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 S a le o f S h a r e s
Type What? Treatment
Do Working
From Subsidiary Proceeds X
Loss of to Investment or
Control Net Assets (Sub) (X)
Associate or Goodwill (X)
nothing NCI X
FV Residual Holding X
Gain/(Loss) X/(X)
Do Working
DR CASH Received X
Sale To NCI From Sub to Sub CR NCI X
(% Sold x (Net Assets + Goodwill)
Difference to Equity Reserve X
Q ue s t i o n T i me !

Illustrations 1 & 2 in your

workbook
Ve rt ic a l G r o u p s
Step 1: Determine Control
Look at group structure (NOT EFFECTIVE INTEREST!)
Step 2: Calculate Effective Interest in S1
Use this for all workings for S1
Step 3: Do Workings
2 x Equity Tables (W2) & 2 x Goodwill (W3)
Step 4: Calculate Indirect Holding Adjustment
NCI% in S
x
Investment by S in S1
DR NCI to Reduce
CR Goodwill in S1 to reduce cost of investment
 Ve rt ic a l G r o u p s

Effective Interest in S1
P Parent (70% x 60%)
NCI
42
58
70% $50m
Total 100
S
60% $25m Indirect Holding Adjustment
NCI% in S x Investment by S in S1...
S1 30% x $25m = $7.5m
I n c ome St a t e me n t
Step 1: Set out Group Structure
Is goodwill working required?
Step 2: Do workings for goodwill if required
Net assets & goodwill computation
Step 3: Go through rest of question note by note
Set up a working for each one
Step 4: NCI share of Profit & Other Comp. Income
NCI% Profit given in Question X
NCI % depreciation on FV adjustments (X)
NCI% goodwill impairment (X)
NCI % PURP if sub is seller (X)
NCI% Any other affecting sub profit (X)
X
Q ue s t i o n T i me !

June 2010 Q1: Ashanti Group

Statement of Comprehensive Income
St a t e me n t o f F i n a n c i a l Po s i t i o n

Step 1: Skim read question to gain understanding

Do W1 for group structure
Step 2: First few notes are consolidation workings
Use these to do W2 - W5 for group
Step 3: Rest of notes refer to parent
Don’t affect any working except W5 so don’t total it yet!
Step 4: Do working for each note you come to
Adjust through W5 and on face of SFP
Step 5: Prepare SFP & leave any notes you run out of time on
Ensure you don’t run over your time allocation
 Pu rch a s e o f S h a r e s

Type What? Treatment

From Step 1: Revalue original investment to
Step - Investment Fair Value (Gain or Loss to I/S)
Acquisition or Associate Step 2: Cost of Investment in Sub (W3)
to Cost of New Shares
Subsidiary +
FV Original Investment

Do Working
Buy Out CR CASH PAID OUT X
NCI From Sub to Sub DR NCI X
(Based on Current Value of NCI)
Difference to Equity Reserve X
Q ue s t i o n T i me !

December 2011 Q1 - Traveler

Statement of Financial Position
Te s t Yo u r s e l f !

December 2009 Q1 - Grange

Statement of Financial Position
M i x e d G r o u p s
Step 1: Determine Control
Look at group structure (NOT EFFECTIVE INTEREST!)
Step 2: Calculate Effective Interest in S1
Remember direct & indirect interest
Use this for all workings for S1
Step 3: Do Workings
2 x Equity Tables (W2) & 2 x Goodwill (W3)
Step 4: Calculate Indirect Holding Adjustment
NCI% in S
x
Investment by S in S1
DR NCI to Reduce
CR Goodwill in S1 to reduce cost of investment
 M i x e d G r o u p s
Effective Interest in S1
Direct Interest 25

P Indirect (70% x 30%)

Effective Interest
21
46
70% $50m NCI 54
Total 100
S 25%
$20m
30% $30m Indirect Holding Adjustment
NCI% in S x Investment by S in S1...
S1 30% x $30m = $9m
Q ue s t i o n T i me !

