Inventory,
so lower of NRV vs Cost ? and included comment about faulty eqiupment returns; Inventory Count procedures done correctly in order to identify and segregate the WIP; plus documentation for related

Gov Grant (4marks);
Criteria fulfilled particularly the deprived areas work for the 2mill; correctly 8 mill on Deferred Inc or not

Q2 – Kadinsky Going Concern issues;
there were quite a bit… just had to list them and state that it all pointed to inability to continue business if they did not find a longer term financing option before being hit and having the Insolvency actions begin..
i just think that i didnt explain what GC meant, but not sure if that sort of elementary level of info was needed…

Q3 -from what i recall on 3 Matters plus Evidence…
first two cannot remember..
the Segment one was about them going to more relevant info…
but then had to say that it was ok as long as it was not less reliable etc..
then said that would have to be convinced with man’t reason behind it, and ask for the info in the former manner to see if there was any creative accounting being done…
but otherwise stated the elementary stuff like Segments need to cover 75% of revs/profits/ assets, even though it covered 100% 🙂

the Audit Committee question for 6 marks;
haha… geez… rambled thru the entire CLARISSA Whistleblower list.. haha.. if i dont get the full 6, i wanna know why 🙂

Q5 -not many seemed material…
the Lease was immaterial, but cos of Man’t refusal to change, it brought up question of Integrity – although not really enuff to change Audit Report, but enuff to mean extra Professional Scepticism required.. blabla.. i think that only the last part was material (by nature) even if not by amount… 2 to 3 of the 4 points didnt seem material… obviously getting to accumulation could get dicey…
seemed like a discussion topic rather than clear-cut answers 🙂

overall, expect to at least pass…
possibly get a decent mark 🙂
if they dont

Hi all

Just to be absolutely clear, the INT paper used Q2b to test the audit of performance info in the public sector, as per a very recent examiner article. Anyone not expecting this on the INT paper? Seemed like the most obvious of all this time’s tips. The UK paper does not have this on its syllabus so I presume will have replaced it with something on insolvency rules (as that is not on the INT syllabus).

I find it odd when students say there was too much to write in Q1a. If there are 18 marks, then write an 18 mark answer and if there are more risks than you need, leave out the nastier ones like the share based payment. The mark allocation is the key (always), not writing every single thing you can see from the scenario.

The Maters and Evidence question was tough. Middle issue was a 10% holding in another company. Key point is that it should be at fair value at the year end (IFRS 9). OK, could argue that even at 10% it could be significant influence, but that is not the main point in that story I think. To then add segmental info … well the first scenario was ok but the combo of 2 and 3 makes it quite a toughie I reckon.

Did anyone not do the Ethics question? Looks far easier than the other 2 option questions to me.

As for Q5, only 4 marks for audit report implications which told me that there are no audit report implications for some of the 4 scenarios or there would have to be more marks.

Lengthy…time pressured

@ukhn said:
IAS2 – Because they sell this equipment therefore its stock!
IAS 16 is Assets like PP&E and IAS 11 is constuction contracts where you are building PPE for own use that you capitalise

Risks – Hold WIP at lower of cost at NRV, risk that returned stock is obselete but still held at cost therefore stock overstate and expense understated.

Evidence
Its ias 2
issues were..establishing how much is stock and how much is obsolete stock but still recorded at cost etc

They were building bespoke assets and alot of it was returned and therefore no resale value as such leading to obsolescence and stock over stated.

1-obtain stock requisition sheets to establish level of stock at year end! and incomplete machinery would be held as stock ensure any returns are excluded for obsolescence reasons

2-Obtain purchase document of components that form part of WIP machinary and verify cost and confirm the same to bank payments

3 – For any revenue recorded in relation to WIP confirm that the product it relates to is not on the stock counts sheet and that its delivered to customer before year end

4 – spoke about provision for returned stock as well – can’t remember the evidence i wrote tho

Just a note… ias 11 and 18 have been superceded by IFRS 15

@raoul7370 said:

Did anyone not do the Ethics question? Looks far easier than the other 2 option questions to me.

I did the ethics question… and kinda wishing I hadn’t. They’re a trap because it’s harder to score the points in them than you think. Previous examiner’s report on them says that they’re always a popular choice, but are rarely well answered.

i was only able to complete 3 questions ie 1,2,3, could not attempt the 4th one but hope to sail through .