AAA*** P7 December 2014 Exam was.. Instant Poll and comments ***

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Tricky - q2 with GW and impairment for the damage with insurance claim was confusing. Also the last bit about the inter group AP and AR seemed to obvious for 6 marks - also didn't get how the inventory fit in . Talked about materiality and attempted Fin treatment - hopefully can get some marks for this and evidence. What did u guys get down for q2? & how was it in general?

Odd exam. Question two was closer to a 'standard' optional accounting issues question but fairly complex areas ... i think to offset the 'easy' marks in the anticipated business risks question. The least 'audit' p7 paper ive seen in some time...apart from q2 there wasnt much 'hardcore' audit..especially if you picked the csr and ethics optional questions. not sure how i did...was rushed at end and not sure my closing answers were specific/clear enough. Will see in ten weeks!

Q1 was nice. I didn't have the mark breakdown but went 11,8,5,7 to get the 31. Q2. Talked about goodwill. Ias 38 Ias 23. Ias 37 for natural disaster. Unrealised profit for last bit. Q4. Through down some random points. Q5 was ok I think bar the discussion with management part.

What a pathetic exam set by the examiner. Worst ever P7 exam!

Not a hard paper. Just a lengthy paper. Time consuming in fact. Q2; goodwill's impairment should be done. fv Of net assets should be as per IFRS13. Many more points like these.

Did you feel there was a lot of rote elements? - tender document content - Consideration that will affect fees - S&E review difficulties - Consideration before reliance on expert The business risks seemed to jump out at you and the MM seemed obvious (i.e. GC, Provision law suit etc.....). Lot of low hanging fruits.........there must be sting in the tail

@abdul.y.ali said: Did you feel there was a lot of rote elements? - tender document content - Consideration that will affect fees - S&E review difficulties - Consideration before reliance on expert The business risks seemed to jump out at you and the MM seemed obvious (i.e. GC, Provision law suit etc.....). Lot of low hanging fruits.........there must be sting in the tail

Hi, can you please tell me how many business risks we were required to identify and evaluate in question 1.

If I remember correctly there were 12 marks up for grabs and found at least 8 (usually there is about 1-2 marks each)......some of the ones I found were (not saying there correct): - Not meeting regulations (loosing licence) - Fines - gearing - credit risk -competition - cashflow - over trading - new market - high public interest (general health & human testing) - Acquisition (due diligence not prop done)

@atab said: I identified quite a few business risks (probably one per mark...so 11). RoMM I identified 4 as we were asked..

I wrote 7/8 business risks. Is it sufficient enough to get me full marks?

MM - wot did u guys put down? I went down the route of: -GC -Provision litigation - Manipulation due Finance sought - Intangible assets abdullahzafar you get one mark per identification capped at about 3-4 thereafter you have to explain (7-8 is about right for full marks)

@abdul.y.ali said: If I remember correctly there were 12 marks up for grabs and found at least 8 (usually there is about 1-2 marks each)......some of the ones I found were (not saying there correct): - Not meeting regulations (loosing licence) - Fines - gearing - credit risk -competition - cashflow - over trading - new market - high public interest (general health & human testing) - Acquisition (due diligence not prop done)

I almost wrote all of points which you mentioned above. There is a business risk of going concern as the company's cash flows were in deficit and loans were increasing. There was a business risk of brand acquisition that it would not generate sales or cash flows for the company leads to risk of more cash flow deficit. New Control and accounting information implantation could require more funds which company would unlike to manage. Many more points like these

How many professional marks might you get if you did the introduction and headings and title but forgot the conclusion? So pressed for time!

@abdul.y.ali said: MM - wot did u guys put down? I went down the route of: -GC -Provision litigation - Manipulation due Finance sought - Intangible assets abdullahzafar you get one mark per identification capped at about 3-4 thereafter you have to explain (7-8 is about right for full marks)

Same points bro :D. Thank you brother for releasing my tension. Just add a one more point of new accounting and control system would lead to error or misappropriation of opening balances which will brought forward from previous year.