Mixed Groups Illustration

Red, Don & Tel
Statement of Financial Position
Fo re i g n C u r r e n c y G r o u p s
W1: Do a detailed W1 checking dates etc.
Look for any inter company loans P to S and calculate FX difference
on translation at Y/E - take to (W2)
W2: Do this in the foreign currency.
Remember FX G/L in W1 to affect net assets at Y/E
W3: Do this in foreign currency.
Investment in Parent currency? Translate at acq. rate.
When Goodwill calculated translate for SFP at Cl. rate.
Do Working: $
Cost of Investment at closing rate X
(Foreign amount invested translated to parent currency)
Cost of Investment at acquisition rate rate (X)
(Foreign amount invested translated to parent currency)
FX Gain / (Loss) to W5 X/(X)
W4: As usual translated at closing rate.

W5: As usual in parent currency - translate post-acq. profit at closing rate.

Q ue s t i o n T i me !

June 11 Q1 - Rose, Petal & Stem

Statement of Financial Position
(Foreign Subsidiary)
G ro u p C a s h - F l o w St a t e m e n t s
Cash Flow Statements
Working $
Opening Balance +
Closing Balance -
Items increasing opening Balance +
Items decreasing opening Balance -
Total 0

If Result of Working is a cash-flow...

Positive Negative
ASSET INFLOW OUTFLOW

LIABILITY OUTFLOW INFLOW

G ro u p C a s h - F l o w St a t e m e n t s
$m $m $m
Associate $m Working
PPE $m Intangible Assets $ INV RE PAY
Capital
m Opening Balance + C
Opening Balance + Long Term $m
Opening Balance + Closing Balance - Opening + + + Borrowings
Closing Balance - Closing Balance - Balance
Acquisition of + Opening Balance +
Disposals - Purchase of + Associate Closing - - -
Balance Closing Balance -
Subsidiary Profit for the Year +
Additions + Repayments in Year -
Sale of Subsidiary - Sale of Sub - - -
Dividend From -
Depreciation - Associate Acquisition + + + New Loans +
New Expenditure +
of Sub Total 0
Purchase Subsidiary + Amortisation - Total 0
Total 0 0 0
Sale of Subsidiary - Total 0
Financial Assets $m
Impairment - Share Capital $m Tax $m
Opening Balance +
Goodwill $m Opening Balance + Opening Balance on +
Revaluation (SOCIE) + Closing Balance - Tax due
Opening Balance + Closing Balance -
Total 0 Additions + Opening Balance on +
Closing Balance - Issue Shares +
Deferred Tax
Disposals -
Disposal of - Total 0
Closing Balance on Tax -
Subsidiary Gains on Financial +
Investment Property $m due
Assets NCI $m
Acquisition of +
Closing Balance on -
Opening Balance + Subsidiary Impairment of - Opening Balance +
Deferred Tax
Financial Assets
Closing Balance - Impairment - Closing Balance -
Tax Charge in IS +
Purchase of New Sub +
Additions + Total 0 Acquisition of Sub +
Deferred Tax on Sale of -
Sale of Sub -
Disposals - Sale of Sub - Sub
Total 0 Buy out NCI - Deferred Tax on +
Gain on Fair Value +
Acquisition of Sub
Sale to NCI +
Loss on Fair Value - Total 0
Profit to NCI in Year +
Total 0
Dividend Paid -
Total 0
 IF RS 10 - C o n t r o l
An investor is exposed to or has rights to variable returns from
an investee...
...and has power to affect those returns through power over
investee.

1 Relevant Determine Policy Appoint key staff

Activities Investment decisions Capital decisions

2 Power Voting Rights Appoint key staff

Potential Voting Rights Decision making

3 Variable Dividends
Returns Variable Remuneration
Other variable
<50% - look at dispersement of other votes...still may have control
Q 2 & Q3 E x a m Te c h n i q u e

Step 1 ID standard

Step 2 State what you know about it

Use the summaries from this course

Step 3 Apply this to the scenario

Re-write the information in the scenario...
...then say ‘this suggests that...’
IF RS 8 - O p e r a t i n g S e g m e n t s
Business Activities
O Operating Segment? CEO Reviews Info
Separate Info Available
10% + Total Revenue
R Reportable? 10% + Total Profit
10% + Total Assets

P Present Revenue, P/L, Assets & Liab, Interest, Tax, Dep’n

Central Costs on reasonable basis
How management use info (even if not IFRS compliant)

75 75% Total Revenue Reported?

If not then ignore O&R above and split further.
Q ue s t i o n T i me !

