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Q1 June 2010

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Q1 June 2010

  • This topic has 5 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • December 2, 2015 at 6:54 pm #287058
    Deborah
    Member
    • Topics: 2
    • Replies: 6
    • ☆

    Hi there,
    I am just looking at the impairment of the bonds in note 4 of June 2010 exam. In my lecture notes the discount rate was the original effective interest rate but in the model answer they use the current interest rate to discount the cashflows. Which one is correct. In a previous exam paper it was also the original effective rate. I cant understand how it is the current rate in this paper.
    Thanks in advance for you help,
    Deborah.

    December 2, 2015 at 7:19 pm #287064
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22714
    • ☆☆☆☆☆

    We use up to date information so need to recalculate each time cost of capital / effective interest rate changes

    December 4, 2015 at 2:51 pm #287559
    Deborah
    Member
    • Topics: 2
    • Replies: 6
    • ☆

    Hi Mike,
    So do you mean the use of the 10% current interest rate is correct rate and the calculations by the other two lecturers of the 8% original effective interest rate is incorrect? Sorry but just want to be sure because I was taught to always use the original effective interest rate.
    Thanks in advance for your help Mike.
    Deborah.

    December 4, 2015 at 8:07 pm #287647
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22714
    • ☆☆☆☆☆

    We will use the original effective rate when we first account for the bonds but, as time goes by, we will use the up-to-date rate

    December 4, 2015 at 10:13 pm #287685
    Deborah
    Member
    • Topics: 2
    • Replies: 6
    • ☆

    Great thanks so much for that Mike.

    December 4, 2015 at 10:55 pm #287691
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22714
    • ☆☆☆☆☆

    You’re welcome

  • Author
    Posts
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