Single entity FS adjustments

Question 1

What is the treatment if the note says ‘X borrowed £130k with interest charged at 6% for machine… qualifies for borrowing costs

Answer 1

remove the ‘interest on borrowings’ for relevant area e.g. P&M after calculating carrying amount in PPE calc

time apportion from date of loan to when starting to build

Question 2

Give treatment for sale of building at year end

Answer 2

calculate carrying amount of disposed asset and remove from carrying amount of total (step 2 of ppe calc)

Question 3

What do you do if something was disposed, however you were still charged for annual maintenance up till a certain date? Interest rate given too

Answer 3

This is onerous contract.

Use PV table ie
cash (maintenance charge) x (1/1+x) indexed

Add to cost of sales

Question 4

How do you treat loyalty cards in SPL question? What about deposits

Answer 4

This is deferred income. Recognise amount relevant to current period and reduce revenue by deferred amount.

Reduce deposits from Revenue

Question 5

If given note on convertible bonds what do you do?

Answer 5

Initial rec (multiply first deets)
Multiply by DCF (%=EIR given)
Final period is full amount x DCF
Work out equity

Then BIC
BF= liability
I= BF x EIR
(cash)= initial rec