June 08 Q2 a) Norman

December 11 Q1 b) Traveler
 IAS 19 - Pe n s i o n s

Defined Benefit Scheme

Defined amount paid out at end e.g. % of salary
If deficit Co. has legal/constructive obligation
Asset or Liability to Company
Defined Contribution Scheme
Defined amount paid into scheme
No obligation on Co.
Expense contributions annually
Q ue s t i o n T i me !

June 2010 Q2 d) Cate

Type of Scheme?
 IAS 19 - Pe n s i o n s

Introducing Paul T. Pensioner

IAS 19 Calculations
 IAS 19 - Pe n s i o n s
Paul T.
Assets Unr’g Liabilities
P/L DR SOCI CR

B/F 0 Ques 0 Ques

B Benefits Paid CR DR
I Interest Cost DR CR
S Ser vice Costs DR CR
C Contributions DR
U Unrealised G/L Bal DR/CR Bal
I Increase Assets CR DR
T Total at Year End Add Ques Add Ques
 IAS 19 - Pe n s i o n s
A company maintains a defined benefit pension scheme for it’s employees. The following information is relevant:
The pension assets brought for ward in 20X0 $1,800 with a closing balance of $2,700.
The company contributes $90 per year into the scheme.
Benefits paid out in the period were $100.
The liabilities of the scheme were $1,600 at the start of the period and $2,100 at the end.
The discount rate is 12%.
The terms of the scheme have changed meaning that past service costs have arisen of $35 and the current ser vice costs for the
period are $70.

Expected Return on Assets

Working $
12% Return on opening of 1,800 (1,800 x 12%) 216

Interest Cost (Unwinding of Discount)

Working $
12% Discount Rate (1,600 x 12%) 192
 IAS 19 - Pe n s i o n s
Paul T.
Assets Unr’g Liabilities
P/L DR SOCI CR

B/F 0 1,800 0 -1,600

B Benefits Paid -100 100
I Interest Cost 192 -192
S Ser vice Costs 105 -105
C Contributions 90
U Unrealised G/L 694 -391 -303
I Increase Assets -216 216
T Total at Year End 81 2,700 -391 -2,100
 IAS 19 - Pe n s i o n s

Income Statement $
Ser vice Costs 105
Net Interest (192 - 216) -24
Figure For Profit & Loss 81
Other Comprehensive Income
Net Re-measurement Component 391
Statement of Financial Position
Net Pension Asset (If Recoverable) (2,700 - 2,100) 600
Q ue s t i o n T i me !

December 2007 Q2 (Adjusted)

In Workbook
IAS 19 - Pe n s i o n s ( De c 0 7 Q 2 )

Expected Return on Assets

Working $
5% Return on opening of 190 (190 x 5%) 9.5

Interest Cost (Unwinding of Discount)

Working $
5% Unwinding of Discount on 200 (200 x 5%) 10
IAS 19 - Pe n s i o n s ( De c 0 7 Q 2 )
Paul T.
Assets Unr’g Liabilities
P/L DR SOCI CR

B/F 0 190 0 -200

B Benefits Paid -19 19
I Interest Cost 10 -10
S Ser vice Costs 20 -20
C Contributions 17
U Unrealised G/L 27.5 1.5 -29
I Increase Assets -9.5 9.5
T Total at Year End 20.5 225 1.5 -240
Income Statement $
Ser vice Costs 20
Net Interest (10 - 9.5) 0.5
Figure For Profit & Loss 20.5
Other Comprehensive Income
Net Re-measurement Component 1.5
Statement of Financial Position
Net Pension Liability (225 - 240) 15
IF R S 2 - S h a r e B a s e d P a y m e n t s

Payment for Goods in Shares Business Combinations

S Scope Share Option Schemes

Employee Purchase Schemes
NOT!
Financial Instruments
with no goods delivered
a ge s
W
DR Eq u i t y
CR Goods = FV Goods on that Date

E Equity Settled
Settled In Shares Yr
No. Expected
to Vest
Fair Value at
GRANT DATE
Employee Services
Proportion of
Vesting Period
Total Charge
Expected
Charge in
Period
NO CHANGE
a ge s y
W t
DR L i a bi l i

