Analysis of Diploma in IFR 2018 Question Paper
Exams are challenging, but every challenge has a limit to testing human potential.
The DipIFR examination held in Dec 2018 posed a similar challenge, to test the potential of candidates on the basis of ACCA IFRS knowledge and techniques.
So, we will discuss Question 1 of the December 2018 IFRS exam paper and understand the key points which are important to remember.
The question is divided into two parts with the parent Alpha, having two subsidiaries Beta & Delta, along with an associate.
An entity is required to present consolidated results if they are having a subsidiary on the last day of the reporting date. Alpha has a subsidiary Beta, so they will be required to present consolidated results even though Delta has been disposed of in the middle of the year. So the question required the calculation of profit or loss on disposal as well as preparation of a consolidated statement of financial position.
The computation of disposal of delta looked easier in terms of one figure to be calculated, but this required calculation of goodwill on the date of acquisition, increase in net assets till the date of disposal, and also had to correctly calculate the profit for the year ( being a mid-year disposal).
The majority of marks were concentrated in part (b) of the question, which required preparation of a consolidated statement of financial position. So, it makes sense to first attempt this question and then attempt part (a) to be able to gain maximum marks and then focus on part (a) unless one is very confident of computing disposal adjustments required to be included in consolidated results.
In addition to the requirement of consolidation procedures, the question also tested the latest standard on leases ACCA IFR 16. This was not a surprise and was much expected since ACCA IFR 16 got applicable from 1 Jan 2019 around the world and it was the need of the hour.
The key areas to focus on while attempting these questions were:
Identifying the group structure and percentage of holding in Beta, Gamma & Delta
Dealing with fair value adjustments, depreciation & deferred taxes related to them.
The accounting treatment of deferred consideration to be included in the cost of investment and unwinding of discount at the end of the year.
The acquisition cost of Beta created confusion on whether to include it or not, this could have resulted in a loss of one mark, to be charged (deducted) as part of group retained earnings along with unrealized profit.
The computation of leases required application of the new standard on leases, IFR 16 with computation of depreciation and finance costs, and also dealing with reversal of the existing charge to profit or loss account.
On the face of the balance sheet, the examiner expected to remember dealing with cash in transit and unrealized profit on the sale of inventories.
Gamma on the basis of de facto control definition looked like a subsidiary, but in the absence of information to perform consolidation for the results of Gamma, proved that Alpha did not control the financial and operating policies and had only significant influence.
Computation of goodwill for Delta
Calculation of net assets of Delta on the date of disposal which also required adjustment to consolidate retained earnings for post-acquisition profits of Delta and consolidated profit on disposal.
Overall, it was an easy question and the knowledge of consolidation steps to perform a balance sheet question would have resulted in gaining maximum marks, which could be done by knowing the computation of group structure, goodwill, calculation of net assets of subsidiary, valuation of non-controlling interest and group retained earnings.
To know more about Dipifrs (Past exam paper Dec 2018 Q1 Part 1) by ACCA Amit Kumar IFR Visit Takshila learning……
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