FAE September 2014

m1ck007

I wonder if something on payday loans would appear. Highly topical. Questions around revenue recognition and ethics could appear.

IR1SH RANG3R

PhilipLuke wrote: »

Yes but they amortised 120 so to get EBITDA you had to add back the full 120.
They adjusted for the incorrect capitalisation correctly but only added back 67 to get EBITDA when they had amortised 120 so therefore the profit was understated by (120 - 67) 53K

Just been through this myself and the solution is wrong you are correct. There is a note saying they took 3 or so different ways of calculating this and gave full marks though so probably wouldn't lose out on anything either way!

Where does the 70% come from though when multiplying the adjusted EBITDA by 10?

The Little Fella

IR1SH RANG3R wrote: »

Just been through this myself and the solution is wrong you are correct. There is a note saying they took 3 or so different ways of calculating this and gave full marks though so probably wouldn't lose out on anything either way!

Where does the 70% come from though when multiplying the adjusted EBITDA by 10?

Have to discount the multiple as 10 is for a public company

IR1SH RANG3R

The Little Fella wrote: »

Have to discount the multiple as 10 is for a public company

Is 70% just a general rule of thumb for that then? Very bad at valuing companies based on financials, need to get some more notes together on this!

Also, does anyone have like a "top 5" things they look at/calculate when given an income statement and balance sheet? Was always very bad at ratios etc.

The Little Fella

IR1SH RANG3R wrote: »

Is 70% just a general rule of thumb for that then? Very bad at valuing companies based on financials, need to get some more notes together on this!

Also, does anyone have like a "top 5" things they look at/calculate when given an income statement and balance sheet? Was always very bad at ratios etc.

I'd say generally it will always be a discount of 20% or 30%

PhilipLuke

IR1SH RANG3R wrote: »

Is 70% just a general rule of thumb for that then? Very bad at valuing companies based on financials, need to get some more notes together on this!

Also, does anyone have like a "top 5" things they look at/calculate when given an income statement and balance sheet? Was always very bad at ratios etc.

Any time you are given a multiple for a public company, if the company you are valuing is unquoted then you always discount it. You could have discounted it to 60% wouldn't have lost any marks

Glad someone on here is awake enough to clarify the mistake on here, think thats the second time "BARNEY" has stuck in me for slating the institutes errors (:

NBA1998

In the Argon steps case. Can someone please explain their of R&D and why they have deferred it? I don't understand the solution and I would like to understand it better.

littlemiss123

IR1SH RANG3R wrote: »

Is 70% just a general rule of thumb for that then? Very bad at valuing companies based on financials, need to get some more notes together on this!

Also, does anyone have like a "top 5" things they look at/calculate when given an income statement and balance sheet? Was always very bad at ratios etc.

My general process when presented with an IS/BS is:
1. Take a minute to read each and every caption on the IS/BS...I've made many mistakes myself by completely ignoring line items.
2. Then I would do a quick scan and identify anything that has significant increased or decreased or if I can spot any trends.
3. Then I would do a very basic ratio analysis - cost of sales/sales; profit/sales; current ratio to check if the company is liquid, if costs are increasing inline with sales etc
4. After that I would go into a more detailed analysis depending on the specifics and requirements of the case, picking additional relevant ratios.

Don't know if that is of any help to you but it is my general train of thought.

heathcliff101

Are people trying to get through all the available cases before exam day or happy enough just trying the majority? Feel like I'm putting myself under unnecessary pressure trying to get through all exams, mocks, steps, self study, cross marking and integrated case days...

littlemiss123

heathcliff101 wrote: »

Are people trying to get through all the available cases before exam day or happy enough just trying the majority? Feel like I'm putting myself under unnecessary pressure trying to get through all exams, mocks, steps, self study, cross marking and integrated case days...

I have been told by numerous people who did FAEs last year that you won't get through all the cases so don't try! I know I certainly won't!

littlemiss123

Is anyone else just reading cases and reading solutions? I don't even have the energy to attempt to answer them anymore...

m1ck007

littlemiss123 wrote: »

Is anyone else just reading cases and reading solutions? I don't even have the energy to attempt to answer them anymore...

Think im going to read the case, jot down what i think are indicators, read the solution thoroughly

jny107

LOccitane wrote: »

Same here. I'm not doing the entire book but with Section 3 of the AAFRP book and about 8 Cases from the DC Cases Book.

I think at minimum it's advisable to have covered cases in the DC Book for the 4 Business Combination scenarios: Investment in Associate, Associate to Subsidiary, Subsidiary to Subsidiary and Subsidiary to Disposal.