C
CR
Cash Settled Yr
No. Expected
to Vest
Fair Value at REPORTING Proportion of Total Charge Charge in
DATE Vesting Period Expected Period
Settled In Cash based on CHANGE EACH YR
Share Price

S Settled
Early? Speed Up Recognition
IAS 16 - N o n C u r re n t A s s e t s
Reliable Measure
If: Probable Flow of Benefit

R Recognise
What?
Direct Costs
Dismantling (Discounted amount)
Separate Components

Cost or revaluation less Dep’n o s t

: e dC

M
o
t e ci a t
In equity to reser ve (SOCI) u p r
Measure? I /S
T t o r ic D
o e p
UP Unless reversing impairment H i s
Revalue
DOWN Against Previous Increase First
Then to I/S

T
Transfer in Reserves?
Transfer Revaluation Reserve to Retained Earnings
Dep’n on revalued amount less dep’n on historic cost
Q ue s t i o n T i me !

June 10 Q1 Note 6
Ashanti Group
IAS 36 - Im p a i r m e n t
Restructuring
I nterest Rate Rise
I Indicators F all in Share Price
L osses or loss of key staff
E nvironmental
D amaged Asset

Carrying Value
T O
C Compare
Higher of
Recoverable Amount
Value in Use
Fair Value Less Cost to Sell

DR Income Statement (or revaluation reserve)

C Charge 1. Damaged Asset
CR 2. Goodwill
3. Other Assets Pro-Rata
Q ue s t i o n T i me !

December 2009 Q2 -Key

December 2011 Q3 b) - Scramble
 l I n s t r u m e n t s C l a s s i f i c a t i o n
Fi n a n c i a

T Hold not Sell J

Fi n a us t D
E Business Model Test Sell For Profit nci a e b t
S l As
Just principle & Interest se t
T Contractual Cashflows s!
Not just principle & Interest
S

Financial Assets Financial Liabilities

Debt Equity All
Hold Not Sell
AC Just P & I
Never All Others

Held For
FVPL All Others Trading
Held For
Trading

FVOCI Never Not Held For

Trading
Never

1. No change bet ween FVPL & FVOCI

Rules: 2. Only change bet ween AC & FVPL to avoid mismatch or if business changes
3. No recycling of gains/losses for FVOCI
Q ue s t i o n T i me !

June 2012 Q3 b) - Ethan

Im p a i r me n t o f F i n a n c i a l A s s e t s

Step 1 Check Carrying Value

Step 2 Compare to recoverable amount

Discounted Future Cash Flows

Requirements:
IAS 39 (Currently) Objective evidence of impairment event
Reliable Measure
Exposure Draft Evidence of expected event
(Expected Loss Model) Adjust effective interest rate to reflect
Q ue s t i o n T i me !

December 2011 Q1 - Traveler

Note 4 - Bond
F i n a n c i a l I n s t r u m e n t H e d g i n g

Type What? Treatment

Fair Value Hedged Item at FVPL Offset P/L on each in

Hedge Hedging Instrument at the Income Statement
FVPL

Hedged Item is FUTURE Recognise P/L on Hedging

Cash Flow Cash-flow Instrument in OCI
Hedge Hedging Instrument at Until Cash-flow occurs -
FVPL then offset in IS

2 Parts to a contract: IAS 39: Separate out and

Embedded treat derivative element as
1. Usual Contract FVPL
Derivative 2. Derivative Element
IFRS 9: Treat all at FVPL
Q ue s t i o n T i me !

June 10 Q3 a) - Seltec
 Fa i r Va l u e H e d g i n g

Hedged Item Hedging Instrument

(Held at FVPL) (Derivative - always at FVPL)

New Fair Value $80,000

Gain $80,000
t i n
f s e
Fair Value $2m Of /S Fair Value $0
I

Loss $80,000

New Fair Value

$1,920,000
 Cash F l o w H e d g i n g

Hedged Item Hedging Instrument

(Future Cash Flow) (Derivative - always at FVPL)

New Fair Value

Gain
l l y i n
i a
Agreed I n i t r ve s Fair Value $0
R e s e

Loss
To I/S when
Settled Cash-flow
occurs
 IA S 17 - L e a s e s

Most of UEL
F Finance Lease? O wnership Transfer
P resent Value of Payments > F. Value
P urchase = Bargain

PV minimum lease payments

Record Asset
L Lessee
Lower of
Fair Value

Adjust for Effective Interest

Record Liability Then
Adjust for Cash Paid

Depreciate Asset

Remove Asset From F. Statements

L Lessor Record a Receivable
Record Interest Income

S Sale & Lease Back Profit deferred over lease term

Q ue s t i o n T i me !

