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Культура Документы
Number of questions
Well answered
Poorly answered
LO1
LO2
LO3
Total
15
13
*If 50% or more of the candidates gave the correct answer, then the question was classified as well
answered.
The poorly answered questions covered a range of different syllabus areas. Comments on two items of
particular note are:
Item 1
This item required candidates to calculate the cost of a subsidiary investment in the parent only statement of
financial position. A gain on bargain purchase (negative goodwill) had been calculated on the original
acquisition, which appeared to confuse a number of candidates.
Item 2
This item required a calculation of gross profit in the consolidated income statement following some intercompany trading between a parent and an associate company. Candidates calculated the correct amount
for the unrealised profit but forgot to reduce this by parents share.
Page 1 of 14
Question 1
Overall marks for this question can be analysed as follows:
Total: 24
This question was a trial balance question with the preparation of an income statement and a statement of
financial position. A number of adjustments were required including a revenue adjustment, a revaluation, a
depreciation adjustment, a finance lease calculation and a bad debt. In addition, candidates were also
asked to explain the principal UK GAAP differences in relation to the revaluation of property, plant and
equipment.
(a)
Sandford Ltd Statement of financial position as at 31 December 2008
ASSETS
Non-current assets
Property, plant and equipment (2,262,040 338,613) (W2)
1,923,427
Current assets
Inventories
Trade receivables (60,000 9,500)
Cash and cash equivalents
148,000
50,500
7,300
205,800
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital
Revaluation surplus (W2)
Retained earnings (370,300 + 446,254)
2,129,227
150,000
400,000
816,554
Equity
Non-current liabilities
Borrowings
Finance lease liabilities (W3)
1,366,554
500,000
4,673
504,673
Current liabilities
Trade and other payables (8,000 + 25,000)
Taxation
Finance lease liabilities (W3)
Interest payable
33,000
180,000
5,000
40,000
258,000
2,129,227
Page 2 of 14
Sandford Ltd Income statement for the year ended 31 December 2008
778,000
(100,113)
(11,000)
666,887
(40,633)
626,254
(180,000)
446,254
Note: Marks were awarded if items were included in a different line item in the income statement
provided that the heading used was appropriate.
37,000
Cost of
sales
415,000
175,000
(148,000)
9,500
50,600
3,013
100,113
442,000
1,800,000
53,000
Acc dep
270,000
15,000
50,600
14,040
(5,000)
9,040
3,013
400,000
2,262,040
338,613
Page 3 of 14
W3 Computer lease
Year end
31 Dec 2008
31 Dec 2009
B/fwd
14,040
9,673
Payment
(5,000)
(5,000)
Capital
9,040
4,673
Interest (7%)
633
C/fwd
9,673
9,673
> 1yr
4,673
< 1yr
5,000
Almost all candidates produced both a well laid out income statement and statement of financial position
however, a minority of candidates also prepared a statement of comprehensive income which was not
required. Candidates need to be reminded how important it is to read requirements carefully as they will
vary from sitting to sitting. Candidates generally spent time totalling their income statements, but
candidates often did not bother with sub-totals in the statement of financial position. Candidates should
continue to be reminded that presentation marks are available in this type of question as the
requirement asked for statements that are suitable for publication.
Most candidates were able to take items from the trial balance and insert them in the correct place in the
formats, with most candidates using an efficient matrix style costs working. Marks were awarded where
presentation differed to the marking guide but resulted in a reasonable alternative.
Candidates generally dealt with the revenue adjustment correctly, calculated closing inventory and a
pleasing majority coped well with the finance lease table, although a significant number of candidates
could not then accurately transfer the figures to the financial statements correctly. Candidates were also
generally able to calculate the revaluation surplus and retained earnings carried forward.
However, candidates still seem to struggle with the concept of double entry, for example, the revaluation
surplus was correctly calculated but only shown in equity, with no adjustment made to PPE; a different
figure for closing inventory appeared in the income statement and the statement of financial position; the
bad debt was written off trade receivables, but no corresponding entry was made in the income
statement; and the deferred income was deducted from revenue, but no corresponding liability was
recognised.
The most common error was the adjustment required for the leased asset in property, plant and
equipment with only a very small minority getting this completely correct. A good majority of candidates
realised that they had to increase the fixtures and fittings total for the leased asset, although often used
the fair value for the computers rather than the present value of the lease payments. However,
candidates generally did not then realise that they needed to reduce this amount by the 5,000 cash
payment that had already been debited to the cost of fixtures and fittings.
Other common errors included ignoring the bad debt or writing it off against revenue and transferring
incorrectly, or not at all, the figures from the lease liability table.
