1

CI MA F2 Pr ac t i c e and Revi si on Ki t (2013) Updat es & Er r at a

Question 10 BN (3/12)
Solution to (a)(i)
At the bottom of (W1), Note 2 should say Annuity factor 9% after 4 years (rather than Discount factor 7% after 4
years).
Question 11 JH (5/12)
Solution to part (b)(ii)
Change Fair value at 31 December 20X4 to Fair value at 31 December 20X1.
Question 13 EAU (5/11)
Solution to part (b)
Journal should be dated for the year ended 31 December 20X2 (rather than 30 September 20X2).
Question 14 QWS (11/11)
Question
Dates are wrong. Replace with:
Financial Instrument
QWS issued a redeemable debt instrument on 1 July 20X1at its par value of $6 million. The instrument carries a fixed
coupon interest rate of 6%, which is payable annually in arrears. The debt instrument will be redeemed for $6.02 million
on 30 June 20X5.Transaction costs associated with the issue were $200,000 and were paid at the time of issue. The
effective interest rate applicable to this liability is approximately 7.06%.
Required:
(i) Explainhow this instrument will be initially and subsequently measured.
(ii) Calculatethe carrying value of the liability to be included in QWS's statement of financial position as at 30 June
20X3. (Round all workings to the nearest $000)
(5 marks)
Pension plan
QWS operates a defined benefit pension plan for its employees. At 1 July 20X2the fair value of the pension plan assets
was $1,200,000 and the present value of the plan liabilities was $1,400,000. The yield on high quality corporate bonds
was 7%.
The actuary estimates that the current service cost for the year ended 30 June 20X3is $300,000. QWS made
contributions into the pension plan of $400,000 in the year.
The pension plan paid $220,000 to retired members in the year to 30 June 20X3. At 30 June 20X3the fair value of the
pension plan assets was $1,400,000 and the present value of the plan liabilities was $1,600,000.
QWS recognises gains and losses on remeasurement in accordance with IAS 19 Employee benefits (revised 2011).
Required:
Calculatethe net expense that will be included in QWS's profit or loss AND the amounts that would be included in
respect of gains or losses on remeasurement for the year ended 30 June 20X3. (Round all workings to the nearest
$000) (5 marks)
(Total =10 marks)
Please accept our apologies for any inconvenience that the following errata may have caused.
2


Solution to part (a)(i)
1
st
sentence of 2
nd
paragraph should read:
It is initially measured at its fair value ie the cash received of $6m (rather than cash paid).
Question 22 ABC and DEF (FA 11/05 amended)
Question
Replace note (d) with:
(d) DEFs inventories included goods at an advanced stage of work-in-progress with a carrying value of $30,000.
The fair value of these goods was estimated at $36,000.
Question 23 AAY (FA 5/08)
Question - In note (1), the profit for the year of AAY should be $81.7 million (not $81,700).
Question 26 ERT (3/11)
Solution
In (W3), note 2, the first sentence should read:
The other reserves balance shown in ERTs separate statement of financial position is eliminated on consolidation
because the carrying value of the investment has to be restated to its cost for consolidation purposes (see (W2).
Question 27 SD (9/11)
Solution: workings
(W3) Date of retained earnings should be 28 February 20X1 not 20X2.
(W4) Replace with:
(4) Non-controlling interest
$
At acquisition 1,960,000
NCI share of post-acq retained earnings to
28 February 20X1 (40% 426,667(W3))

170,666

2,130,666
Decrease in NCI on further acquisition (20/40 2,130,666) (1,065,333)
NCI share of post-acq retained earnings to
30 June 20X1 (20% 153,333(W3))

30,666



1,095,999
Question 28 BN and AB (5/12)
Solution to part (b)
Retained earnings working should say Share of ABs post acquisition reserves (rather than BN).
Question 31 ST (FA 5/06)
Question
Replace note 1 with:
(1) Investments by ST
Several years ago ST acquired 70% of the issued ordinary share capital of UV. On 1 February 20X5, ST
acquired 50% of the issued share capital of WX, an entity set up under a contractual arrangement as a joint
venture between ST and one of its suppliers. The arrangement gives the two parties joint control and rights to
the net assets of WX.
3

Solution
Replace the whole solution with the following:
Text reference. Joint arrangements are covered in Chapter 9.
Top tips. This is a fairly straightforward consolidation with the addition of the treatment of WX as a joint arrangement
using the equity method. However this is complicated by the intra group sale from WX to ST. ST's share of unrealised
profits at the reporting date must be eliminated.
Easy marks.Easy marks are available for setting out the proforma and adding across. Also, remember to split out the
profit into parent and non-controlling interests.
ST GROUP
CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 JANUARY 20X6


$'000

Revenue (1,800 + 1,400)

3,200

Cost of sales (1,200 + 850)

(2,050)

Gross profit

1,150

Operating expenses (450 + 375)

(825)

Finance cost (16 + (12 6 (W2)))

(22)

Share of profit of joint venture ((50 50%) 1 (W3))

24

Profit before tax

327

Income tax expense (45 + 53)

(98)

Profit for the year

229

Profit attributable to:


Owners of the parent (bal fig)

196

Non-controlling interest (110 30% (UV))

33



229


Workings
1 Group structure
ST


UV WX
(subsidiary) (joint venture)



2 Intragroup debenture loan interest
Intragroup debenture loan interest = $100,000 x 6% = $6,000
Eliminate by:
Interest income $6,000
Finance costs $6,000