Dec 08 Q3 b) - Johan
June 12 Q2 a) - William
 IAS 37 - P r o v i s i o n s

N Present Constructive/legal obligation from past event

E
Probable Outflow
E
D Reliable Measure
Virtually
Probable Possible Remote
Certain
Create Disclose
Liability Provision Contingent
Liability
Nothing

Disclose
Asset Create Asset Contingent
Asset
Nothing Nothing

Many Items - Expected Values

Measure One Item - Best estimate

Time value material? - Discount
Q ue s t i o n T i me !

Dec 10 Q3 a) - Greenie
Dec 09 Q1 (Note 8) - Grange
June 12 Q2 d) - William
IAS 38 - I n t a n g i b l e A s s e t s

Identifiable & Controlled

R Recognise? Future Economic Benefit
Reliable Measure

Never Research
C Capitalise?
Development if:
Feasible
Future Economic Benefit

Future Economic Benefit

Future Costs if: above previously achievable

Straight line over UEL

A Amortise?
Indefinite life
No Amortisation
Assess for impairment each year
Q ue s t i o n T i me !

June 11 Q2 c) - Lockfine
Dec 11 Q2 a) - Scramble
June 10 Q3 b) - Seltec
I A S 1 8 - R e v e n u e R e c o g n i t i o n

Transfer of Risks & Rewards

Goods No Management Control
Reliable Measure

Ser vice Stage of Completion of

Contract

Both Reliable Measure

Probable Flow of Benefit
Same contract
Separable Part Goods & Part Services
Separate out if possible
Q ue s t i o n T i me !

Dec 11 Q4 b) - Venue
 A s s e t s H e l d F o r S a l e & D i s . O p .
IF RS 5 -

P lan to sell
A vailable Immediately
A Available? L ocating a buyer
M arketed - reasonable price
12 Months of SFP date

Revalue to Fair Value

F Fair Value Any impairment to I/S
Not Depreciated

Major Line of Business

S Sub Discontinued? Geographical Area
Plan to sell
Disclosures Required
Q ue s t i o n T i me !

December 2009 Q2 b) -Key

(Last Paragraph)
December 2012 Q1 - Minny
a) Note 6 & b)
IAS 40 - I n v e s t m e n t P r o p e r t y

Capital Appreciation
I If Held For Rental
Land where unsure of Use
Not if rented to employees!
Put revaluation through I/S with no Dep’n...or
P Hold at Cost less Dep’n

S Split if some own use

Q ue s t i o n T i me !

December 2012 Q3 a) - Blackcutt

IAS 12 - I n c o m e Ta x

Tax asset must be recoverable

Deferred tax reflects timing differences
Compare FS Carrying Value to tax base &
multiply the difference by the tax rate...

Financial I/S Tax Deferred

Statements Show Effect Tax
More Asset/ More Tax Def. Tax Liability
Income DR CR

Less Asset/ Less Tax Def. Tax Asset

Income CR DR

More
Less Tax Def. Tax Asset
Liability/
CR DR
Expense

Less Liability/ More Tax Def. Tax Liability

Expense DR CR
Q ue s t i o n T i me !

Dec 10 Q1 Note (i) - Jocatt

June 10 Q2 a) - Cate
IAS 20 - G o ve r nm e n t G r a n t s

Grant may relate to...

E
Set off against expense or...
Expense
Treat as other income

Reduce NBV asset or...

A Asset
Hold as deferred income
IAS 23 - B o r r o w i n g C o s t s

Building an asset

W When For Sale or use

Capitalise interest cost

Interest cost
A Amount
Less...
Temporary investment income
Activities begin

S Start on later of... Borrowing costs incurred

Expenditure begins
IF RS 13 - F a i r Va l u e

Levels of Inputs to determine...

1
Quoted Active Market
Best Identical Items

2
Quoted price...similar items
Ok Inactive market...identical items

Observe similar items

3 Not Great Replacement cost

Discounted cash flows