Total possible marks
Maximum full marks
21
21
Page 4 of 14
Most candidates made a good attempt at Part (b) showing that their knowledge of the differences between
IFRS and UK GAAP was better than that of candidates at some previous sittings.
The most common points made were those concerning the timing of valuations and existing use
valuations versus market values. Fewer candidates made the points about reversals of previous
valuations and where such points were made there was some confusion about which treatment was IFRS
and which was UK GAAP.
A number of candidates made irrelevant points about general impairments and the calculation of residual
values.
Total possible marks
Maximum full marks
5
3
Page 5 of 14
Question 2
Overall marks for this question can be analysed as follows:
Total: 22
This was a single-topic question based around non-current assets. The main part of the question focused
on intangible assets, although there were some related property, plant and equipment issues. The first
part of the question focused on the qualitative characteristics of the IASB Framework, with particular
reference to intangible assets.
(a) Qualitative characteristics and IAS 38
Understandability
Information must be readily understandable to users so that they can perceive its significance. It is
dependent on how information is presented.
For example, IAS 38 requires that disclosure is made for movements in the period in respect of each class
of intangible asset. These disclosures include intangible assets acquired during the year, those disposed
of, amortisation for the period and any impairments. If this information was amalgamated it would be less
understandable.
Relevance
Information is relevant if it influences the economic decisions of users.
Fair value is more relevant than historic cost as it more closely reflects the value of the underlying assets.
A class of intangible assets may be revalued if there is an active market in which they can be readily
traded, however in reality such a market rarely exists for intangible assets due to their unique nature.
Reliability
Information is reliable if it is free from error or bias, complete and portrays events in a way that reflects
their reality.
Intangible assets are normally shown at cost in the statement of financial position because it is a reliable
measure and it is often not possible to calculate fair value.
Internally generated intangible assets, such as brands, cannot be capitalised as an asset as their cost
cannot be reliably separated from the cost of developing the business as a whole.
Comparability
Users must be able to compare information with that of previous periods or with that of another entity.
Comparability is achieved through consistency and disclosure.
The disclosure requirements in IAS 38 help users to be able to compare information on intangible assets
from one year to the next and between entities. Comparability is helped by the clear explanation of what
accounting policy an entity has adopted for the recognition and measurement of its intangible assets.
Candidates could have gained a number of marks in Part a) by simply explaining the four qualitative
characteristics. Some candidates made pertinent comments, but related them to the wrong characteristic.
Very few candidates showed a clear understanding of how the qualitative characteristics relate to
intangible assets.
Reasonable candidates were able to identify that the disclosure of information helped with
understandability and comparability although, most were unable to provide well structured and full
answers. Candidates generally struggled with the significance of relevance in relation to intangible
assets. Disappointingly, very few candidates made the basic points that whereas cost is more reliable,
fair value is usually more relevant but that intangibles can only be valued at fair value if an active market
for them exists, which will be rare.
Total possible marks
Maximum full marks
10
7
Page 6 of 14
(b)
(i) Extract from statement of financial position as at 31 December 2008
Non-current assets
Property, plant and equipment (W4)
Intangible assets
8,500
3,436,200
Cost
As at 1 January 2008
Additions
3,900,000
Patent
(W2)
Software
(W3)
Total
24,000
9,000
33,000
3,900,000
3,900,000
24,000
9,000
3,933,000
Accumulated amortisation
As at 1 January 2008
Charge for the period
487,500
1,200
2,850
2,250
3,000
3,450
493,350
As at 31 December 2008
487,500
4,050
5,250
496,800
Carrying amount
As at 31 December 2007
As at 31 December 2008
3,412,500
22,800
19,950
6,750
3,750
29,550
3,436,200
As at 31 December 2008
Workings:
(1)
(2)
(3)
Patent - amortisation
Original cost
Less: amortisation for 2007 (24,000 / 20yrs)
24,000
(1,200)
22,800
(2,850)
19,950
Software
Original cost
Installation costs
B/fwd cost
Less: amortisation for 2007
9,000 / 3 years x 9/12 months
7,000
2,000
9,000
(2,250)
6,750
(3,000)
3,750
Page 7 of 14
(4)
Original cost
Less: depreciation for 2007
12,000 / 6 years x 9/12 months
12,000
(1,500)
10,500
8,500
(2,000)
Answers to Part b) were very disappointing. Many candidates were simply unaware of what an intangibles
movement table should look like in the notes to the financial statements or they produced a separate table
for each project. Although, intangible assets have not been tested before in this depth, candidates should
not be surprised by this style of question. There were a number of very straight forward parts to this
question if candidates tackled each project separately and in a methodical manner.