Was happy with the paper. Kaplan smashed it with their QBD very similar. Most of the tipped stuff came up so felt well prepared. The only tricky part was 2a with the goodwill and finance which was 12 marks and seems quite a lot of marks on offer so hoping I covered enough. The other two weren't too bad in the requirement. Roll on P6 dreading that :-(

Tricky paper massively time constrained as usual but plenty of opportunities to score points to be fair. Q1 not bad but a lot on intangible assets which wouldn't be strongest area. Most of the key business risks mentioned above plus the fact they are a listed company. Always an easy point to pick up. Was there a section on evidence expect to find in respect of New brand? There I have the usual board minutes and mgt rep on basis for useful life duration. Oh also wanted to see the sales projections for products sold under the brand. Moved on to time and left behind 5 marks on the last part (got down the managememt threat) Q2 Bit of a blur but felt I scored ok, the bit on contingent asset was disturbing, I discussed the likelihood that the claim would not be fully settled as the assessors have nothing to go by. Just a bit of common sense here I guess, if my car gets crashed into and I decide to burn it out I think my insurance company might challenge the extent of my claim. Q3 - what was this again? I think it was on social and environmental kpis. Did ok on this one but just like soc & env kpis it's a subjective area... Was use of audit expert in here? Ah SODIT (see what I did there? ;-) Skipped Q4 Q5 was ok but the implications to the AR were tricky. In all instances T&F, one except for, one completely Unmodified and one with a other matters paragraph (closure of plant) I need a vacation... Good luck folks

I guess question 1 clearly said " No control issues with the accounting system ", so any comments about business risk for it would not score mark.

There were 3 diff points in (a) quest 2 - goodwill, new loan and valuation so I assume the marks are spread either evenly or almost.

Q1,2,3,4... 5 looked troublesome so ignored it. :D In q2, the insurance claim was tricky, because the building had been destroyed due to natural disaster, and most insurance policies do NOT cover so-called "Acts of God" Therefore I demanded a copy of Insurance policy and any communication with Insurance company, because unless the policy is specifically covering such diverse damages as natural disasters, there is a very high chance there would be no compensation. IIRC, there was no mention that the company had purchased additional insurance specifically covering natural disasters.

Q2 did anyone notice that the natural disaster was after the year end. So I felt the carrying value didn't need any adjustment. Therefore, the contingent asset should only be provided for only when it is certain. I was so time constrained..... Hoping for the best

For the goodwill part in Q2, in addition to impairment, I think there was something with the initial recognition of goodwill. It said the following things: Add, NCI share of net assets (20%) = $13,000 Less, total net assets (i.e., 100%) = $61,000 As the NCI share is not PROPORTIONAL to the total net assets, this means it has been accounted using the fair value method and so, the NCI share includes goodwill, which effectively amounts to $800 (13,000 - (61,000*20%)). Thus, goodwill is overstated by $800. I am not sure if this is correct, nor did I do this in the exam myself. But there should be a reason they gave all of that!

@ifeyan said: Q2 did anyone notice that the natural disaster was after the year end. So I felt the carrying value didn't need any adjustment. Therefore, the contingent asset should only be provided for only when it is certain. I was so time constrained..... Hoping for the best

IAS 10 The nature and estimate of the financial impact of material non-adjusting events shall be disclosed in the financial statements. - Examples of material non-adjusting events include: Major losses suffered as a result of a natural disaster occurring after the end of reporting period

I agree q2 was a stitch up - I hope there are marks for saying the usual impairment of GW, materiality calc and the evidence/procedures. I get the feeling seeing that most people where quite good with the rest of paper the will mark them stringently and hit people hard with q2 ( and no doubt maintain those suspiciously consistent low pass rate). Anyone (with a better memory than I) recall the questions and mark split for q1-4?

its linked with RMM though.

