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1)what do we do with contingent assets in an acq(examiner has written in the dec 13 ans that cont assets should be considered in a due diligence review)?
2)in the dec 13 Q1 the subsidiary accounts for less than 15% of the assets,liab etc,why still does the examiner say its a significant component?
3)If a company charges a yrly subscription fee to its customers,how much is to be recognised as this yrs sales?cz customers access continuously the books on the site due to being a subscriber.
“what do we do with contingent assets in an acq(examiner has written in the dec 13 ans that cont assets should be considered in a due diligence review)”
We need to consider whether they really do represent a contingent asset and we need to include them within the fair value of the subsidiary net assets at date of acquisition.
There is talk at the moment of bringing in probability weightings to contingent assets and liabilities, but it’s not implemented yet
“in the dec 13 Q1 the subsidiary accounts for less than 15% of the assets,liab etc,why still does the examiner say its a significant component?”
Do you think 14% is not material?
“if a company charges a yrly subscription fee to its customers,how much is to be recognised as this yrs sales?cz customers access continuously the books on the site due to being a subscriber.”
There was issued last week a new IFRS on Revenue Recognition and measurement to replace the existing IAS!
Is this a trick question or am I missing something? What’s the problem with recognising the annual subscriptions (time apportioned for new members joining within the year) as revenue for the year?
As for part 2)its even less than 14%
Component profit is 11.3% of the group(and yeah why hasnt the examiner apportioned this by 11/12 mths cz we took control only 11 mths ago)
Component assets are 8% of the groupSo prudently,what amount can indicate a significant component?
Thank you Sir
That’s an impossible question – its such a subjective matter. However, if you apply the “standard” guideline percentages of “.5% – 1%”, “1% – 2%” and “5% – 10%” I believe that you’ll find the company in question lies beyond these upper limits and must therefore be considered to be material / significant
And why havent they apportioned the profit to only include 11 mths profit as the sub was acquired only 11 mths ago? and so only that portion would be affecting the Inc statement
Surely if they grossed up the subsidiary to 12 months, it would represent an even greater percentage of the group results!
But there was no need of grossing up,it shud have been apportioned to 11 mths ryt?
I dont have the question in front of me. However, I’m trying to interpret as best I can from the information that you are feeding me.
A newly acquired subsidiary accounts for 11.3% of the group’s profit for the year and we have only incorporated the subsidiary’s results for the 11 months post acquisition. And now you’re querying whether 11.3% is material or not. In addition you are querying my comment about grossing up.
If the subsidiary accounts for 11.3% of the group’s profits and we have only consolidated for 11 months, just what percentage will it be next year when we include a full year’s results?
11.3% is clearly material this year and, all things being equal, the subsidiary will be contributing more than 11.3% next year when we bring in a full 12 months’ results
Ok?
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