The most common error in the preparation of the extract for non-current assets was that candidates failed
to realise that there were two elements to it, being intangible assets and property, plant and equipment.
Many candidates listed out carrying amounts by project or individual asset, as opposed to showing noncurrent assets split between property, plant and equipment and intangible assets. Candidates simply had
to add up their figures and show them as an extract to gain the marks for this part of the requirement.
Most candidates were able to accurately calculate a year-end carrying amount for one or more of the noncurrent assets but were not then able to distinguish between accumulated amortisation brought forward at
the start of the year and the amount charged in the year when it came to putting the movement for each
intangible asset into the table.
Common errors included not adding the installation costs to the software brought forward figure, including
the development expenditure as a brought figure balance rather than as an addition, including the
calibration tools as intangible assets in the table and adding the software costs and calibration tools
together as one asset.
Total possible marks
Maximum full marks
13
13
(c) Summary of costs from the income statement for the year ended 31 December 2008
2,000
220,000
493,350
35,000
Note: Marks were awarded for a narrative explanation of the costs that should have been included in the
income statement for the year ended 31 December 2008.
Part (c) should have been a by-product of Part (b) and the most effective approach would have been to
tackle these two parts simultaneously. Many candidates did not appear to do this as they omitted putting
the depreciation and amortisation charges from their Part (b) into Part (c). Most candidates included the
35,000 marketing costs and 220,000 research cost in the costs to be expensed in the current year but a
number also included the 37,000 training costs, even though these related to the previous year and
would have been expensed in that year.
Total possible marks
Maximum full marks
2
2
Page 8 of 14
Question 3
Overall marks for this question can be analysed as follows:
Total: 16
This question was split into two distinct parts. Part (a) required the calculation of profit on a discontinued
operation. Part (b) required the preparation of the provisions note, along with related narrative disclosures.
(a)
Profit for the period from discontinued operations
(88,000 (W1) + 87,500 (W2))
175,500
Workings:
(1)
(2)
Sale proceeds
Less: Share of net asset at disposal (560,000 x 75%)
600,000
(420,000)
180,000
Less: Impairment
Carrying amount of goodwill at disposal
500,000
(470,000)
117,500
147,500
(55,000)
(92,500)
87,500
Answers to Part a) of this question were quite mixed. Many candidates provided a reasonable answer, with a
good proportion of candidates gaining full marks on this part, whilst other candidates made fundamental
errors.
Common errors involved using nine months for the profit for the year to disposal as opposed to eight months,
incorrectly calculating the share of net assets at disposal and not realising that the profit for the period from
discontinued operations had two elements to it. In addition, a number of candidates calculated the profit of
the subsidiary for the year to disposal net of the non-controlling interest and reduced the group profit on
disposal by the goodwill impairment of 55,000, instead of deducting the impairment from the goodwill arising
on acquisition to arrive at the carrying amount of goodwill at disposal.
Total possible marks
Maximum full marks
5
5
Page 9 of 14
(b)
Notes to the Financial Statements as at 31 December 2008 Provisions
At 1 January 2008
Utilised in the year
Income statement charge / (release) bal fig
At 31 December 2008 (workings)
Warranty
provision
(W1)
Onerous
contract
(W2)
Returns
provision
(W3)
Total
14,000
(12,500)
13,500
360,000
(30,000)
(224,000)
25,000
(24,000)
20,000
399,000
(66,500)
(190,500)
15,000
106,000
21,000
142,000
Warranty provision
The warranty provision relates to estimated claims on electrical products sold in 2008 which come with a oneyear warranty. A weighted average method is used to provide a best estimate. It is expected that the
expenditure will be incurred in the next year.
Onerous contract
The company vacated a retail unit at the end of the previous year due to increased competition in the area.
However, the company continues to have a lease obligation of 30,000 per annum until 31 December 2019.
During the year Ferndown plc found a tenant for the building and it was sub-let from 1 January 2009 thereby
reducing the outstanding liability. However, at the end of the lease period Ferndown plc is required to remove
all fixtures and fittings installed by the tenant, the cost of which is estimated to be 18,000.
Returns policy
The returns provision relates to an open returns policy on goods (excluding electrical goods) offered to all
customers by Ferndown plc. Customers are given 28 days in which to return goods and obtain a full refund.
The provision at the year end is based on a percentage, using past experience, of the number of sales made in
December.