As a general point, looking back on the Material covered in the lectures I attended:

IFRS had a heavy focus on DC cases around Business Combinations.

Finance focused on FX risk and the valuation of a business in terms of questions covered.

MA focused on TP and Div PM in terms of questions covered.

We have seen a follow up focus on ISA 600 post the Mocks.

Again, obviously there is no predicting but I think there is at least a (possibly coincidental) trend there in terms of areas emphasised through questions.

I've hardly touched on dc book cases - which would you recommend re the 4 business combination scenarios??

LOccitane

jny107 wrote: »

I've hardly touched on dc book cases - which would you recommend re the 4 business combination scenarios??

Hey. Telfer Industrial Group is very good. Case No. 25 in the DC Book as it covers 3/4 scenarios. Current Issues Case No. 3 is also very good. Hope this helps!

Just my two cents on IS/SOFP reviews as well... Always check if there are illegal loans to directors in excess of the 10% threshold that would trigger a reporting requirement to the ODCE or if there are proposed journals affecting Asset values such as impairments - would a previously below the threshold loan now represent a breach... Just something that I check for when looking at liquidity/solvency.

Dellboy2007

jny107 wrote: »

which would you recommend re the 4 business combination scenarios??

The 4 business combination questions

20 Times 20 Times

Anyone got an email address for sean murray ?

Littlespoon

At possibly the worst timing, I have received terrible news about a family member- does anyone know should I inform the institute? Exams are the last thing on my mind right now but wondering what advice anyone would give me

Debs23

littlemiss123 wrote: »

I have been told by numerous people who did FAEs last year that you won't get through all the cases so don't try! I know I certainly won't!

I wont either. What cases do you think are a must do?

jny107

Dellboy2007 wrote: »

The 4 business combination questions

Cheers for that. Didn't have the book on me

Dellboy2007

Littlespoon wrote: »

At possibly the worst timing, I have received terrible news about a family member- does anyone know should I inform the institute? Exams are the last thing on my mind right now but wondering what advice anyone would give me

Sorry to hear that. I'd say no harm in contacting them before to let them know of your circumstances. At least then if things didn't go well for you on the day (presuming you're still going to do the exams) then when you did apply for extenuating circumstances (think it's within 7 days of finishing exam) they would know that you did have legitimate reasons. Probably let the firm that your working in know also, tell hr, who would more than likely contact the institute on your behalf.

I'd say, if possible, still give the exams a good attempt. You have done a lot of work now to have to wait another year before doing them.

Littlespoon

Thanks dellboy. I'm not working at the moment. Got made redundant before study leave (but completed training contract last year anyhow) so don't actually have anyone to contact the institute on my behalf. Just wondering would they need something else for proof? Not sure what to do

mark_m360

Littlespoon wrote: »

Thanks dellboy. I'm not working at the moment. Got made redundant before study leave (but completed training contract last year anyhow) so don't actually have anyone to contact the institute on my behalf. Just wondering would they need something else for proof? Not sure what to do

I would call the institute in the morning. I'm sure they would have guidelines for these circumstances. I would imagine they would focus on close family members. If you were not to sit the exams, I'm sure a printout from the notice in the paper would do. But they will be able to tell you in the morning.

LOccitane

In relation to the PASE (Ethical Standard); is anybody aware of what the thresholds are for qualification? The Audit Elective book does not specify.

When I looked this up on CAI, the thresholds seemed to be reflective of the previous audit exemption thresholds but it also states on there that only 2/3 of the conditions need to be satisfied for PASE qualification:

http://www.charteredaccountants.ie/en/Members/Technical/Ethics-/FAQ/I-have-heard-a-lot-about-audit-exemptions-for-small-entities-What-is-a-small-entity-and-who-can-take-advantage-of-these-provisions/

Any ideas? Thanks.

FAEStudent2014

In the CGS book it is
1) not more than €7.3m turnover
2) not more than €3.65m in balance sheet
3) not more than 50 employees
Have to meet two to qualify..

womandriver

LOccitane wrote: »

In relation to the PASE (Ethical Standard); is anybody aware of what the thresholds are for qualification? The Audit Elective book does not specify.

When I looked this up on CAI, the thresholds seemed to be reflective of the previous audit exemption thresholds but it also states on there that only 2/3 of the conditions need to be satisfied for PASE qualification:

http://www.charteredaccountants.ie/en/Members/Technical/Ethics-/FAQ/I-have-heard-a-lot-about-audit-exemptions-for-small-entities-What-is-a-small-entity-and-who-can-take-advantage-of-these-provisions/

Any ideas? Thanks.

