ACCA FR Flashcards
Profit or Loss on disposal in the group accounts
£ £
Sale proceeds X
Net assets at disposal X
Goodwill at disposal X
Less: NCI at disposal (X)
X
Profit or loss on disposal X/(X)
Definition of associate
Significant influence 20-50%
Representation on the board of directors
Participation in policy making processes
Material transactions between investor and investee
Enhancing qualitative characteristics
Comparability
Verifiability
Timeliness
Understandability
Asset
A present economic resource controlled by the entity as a result of past events
Liability
A present obligation of the entity to transfer an economic resource as a result of past events
Equity
The residual interest in the assets of the entity after deducting all its liabilities
Income
Increases in assets or decreases in liabilities that result in increases in equity other than those relating to contributions from holders of equity claim
Expenses
Decreases in assets or increases in liabilities that result in decreases in equity other than those relating to distributions to holders of equity claims
Non current assets held for sale
Seeking - the entity must be actively seeking a buyer
Available - the asset must be available for immediate sale
Likely - the sale must be highly probable
Expected - the sale is expected to be made in 1 year
Development costs can be capitalised if: (pirate)
P - probable future economic benefits will be generated by the asset
I - intention to complete and use/sell asset
R - resources adequate and available to complete and use/sell asset
A - ability to use/sell the asset
T - technical feasibility of completing asset for use/sale
E - expenditure can be measured reliably
Disposing of a subsidiary (single company accounts)
Sale proceeds X
Less Cost of investment (X)
Profit or loss X/(X)
Disposing of a subsidiary (group accounts)
Sale proceeds X
Net assets at disposal X
Goodwill at disposal X
Less NCI at disposal (X)
Total (X)
Profit of loss in disposal X/(X)
Goodwill working
Cost of combination X
Plus: NCI at acq X
Less: subs net assets
Share capital X
RE X
subtotal X
Goodwill at acq X
Cumulative impairments (X)
Carrying amount of goodwill X
Retained earnings working
PARENT SUB
RE at SFP X X
RE at acq (X)
Subs post acq RE (sub total) X
Group share
subs post req RE X
Less goodwill impair (X)
Retainer earnings X
IFRS Interpretations Committee
Interpret the application of IFRS standards
Provide guidance on financial reporting issues not specifically addressed in IFRS accounting standards
Publish draft interpretations for public comment
Change in depreciation method
Change of accounting estimate
Applied prospectively
PUP
Profit on inter company sale x % of goods still in inventories at the year end
Cash generating units
A cash generating unit is the smallest identifiable group of assets for which individual cash flows can be identified and measured.
Non current assets held for sale
SEEKING - The entity must be actively seeking a buyer.
AVAILABLE - The asset must be available for immediate sale.
LIKELY - The dale must be highly probable
EXPECTED - The sale is expected to complete in the next year.
Discontinued Operations
Represents a major line of business or geographical area. Or
Is part of a single coordinated plan to dispose of a separate major line of business or geographical area. Or
Is a subsidiary acquired exclusively with a view to resale.
Which currency exchange rates may be used?
The rate that existed on the day of purchase or sale.
An average rate for the year, provided there have been no significant fluctuations in the year.
Bonus fraction (bonus issue of shares)
New number of shares / old number of shares
Rights issue - bonus fraction
Fair value per share immediately before exercise of rights / TERP (theoretical ex rights price)
Financial instrument
Any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity
PUP
P&L - Add to COS
SFP - Deduct from inventory & RE
Include in NCI if sub made sale
Inter-company sales
P&L - deduct full amount from revenue & COS
SFP - deduct outstanding amount in receivables and payables
Increase a provision
Dr - expense
Cr - provision (SFP)
Unwinding of a discount factor
Times amount by discount factor percentage.
Dr - finance cost
Cr - provision (increase)
Gain on disposal of subsidary
Proceeds
Less: net assets (at disposal)
Less: goodwill
Plus NCI (at disposal)
Limitations of comparing ratios
Didn’t use same accounting policies
Different accounting years
Sector averages are just averages
Ratios have not been consistently calculated
Impairment - recoverable amount
Higher of value in use and fair value less selling costs