Question 1-- business risks mentioned above Risk of MM - Litigation claim, Revenue recognition of animal rev,Valuation of intangible assets - brand,research n dev,gdwil if any; Inventory - gels, tablet, cream etc- can't remember the other Procedures - prior fin statements, bank depost, depreciation schedule,board minutes, due diligence report, sale cojtract etc Ethical - loan guarantee - self interest (pay off audit fees due - cahs flow probs, going concern increased gearing); reveiw of system - self review Q2 a. goodwill-material - impairment test req.increase loss valuation - not material in sense of value but bcuz of acq. 50% ofold value Loan -vlauation of financial instruments- amortised value-interest in PL, balance on FS Also had to discuss audit evidence to find (i think-cant rem) b.Claim - virtually certain - premature recognition 9insurance comp investigate: look at ins policy, report for demo cost, report property unsafe, etc c. cant remembr quest -ethics?? Q4 tender - company briefing, quality control standards, personnel backgroud,management and auditor responsibilities, audit objectives n approach ii.Fee issues n ethics - new client - two yrs no audit, test of controls, one accountant - overworked? reliance on data n also limited assurance review , evaluate qualif of unrlated firm;owner wants 4 mnt report and low fees in short time frame, strategic advice - ethical issues - lowballing, self interest. Fees based on qualification and time to be spent, develop learning curve. c. Former partner as quality control - no- familiarity n self interest, mitigate risk , new partner. Q5 Quality control n ethical New client, 20 locations, discussion wit finance dir. and no other info given (there was another issue-cant remembr) ethical issue - disc with fin - self interest b.share option -Ifrs 2 -material, provision - not comm b4 yr end, obsolete inv - due to market etc (not sure if it hard to be tied to part a but if it did the fig was not material) c. I thought adverse. Also a quest bout comp system - give rise to self review(cant remeber which part). Wheeww... I think/hope what I did is enough to muster 50%.

@nigs001 said: Question 1-- business risks mentioned above Risk of MM - Litigation claim, Revenue recognition of animal rev,Valuation of intangible assets - brand,research n dev,gdwil if any; Inventory - gels, tablet, cream etc- can't remember the other Procedures - prior fin statements, bank depost, depreciation schedule,board minutes, due diligence report, sale cojtract etc Ethical - loan guarantee - self interest (pay off audit fees due - cahs flow probs, going concern increased gearing); reveiw of system - self review Q2 a. goodwill-material - impairment test req.increase loss valuation - not material in sense of value but bcuz of acq. 50% ofold value Loan -vlauation of financial instruments- amortised value-interest in PL, balance on FS Also had to discuss audit evidence to find (i think-cant rem) b.Claim - virtually certain - premature recognition 9insurance comp investigate: look at ins policy, report for demo cost, report property unsafe, etc c. cant remembr quest -ethics?? Q4 tender - company briefing, quality control standards, personnel backgroud,management and auditor responsibilities, audit objectives n approach ii.Fee issues n ethics - new client - two yrs no audit, test of controls, one accountant - overworked? reliance on data n also limited assurance review , evaluate qualif of unrlated firm;owner wants 4 mnt report and low fees in short time frame, strategic advice - ethical issues - lowballing, self interest. Fees based on qualification and time to be spent, develop learning curve. c. Former partner as quality control - no- familiarity n self interest, mitigate risk , new partner. Q5 Quality control n ethical New client, 20 locations, discussion wit finance dir. and no other info given (there was another issue-cant remembr) ethical issue - disc with fin - self interest b.share option -Ifrs 2 -material, provision - not comm b4 yr end, obsolete inv - due to market etc (not sure if it hard to be tied to part a but if it did the fig was not material) c. I thought adverse. Also a quest bout comp system - give rise to self review(cant remeber which part). Wheeww... I think/hope what I did is enough to muster 50%.

There were no financial instruments. In fact it was a borrowing cost under IAS 23.

What were the marks available for question five please???

Q2 did anyone notice that the natural disaster was after the year end. So I felt the carrying value didn’t need any adjustment. Therefore, the contingent asset should only be provided for only when it is certain. I was so time constrained….. Hoping for the best I did the same. That be the correct treatment to not recognise? Conditions didn't exist at ye. Non adjusting event no?? Any thoughts?

q5 - think it was 3 marks for each accounting issue (3 x 3mrks) , 4 marks for the audit reoprt opinion and cant remember think part a was 7 marks regarding the long standing business relationship

Thanks emmamac. I thought the exam was ok. Time pressure got to me and I had to rush Q5. I found q2 very hard.. Wasn't sure about that one to be honest.