Workings:
(1)
Warranty provision
At 31 December 2008: (35,000 x 20%) + (80,000 x 10%) = 15,000
(2)
Onerous lease
20 years 8 years = 12 years remaining
Onerous contract bfwd: 30,000 x 12 years = 360,000
330,000
(242,000)
88,000
18,000
106,000
(3)
Returns policy
210,000 x 10% = 21,000
Note: Marks were awarded accordingly where candidates included the rental income as a reimbursement.
Page 10 of 14
Answers to Part b) were disappointing with a good number of candidates clearly not understanding the
information provided in a provisions table. Accompanying narrative notes were either poor or non-existent,
even though information could be pulled directly from the text of the question. There were a number of very
easy marks available in this question that simply required candidates to transfer the information from the
question into the provisions table, for example some of the brought forward figures and provisions utilised
during the year.
A significant minority of candidates did not produce the numerical movements table in a columnar format,
instead producing a single column in different places in their answer for each type of provision.
The majority of candidates correctly calculated the warranty provision and the provision for the expected
returned goods, but were often unsure where these figures should be shown in the provisions table. A
worrying number of candidates thought that the provision for the year should be shown as a separate line in
the table with the carried forward figure simply being a total.
The calculation of the onerous lease caused candidates a number of problems. Candidates seemed confused
about the number of years left to run on the lease, with 12 years being incorrectly used rather than 11 years for
the outstanding provision. However a pleasing number of candidates realised that the restoration work for the
removal of the fixtures and fittings should be added when calculating the provision at the end of the year.
Other common errors included calculating the closing provision in respect of the onerous lease based on one
year of rent payable less one year of rent receivable, instead of the number of years left to run at the year end
and narrative notes taking the form of an explanation as to why the amounts had been provided for (i.e. by
reference to the provisions of IAS 37) or a narrative description of the numerical movements for each
provision.
Total possible marks
Maximum full marks
15
11
Page 11 of 14
Question 4
Overall marks for this question can be analysed as follows:
Total: 18
This question required the preparation of a consolidated statement of financial position. The group had an
associate, with the acquisition of a subsidiary during the year. A fair value adjustment was required and
inter-company trading had taken place.
Verwood plc
(a) Consolidated statement of financial position as at 31 December 2008
000
Assets
Non-current assets
Property, plant and equipment (610,000 + 20,500)
Goodwill (W3)
Investments in associates (W7)
000
630,500
10,500
8,400
649,400
Current assets
Inventories (188,000 + 9,000 40)
Trade and other receivables (130,000 + 21,000 5,000)
Cash and cash equivalents (6,000 + 1,500)
196,960
146,000
7,500
Total assets
350,460
999,860
356,000
123,298
479,298
4,892
484,190
Non-current liabilities
Bank loan
Current liabilities
Trade and other payables (178,000 + 25,500 5,000)
Taxation (23,170 + 2,000)
292,000
198,500
25,170
223,670
999,860
Workings
(1) Group structure
Verwood plc
32,000 /
(20,000/0.5) = 80%
Holwell Ltd
6,250/25,000 = 25%
Chetnote Ltd
Page 12 of 14
Share capital
Retained earnings
Per Q
PURP (W 6)
FV adj Contingent liability
31 Dec 2008
000
20,000
Acquisition
000
20,000
Post acq
000
4,500
(40)
24,460
1,750
(500)
21,250
2,750
(40)
500
3,210
Consideration transferred
Net assets at acquisition (W2)
Non-controlling interest at acquisition (21,250 (W2) x 20%)
Less: Impairment
4,892
125,830
2,568
(1,500)
1,400
(5,000)
123,298
(6) PURP
Holwell Ltd
000
120
(100)
20
240
(200)
40
000
12,000
1,400
(5,000)
8,400
Page 13 of 14
The average mark on this question was extremely pleasing with candidates clearly very comfortable with
this style of question. Generally errors were minor or careless ones except for a minority of candidates who
clearly do not understand the concept of consolidation.
Common (minor or careless) errors included simple addition errors on the face of the consolidated
statement of financial position or mixing up and 000, calculating the PURP figure based on the
600,000 being selling price, as opposed to cost and deducting the PURP against group retained earnings,
instead of against the subsidiarys retained earnings. Other common errors included not including a subtotal prior to and immediately after the non-controlling interest line, deducting the subsidiarys contingent
liability from its year-end net assets, as well as from its net assets at acquisition or adding this amount and
using 6,250,000 as the cost of investment of the associate (6,250,000 being the number of shares
acquired) instead of 12,000,000, per the parent companys statement of financial position.
Total possible marks
Maximum full marks
18
18
Page 14 of 14