Trailer June 2013

This topic has 13 replies, 4 voices, and was last updated 8 years ago by MikeLittle.

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November 12, 2013 at 8:26 am #145566
lsoltobaeva
- Topics: 38
- Replies: 72
Hello Mike!

Why do they take the fair value of Trailer’s investment in Caller in calculation of goodwill and not the actual consideration paid? They take 280 but not 260 actually paid!
Where is the increase in value credited then? Retained earnings?

I am so confused at this point. Is there a particular rule or diagram in understanding calculation of goodwill by both methods? In what case we take what figures?
November 12, 2013 at 8:54 am #145569
lsoltobaeva
- Topics: 38
- Replies: 72
Second question is regarding impairment of goodwill and PPE.
Please, have a look at their answer, first they add some unrecognized NCI interest, then they subtract it. Then what was the point of calculating it ?

What I did is the following:
Goodwill 80
Plus
Fair value which is meant to be (1950+increase in total equity 305) = 2255
Less new FV 2088
Equal
Impairment = 247
80 goodwill, PPE 167

Is there a conceptual error in my calculation?
November 13, 2013 at 5:46 am #145764
lsoltobaeva
- Topics: 38
- Replies: 72
could you please, answer my questions?

many thanks!
November 15, 2013 at 7:38 am #146110
lsoltobaeva
- Topics: 38
- Replies: 72
Dear Mike,

My questions here remain unanswered.

Please, kindly help me!

Thanks!

Louisa
November 15, 2013 at 2:25 pm #146156
acca13
- Topics: 57
- Replies: 175
Isoltobaeva, I hope you wouldn’t mind me posting in your thread, since I’ve a query from the same question, I thought it would be ok so that Mike doesn’t have to go back and open my thread.
November 15, 2013 at 2:33 pm #146158
acca13
- Topics: 57
- Replies: 175
point 4 : Trailer has made a loan of $50m to a charitable organisation for the building of new sporting facilities. The loan wad made on 1 june 2012 and is repaybale on maturity in 3 yrs time. Interest is to be chargef 1 yr in arrears at 3%, but Trailer assesses that an unsubsidised rate for such a loan would have entries for the loan and interest received which have resulted in a balance of $48.5m being shown as a financial asset. Mike, could you pease explain this to me?
November 15, 2013 at 3:13 pm #146169
MikeLittle
Keymaster
- Topics: 26
- Replies: 22600
Hi you two

I’m waiting (now for over 50 minutes) for the acca website to come up on my terribly slow internet connection. I’m waiting so I can get to a June 2009 query.

Your june 2013 questions are going to have to wait.

Now, because I’m the last person to post on this thread, when I check “Ask the tutor” again, I’ll see that I’m the last person, so I won’t open it. Acca13, will you please post a brief message so that, when I look again, yours will be the last message so I’ll open it again.

Did you follow that?
November 15, 2013 at 3:52 pm #146177
MikeLittle
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- Topics: 26
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On 31 May, 2012, Trailer increased their holding in Caller from an investment to a subsidiary. There is a deemed disposal of the 14% at fair value and fair value at date of deemed disposal was 280!
November 15, 2013 at 3:54 pm #146178
MikeLittle
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- Topics: 26
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I think you would have arrived at the same figure if, instead of adding the “unrecognised goodwill” you had taken only Trailer’s share of the carrying value and only Trailer’s share of the recoverable amount. That should have brought you to the same impairment figure
November 15, 2013 at 4:03 pm #146179
MikeLittle
Keymaster
- Topics: 26
- Replies: 22600
acca13, the loan is made at a discounted rate of interest. If it had been correctly valued with a discount / interest rate of 6%, the present value would have been 46.01. So we need to reduce the financial asset by 3.99 to bring it down to amortised value. Now add, as each year goes by, 6% of the brought forward amount (46.01 in this first year) and deduct the interest actually received / receivable of 3% on 50.

After 3 years you finish up with a receivable of 50 which (hopefully!) the charity will repay

OK?

There’s a good article (by Tom Clendon?) in Student Accountant – probably around September last year. It’s worth a read
November 16, 2013 at 4:37 pm #146335
acca13
- Topics: 57
- Replies: 175
Thank you very much, Mike
November 16, 2013 at 8:36 pm #146385
MikeLittle
Keymaster
- Topics: 26
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You’re welcome
April 11, 2014 at 5:26 pm #165059
QIN
- Topics: 63
- Replies: 176
Sorry guys, I have to reopen this thread. I still can’t understand the journal entries from the financial asset $50m – Dr. Financial asset $2.76m, Cr. Retained earnings $2.76m. Why not just $1.41m?
April 13, 2014 at 3:10 pm #165203
MikeLittle
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- Topics: 26
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Where is $1.41 from?
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