Step acquisition

Have you followed the course notes and the related lecture videos? It's all in there with a worked example May I ask that you do that and then, if you're still having a problem, come back to me

Hello from Cyprus Thanks for your quick replay as my understating we threat the associate as a deemed disposal(in fair value) we add it the cost of the investment (goodwill) and if there is any change in fair value we Dr/Cr retain earnings and if there is election for OCI we make it trough OCI. e.g 25% of A Inc 20m at the control day the value is 25m Cost for the additional 45 % 60m so it will be Goodwill Cost of 45% 60m Cost of 25% 25m and at the working for parent Profit on revaluation (25-20) 5m thanks in advise

That sounds good to me! Is that how the course notes dealt with it?

Hi Mike, It s the first time i post something on this website. Not sure you are still available around 24h before the exam, but I will try. First, thanks for your free time, that's really uncommon nowadays a website site and people like this. I have got two questions on P2 : 1) Step acquisition. I don't really get why when calculating NCI, we remove the part of cost of investment in the sub sub-subsidiary attributable to the NCI. I have a feeling it makes sense, but a few words of explanations might help understand better. If it is specifically mentioned in one of your videos, let me know. 2) contracts to buy non financial assets : i guess you will agree that a contract to buy raw materials or other goods in 6 months (no other clauses) need not to be put on the balance sheet ? Until there is delivery entailing revenue recognition. Do you agree ? Though, i saw in one of the BPP revision kit the following : "Electron buys and sells oil and currently has a number of oil trading contracts. The contracts to purchase oil are treated as NCA and amortised over the contracts duration. The contract always result in the delivery of the commodity". The answer agree with this amortisation. I would have expected that revenue is recogn each time oil is delivered, and not amortised. Can you shed light on this ? Thanks a lot,

Hi Step acquisitions are dealt with in lectures but I think that you're referring to consolidation of a vertical or a D shape group Certainly these ar situations where there is an indirect nci in the sub-subsidiary The logic is this: when calculating the nci share of the sub-sub we have given them not only their direct share but also their indirect share of the sub-sub Now, when we look to calculate their interest in the subsidiary, we could do that in "the old-fashioned way" of giving them their share of the subsidiary's net assets. But those net assets include the subsidiary's investment in the sub-sub ...... and we've already given the subsidiary's nci their share of sub-sub So, when calculating nci in subsidiary, we need to exclude from that calculation the subsidiary's investment in the sub-subsidiary Is that any better? I think that you're getting confused with the terms "revenue" and what you should be referring to as "cost of sales". For example, the concept of amortising revenue (your penultimate sentence) is quite alien to me! I seem to remember this question from the real exam and remember reading that, because these contracts ALWAYS result in deliveries, they are not classed as financial instruments. The signing of the contract gives rise to an obligation and an asset. I would have thought that the asset would be amortised upon delivery of the oil but, without the full question in front of me, I'm not going to be definitive about that

Hi Mike, thanks for the 1st question, i think i got it. for the second question, the extract of the question is : “Electron buys and sells oil and currently has a number of oil trading contracts. The contracts to purchase oil are treated as NCA and amortised over the contracts duration. The contract always result in the delivery of the commodity”. for me, it is an executory contract, isn't it ? So no asset nor liab should be recognised until a certain point in time. How can a contract to purchase let's say a given amount of oil during 5 years, could be amortised ? Given no delivery has been done ? Thanks for clarying, Rudy

Am I correct in my memory here ....... doesn't the company have to pay a premium to be able to enter into a contract to buy the oil. If I am correct, then it's that premium that is being capitalised and amortised