Sean murray's elective session 1 and 2 notes have the thresholds in them.

womandriver

FAEStudent2014 wrote: »

In the CGS book it is
1) not more than €7.3m turnover
2) not more than €3.65m in balance sheet
3) not more than 50 employees
Have to meet two to qualify..

They don't agree to Sean's notes

Philip1988

womandriver wrote: »

They don't agree to Sean's notes

Page 12-13 in the audit book lists out the requirements. All 3 need to be met.

RichFTW

LOccitane wrote: »

In relation to the PASE (Ethical Standard); is anybody aware of what the thresholds are for qualification? The Audit Elective book does not specify.

When I looked this up on CAI, the thresholds seemed to be reflective of the previous audit exemption thresholds but it also states on there that only 2/3 of the conditions need to be satisfied for PASE qualification:

http://www.charteredaccountants.ie/en/Members/Technical/Ethics-/FAQ/I-have-heard-a-lot-about-audit-exemptions-for-small-entities-What-is-a-small-entity-and-who-can-take-advantage-of-these-provisions/

Any ideas? Thanks.

http://www.cro.ie/en/annual-return-audit-exemption.aspx

They changed recently, that's why people have different thresholds. CRO figures will be the most up to date.

All conditions need to be satisfied as far as I know.

mark_m360

FAEStudent2014 wrote: »

In the CGS book it is
1) not more than €7.3m turnover
2) not more than €3.65m in balance sheet
3) not more than 50 employees
Have to meet two to qualify..

They are the old figures and are also stated in para 4 (ii). The updated figures are T/O €8.8m, BS €4.4m & not more than 50 employees.

Also, "two or more" of these are required to meet the definition of a small entity under PASE. This is also stated in para 4 (ii). You do not need to meet all 3, however you do need to make sure they meet this requirement in the current and preceding year.

womandriver

Philip1988 wrote: »

Page 12-13 in the audit book lists out the requirements. All 3 need to be met.

Sean Murray's notes are the up to date thresholds

LOccitane

mark_m360 wrote: »

They are the old figures and are also stated in para 4 (ii). The updated figures are T/O €8.8m, BS €4.4m & not more than 50 employees.

Also, "two or more" of these are required to meet the definition of a small entity under PASE. This is also stated in para 4 (ii). You do not need to meet all 3, however you do need to make sure they meet this requirement in the current and preceding year.

Thanks, so to be clear:

1. We know that all three must be met for audit exemption together with other factors such as on time statutory returns etc.

2. But SPECIFICALLY for PASE for Ethical Standards application only at least two of the conditions need to be met in consecutive years?

mark_m360

LOccitane wrote: »

Thanks, so to be clear:

1. We know that all three must be met for audit exemption together with other factors such as on time statutory returns etc.

2. But SPECIFICALLY for PASE for Ethical Standards application only at least two of the conditions need to be met in consecutive years?

Yes that's right. And I believe this distinction is where the confusion arises.

So its important to not mix up the two during the exam.

PhilipLuke

FAEStudent2014 wrote: »

In the CGS book it is
1) not more than €7.3m turnover
2) not more than €3.65m in balance sheet
3) not more than 50 employees
Have to meet two to qualify..

Those are the old thresholds see pg 13 of the External Audit & Assurance Book

FAEStudent2014

Okay thanks.. Pity CGS couldn't of updated it. So it's same thresholds for ESPASE and audit exempt.. Thanks!!

FAEStudent2014

For ESPASE and other services it seems that we can do many service once we tell shareholders of that and of the threat?!

galway321

NBA1998 wrote: »

In the Argon steps case. Can someone please explain their of R&D and why they have deferred it? I don't understand the solution and I would like to understand it better.

The first line of appendix 3 states that the conditions of IAS 37 are met to capitalise R&D expenditure, so we assume this is correct.

Amortisation for the first three projects is the balance at 31.12.13 divided by 26 accounting periods (2 years left with 13 reporting periods per year per the questions) multiplied by 7 (the number of accounting period so far this year)

Project twinkle had 9 accounting periods left at the start of the year. 7 have passed so the amortisation is 7/9 * the balance at 31.12.13

Current year spends are not amortised as you can't start amortising until it's ready for use.

Hope this helps

m1ck007

In the telfer group case in dc book, the property is reclassified as held for sale. When reclassifying as held for sale u measure at lower of carrying value or fv less costs to sell. Why does the solution remeasure the asset to its fv less costs to sell which is higher than its carrying value??

