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Related to Examiner Answer
Q3(a)
Salaries and other payment:I. How the percentage of 8.5% and 9.4% as well as 4.1% being calculated?
Repayment of the bank loan
“therefore,the loan repayment event represents a material uncertainty which may need to be fully disclosed in the financial statements of Rope Co in accordance with IAS 1 Presentation of Financial Statements”
ii. This question is for Review of PFI(ISAE 3000) or part of the audit procedure(examine the GC status) to examine the CF forecast ? as I have a bit confused abt the requirement of the question, which if it’s related to review engagement , the above paragraph will not necessary?
Further audit procedures
iii.The fifth one. What are the agreements in principle?
Thank you.
“While annual receipts from customers and payments to suppliers are forecast to rise during the forecast period by 8·5% and 9·4%, respectively, the amounts attributable to salaries and other operating payments are only forecast to rise by 4·1%.”
So you should be looking at ANNUAL amounts and FORECAST period – e.g. receipt from customers (14,950 + 15,400)/(13,945 + 14,050) = 1.0845095 – i.e. 8.5% increase.
Remember to read the intro sentence/para to a scenario for context “a cash flow forecast covering six-month periods to 30 September 2018 as prepared by management as part of their assessment of the going concern status” – and read requirements carefully:
(a) … further AUDIT procedures …
(b) … further AUDIT procedures …
The context of this Q is entirely audit.You should be able to find any number of descriptions of “agreement in principle” if you browse for it – but you should also be able to make a reasonable guess based on context – clearly it’s not as much as a signed agreement – but it is more than correspondence. So essentially it is an agreement of terms (not necessarily all) to a contract.
Miss, related to part (i)
why the calculation of the forecast period is only considered for the period from 31 March 2018 to 30 Sept 2018 , how about the forecast y/e 2017 which is one year later?Thank you.
I do not know what you mean. There is actual info to 30/9/16 and forecast info for two years to 30/9/18. The answer considers the two-year period.
“So you should be looking at ANNUAL amounts and FORECAST period – e.g. receipt from customers (14,950 + 15,400)/(13,945 + 14,050) = 1.0845095 – i.e. 8.5% increase.”
refers to this part calculation
how about 14300 and 14700 for receipt from customer?I have illustrated already how 8.5% was derived. If you cannot play around similarly with the numbers in the Q/A to see where they are coming from I suggest you ask a fellow student on the AAA forum. You will see in the answer that for receipts it considered 6 month comparison – for salaries, an annual comparison.
There are clearly alternative and equally acceptable answer points that could have been given – obviously what is important is to compare like with like.
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