3 Provision for unrealised profit
WX ST
PUP = $20,000 x in inventories x 20/100 margin x 50% group share = $1,000
Eliminate by reducing share of profit of joint venture.
70%
50% 1.2.X5
4

Question 36 Preparation question: Part disposal
Question
Last paragraph of question (just before requirement):
The fair value of the non-controlling interest on 1 January 20X6 was $51,400.
Question 40 AZ (FA 5/06)
Solution to part (c)
In (W2) Investment in associate, the share of post acquisition retained reserves should be $85,000 x 40% not $885,000
x 40%.
Q47 Preparation question: Foreign operations
Solution
For your convenience the consolidated statement of profit or loss and other comprehensive income, consolidated
statement of changes in equity and workings 2, 3 and 5 are shown in full. Affected numbers are shown in bold.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR
ENDED 31 DECEMBER 20X6

Standard

Odense

Rate

Odense

Consol


$'000

Kr'000

$'000

$'000

Revenue

1,125

5,200

8.4

619

1,744

Cost of sales

(410)

(2,300)

8.4

(274)

(684)

Gross profit

715

2,900

345

1,060

Other expenses

(180)

(910)

8.4

(108)

(288)

Impairment loss (W2)

(20)

Dividend from Odense

40







Profit before tax

575

1,990

237

752

Income tax expense

(180)

(640)

8.4

(76)

(256)

Profit for the year

395

1,350

161

496

OTHER COMPREHENSIVE INCOME
Items that may subsequently be reclassified
to profit or loss

Exchange difference on translating foreign

operations (W5)














71
TOTAL COMPREHENSIVE INCOME FOR
THE YEAR

395

1,350

161

567
Profit attributable to:

Owners of the parent

464

Non-controlling interest (161 20%)

32



496

Total comprehensive income for the year attributable to:

Owners of the parent

525

Non-controlling interest (161 + 48 (W5)) 20%

42


567

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EXTRACT)

Retained

earnings


$'000


Balance at 1/1/X6 (W4) 1,065
Dividends paid (195)
Total comprehensive income for the year (per SPLOCI)

525
Balance at 31/12/X6 (W3)

1,395


5

Workings
(2) Goodwill

Kr'000

Kr'000

Rate

$'000


Consideration transferred (520 9.4)

4,888

520

Non-controlling interests (3,100 20%)

620

66

Share capital

1,000

9.4

Reserves

2,100



(3,100)



(330)

2,408

256

Exchange differences 20X4-20X5



18

At 31.12.X5

2,408 8.8 274

Impairment losses 20X6

(168)

8.4

(20)

Exchange differences 20X6



23

At 31.12.X6

2,240

8.1

277

(3) Consolidated retained earnings carried forward


$'000


Standard

1,115



Group share of post acquisition reserves of Odense (324 80%)

259



1,374


Less goodwill impairment losses (W2)

(20)

Exchange differences on goodwill (18 + 23)

41



1,395

(5) Exchange differences


$'000

$'000


On translation of net assets:



Closing NA @ CR

654



Opening NA @ OR (5,300 1,350 + 405 = 4,355 @ 8.8)

(495)



Less retained profit as translated (161 (SPLOCI) 405 @ 8.1)

(111)



Exchange gain

48


On goodwill (W2)



23



71


Question 48 Little (FA Pilot Paper)
Solution to part (b)
(W4) Non-controlling interest share of post acquisition retained earnings should be 355 not 335.
Question 49 Home Group (FA 11/06)
Solution
(W3) Should be headed up Exchange difference on foreign payable (rather than Exchange difference on plant).
Question 51 BH Group (11/11)
Question
In the additional information, note 1, 3
rd
paragraph, first sentence, the fair value of the investment at 31 March 20X1
should be $1,170,000 (not $1,1700,000).
In note 3, the second sentence should read: Half of these items remain in BHs inventories at the yearend.

6

Question 53 AH Group (FA 11/05)
Solution
In (W2), goodwill arising on acquisition should be calculated as follows:


$'000


Consideration transferred:



Shares (2m x $2)

4,000
Cash

2,000
Non-controlling interest (5,000 x 25%)

1,250
Less: Net assets at acquisition

(5,000)

Goodwill

2,250

Question 57 AB (9/11)
Solution
In the operating activities section of the cash flow, the headings for decrease in trade receivables and decrease in
inventories are the wrong way round. Decrease in inventories should be 4,800 and decrease in receivables should
be 200.
In the note at the foot of the consolidated statement of cash flows, it should say dividends could also be shown under
operating activities.
Question 62 KER (5/10)
Question
In the statement of financial position, the cash and cash equivalents balance for 20X8 should be $22m (not $2m).
Question 63 DFG (3/11)
Solution to part (a)
ROCE for 20X1 is incorrect. It should be 15/337 = 4.5%.
The share of the profit of associate should have been removed when calculating interest cover for 20X1:
Interest cover =
12
7 - 12 10
= 1.25 times
Mock Exam 1: Question 3 FDE (5/09)
Question
Delete last sentence of question: The average remaining working life of employees who participate in the scheme is 10
years.
Reword requirement (a):
Calculate the amounts, in respect of the pension plan, that FDE will include in its statement of profit or loss and other
comprehensive income
Mock Exam 1: Question 4 JK (5/10)
Solution to part (b)
Year end should be 30 November (not 31 December).
Mock Exam 2: Question 7 TYU (9/12)
Solution to part (a)
Operating margin for 20X1 should be 4.9% (rather than 5.0%).