Mark1916

m1ck007 wrote: »

In the telfer group case in dc book, the property is reclassified as held for sale. When reclassifying as held for sale u measure at lower of carrying value or fv less costs to sell. Why does the solution remeasure the asset to its fv less costs to sell which is higher than its carrying value??

It doesn't give you the fair value after it has been moved to HFS, the carrying value at that date is the 3m. It only gives you the FV when it's no longer HFS! (That's how I saw it, could be wrong)

m1ck007

Mark1916 wrote: »

It doesn't give you the fair value after it has been moved to HFS, the carrying value at that date is the 3m. It only gives you the FV when it's no longer HFS! (That's how I saw it, could be wrong)

The market value at the date it was held for sale is 3m. Which is higher that the cv. Anyway im just going to ignore it.

aca2801

anyone know how long more the student website will be down?

Chris Partlow

womandriver wrote: »

Revised ISA 700 says you can not date and sign audit report until you have reviewed all other info, so it wouldn't be an eom now. It's not a qualified report either as you can't actually issue report. Think it's paragraph 20 or 21 in the revised ISA 700, somewhere around there anyway.

Edit: it's para 24 and A20 & A21.

Cheers for that. Just spotted P249/250 of the AAA book specifically mentions a Chairmans Report and seems to imply it would just be an Other Matter paragraph

Chris Partlow

aca2801 wrote: »

anyone know how long more the student website will be down?

Working fine for me

Accountant81

Chris Partlow wrote: »

Working fine for me

Me too

aca2801

Accountant81 wrote: »

Me too

really, its drivin me crazy hasn't been working for me all day, thanks for letting me know!

womandriver

Chris Partlow wrote: »

Cheers for that. Just spotted P249/250 of the AAA book specifically mentions a Chairmans Report and seems to imply it would just be an Other Matter paragraph

Those pages don't seem to make reference to not actually getting to review the other info tho, or does it? Didn't see it if it did.

Sean Murray specifically discussed this issue when covering the new Isa 700 in his lecture on audit report and the outcome as per Sean is you don't sign or date the report until such time a you have reviewed all other info.

If you read ISA 700 para A21, the answer is there. The date the auditor signs and dates the audit report is after 3 things have occurred. A21 (B) "review all documents" and specifically mentions chairman's report.

myshirt

IFRS 5

Does the loss on 'reclassification to held for sale' go to P+L always, or to OCI if the asset was previously revalued?

I have one set of notes that says the loss goes to P&L always, and this is inconsistent with IAS 36. Derry's book however say that the standard is silent, and you have a choice.

Also, in the example I was looking at (p.42), as the loss on reclassification was purely because of estimated selling costs, he didn't reduce the carrying value of the asset, but instead just created a provision. Smart.

Is this acceptable across the board for losses on reclassification, or should you just write down the asset?

mark_m360

womandriver wrote: »

Those pages don't seem to make reference to not actually getting to review the other info tho, or does it? Didn't see it if it did.

Sean Murray specifically discussed this issue when covering the new Isa 700 in his lecture on audit report and the outcome as per Sean is you don't sign or date the report until such time a you have reviewed all other info.

If you read ISA 700 para A21, the answer is there. The date the auditor signs and dates the audit report is after 3 things have occurred. A21 (B) "review all documents" and specifically mentions chairman's report.

Check SX-Maxx Ltd indicator 3. It deals with this specific issue.

womandriver

mark_m360 wrote: »

Check SX-Maxx Ltd indicator 3. It deals with this specific issue.

That case is old, not updated for new Isa 700. It's really worth watching the online lectures if you have any doubts re. audit reports because they're very likely to be on the paper.

I'd advise extreme caution when relying on old cases,especially where the ISAs have been revised since.

20 Times 20 Times

aca2801 wrote: »

anyone know how long more the student website will be down?

#indicator, testing your knowledge if you have a contingency plan in place!

Chris Partlow

womandriver wrote: »

Those pages don't seem to make reference to not actually getting to review the other info tho, or does it? Didn't see it if it did.

Sean Murray specifically discussed this issue when covering the new Isa 700 in his lecture on audit report and the outcome as per Sean is you don't sign or date the report until such time a you have reviewed all other info.

If you read ISA 700 para A21, the answer is there. The date the auditor signs and dates the audit report is after 3 things have occurred. A21 (B) "review all documents" and specifically mentions chairman's report.

So its not a case of adding another paragraph (EOM, Other Matter), its just a case of not signing?

Is this launch session 6 lecture you're referring to? I'll have to have a quick look over it again. Happy enough with Audit Reports in general but I found this indicator a bit odd.

Thanks for your help.