- November 25, 2015 at 5:26 pm #285263
I have 2-3 queries regarding this question
1. Regarding the intangible asset , its included in fair value adjustment but its amortization is not included, and more importantly will the intangible asset be included in following 6 months of acquisition ?
2. Why is 2000 being added back for finance costs And 2000 subtracted from 3000 also?November 25, 2015 at 7:22 pm #285280
I’ve recorded a video answer to Pandar and Salva. It’s in the F7 material called “Revision lectures”
Have you checked that out?November 25, 2015 at 8:31 pm #285297
1. The intangible asset you are referring to is probably “popular internet domain name”. It is written in the question that it is renewable indefinitely at a nominal cost, therefore, the amortization is not included.
2. Salva’s finance cost is 3000. Pandar invested “immediately after its acquisition of Salva” i.e on 1.April.20X9, therefore, Interest cost after the acquisition is 2000 (50,000 x 8% x “6/12”), which is intra-group and should be excluded. The remaining 1,000 (3,000 – 2,000) will be charged for six months = 1,000 x 6/12 = 500. So Pandar 1800 + Salva 500 = 2300.
I am giving F7 in December 2015 and tried to answer your question in best of my knowledge. I may be wrong.November 25, 2015 at 8:35 pm #285298
Thanks a lot I get it, just please tell me regarding intangible assets whether they will included hypothetically speaking post acquisition as they are included in pre acquisitionNovember 25, 2015 at 8:42 pm #285299
No sir I haven’tNovember 25, 2015 at 9:24 pm #285300
Read the question again, it is written there that “The fair values of the plant an the DOMAIN NAME have “not” been reflected in Salva’s financial statements”. Had the domain name already included in the financial statements, we would NOT include it.November 25, 2015 at 11:17 pm #285306
If the domain name had been included as a result of the fair valuation exercise as at date of acquisition, then it would have been shown in Salva’s SoFP.
If that had been the case, then it WOULD have featured in the consolidated SoFP
If the fair values have NOT been reflected after the fair value exercise as at date of acquisition then, upon consolidation, the intangible asset of the domain name WILL STILL be reflected in the consolidated SoFP
In this respect Ammar, you are incorrect. And, because of that, it would be preferable if you didn’t elevate yourself to the status of “tutor” – this page is entitled “Ask ACCA Tutor” for a reason 🙂November 25, 2015 at 11:21 pm #285307
Muslim Farooque, the reason that I spent my time recording answers to questions like Pandar was to prevent the necessity for students to ask about questions such as Pandar. I work through the question step by step and explain as I go along.
Can you begin to imagine just how frustrating it is to have to read about, and then answer, the problems faced by students that are not prepared themselves to check out the resources available to them through this site
May I respectfully ask you to check in future the extensive resources available for each paper?November 26, 2015 at 12:08 am #285311
With all due respect, I was not trying to elevate myself to the status of “tutor” at all.
I just shared my approach to the question, therefore, I also included that I might be wrong. Moreover, I was waiting for your answer to check whether my approach is correct or not. However, I will refrain from commenting any further on this website. Acknowledged.
P.s I said we will NOT take it in Goodwill calculation and I was NOT referring to Statement of Financial Position. I might be wrong again.November 26, 2015 at 6:25 am #285346
Thanks a lot sir just wanted to know that whether the intangible will be included at reporting date also, as amortization is not being charged, I will look into the resources you just mentioned alsoNovember 26, 2015 at 9:41 am #285392
Ammar, yes, you are wrong again. The unrecognized value of an intangible asset WILL BE included within the goodwill calculationNovember 26, 2015 at 9:44 am #285396
Muslim, development costs still being incurred on a development project will be recognized in the statement of financial position even though amortisation is not being charged.
Land is similarly included even though depreciation is not being charged
Investment property is also included even though depreciation is not being charged
Assets held for sale are in there too even though depreciation is not being charged
What on earth makes you think that an asset would be excluded simply because amortization was not being charged?November 26, 2015 at 12:14 pm #285449
I got it thanks sirNovember 26, 2015 at 12:34 pm #285452
I am sorry but I cannot understand this point. In Pandar, it is specifically mentioned that intangible asset is NOT reflected in Salva’s Financial Statements, that is why we take it in the calculation of goodwill and Statement of Financial Position.
In the normal goodwill calculation, we take the Fair Value of Net Assets at acquisition and therefore, use the Equity section of Statement of Financial Position which is (total assets minus total liabilities) so why will we include intangible asset if it’s reflected in the Financial Statements? There will be doubling, no? I am not trying to make a point but trying to clear my concept regarding this matter. Waiting for your answer.November 26, 2015 at 1:08 pm #285458
If it’s already reflected in the figures then it’s automatically taken into the goodwill calculation
if it’s not already reflected in the figures then we need to include it as an additional asset in the goodwill calculation
In both situations it is included in the goodwill calculationsNovember 26, 2020 at 10:55 pm #596613FamousWolfMember
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cant find the video of pandar and salva’s question. can you assite me with a direct link/urlNovember 28, 2020 at 7:38 am #596798
I’m not sure they exist anymore. If they do then they will be in the revision section.
ChrisJanuary 24, 2021 at 9:14 am #607727SakinaMember
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So i tried to find this question on the revision tab, but it seems to be not available.
I have done this question perfectly only stuck on the finance costs, i am not able to get it.
Can you please help understand on a step by step basis of how we got 2500 as finance costs for subsidiary.
I am okay with Parents share of 1800 and i am okay with the adding back on inter company interest of 2000.
But the 2500 for subsidiary is where i am stuck, please if you can explain it in a simplified manner.January 29, 2021 at 8:13 pm #608514
I doubt many people in the exam will have got this correct, so don’t worry about it too much as it is very tricky indeed.
We can’t simply pro-rate the 3,000 by 6/12 as some of this relates to the intra-group interest. As the intra-group interest is a post acquisition amount it will not be pro-rated, it is effectively the amount incurred for the 6-months since acquisition.
To work out the amount that needs to be pro-rated we therefore remove from the full expense the amount that is not going to be pro-rated, i.e. the 2,000. This means then that 1,000 is going to be the figure that relates to the full 12-months (3,000 – 2,000). This can then be pro-rated for 6-months, hence the (3,000 – 2,000) x 6/12 in the answer.
To then get the full amount to be included for the subsidiary for the 6-months we then need to add in the 2,000. This is a bit strange as this is then the amount that is deducted due to it being intra-group but is how it has been shown in the answer.
Hope that helps.
ThanksAugust 20, 2021 at 3:50 am #632280avantikaphuyalMember
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thanks chris got it . i spend soo many hours trying to figure out on my own but you explained soo simplyAugust 29, 2021 at 10:30 am #633337
Glad to hear that you’ve understood it. Try to not spend too long on trying to understand the more complex aspects of the questions. Stick to the basics and you will be fine.
ThanksDecember 5, 2021 at 7:52 pm #642644bhavesh11Member
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love your reply thank you sir
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