2013 CAP2 Discussion Group

Kevint30

y0ssar1an22 wrote: »

I have a question I hope someone will be able to help with. Its from FR Jan 2013 Q2 part a. Ballyhoe LTD.

31 dec 2011: NBV = 1166
__________ revalu to 1100

= revaluation decrease of 66000

1. eliminate AD

AD 157000
revalu______157000

2. account for remainder of movement:
66000 + 157000 (AD) = 223000

NCA____________________223000
revalu. surplus 180000
loss on revalu 43000

NBV now = 1100


Dep for 2012:

1100@5% = 55000

AD__________________55000
Dep Expense 55000



Giving a net result of:

NCA_____________________223000
AD ______________102000
Revalu

---

P/L (loss on revalu) 43000
Dep exp _________55000



I am going wrong somewhere, cos the solution is completely different. Help!!

Asset bought 2009 1,300
Dep 25yrs 2009 -52
2010 -52
CV 2010 1,196

In 2011 Reval Surp 23
Charge for year 53 Charge for year is 157-104=53
CV 2011 1,166

2012 reval loss -66
New cost 1100 1166-66
Charge for year 55 1100/20

Carrying Val 12 1045

Kevint30

Does anyone understand the tax/capital allowance treatment for npv calculations?

Noonster

Yeah, just been looking at the tax calculations now.

Basically, when calculating the base figure for tax payable, instead of subtracting depreciation from (1)profit we subtract the capital allowances instead, as these are approved by Revenue for this purpose.

If the Profit figure we are given has taken depreciation into account, we add it back in and subtract the capital allowances instead. If depreciation has not been considered in the profit figure then we can just take away the capital allowances straight away.

Once we have done the above, we calculate tax figure I.e.. 20 % of taxable profit in the SFMA Case study paper.

Then here comes the messy bit, We then subtract this tax figure from the (1)profit figure above and then we have the final cash flow figure for NPV purposes. So essentially the capital allowance figure is only relevant for calculating the tax figure and then we ignore it when calculating our overall cash flow figure as, like depreciation, it is not a cashflow at all.

An example would best explain this, but there are a few good ones on the notes provided by Horsebox, so I would recommend looking at them.

Kevint30

Thanks for that noonster. One more question. In some investment appraisal questions the capital allowance amount is multiplied by the tax rate and the resulting figure is then added back after tax. In other solutions this doesn't occur is this all connected to depreciation. Thanks again

y0ssar1an22

Kevint30 wrote: »

Thanks for that noonster. One more question. In some investment appraisal questions the capital allowance amount is multiplied by the tax rate and the resulting figure is then added back after tax. In other solutions this doesn't occur is this all connected to depreciation. Thanks again

This will give you the same result:

eg: taxable profit: 100
CA: -20
= 80

tax@ 15% = 12

---

taxable profit: 100
tax@ 15% = 15

CA: 20
Tax benefit of CA: 20 @15% = 3

15 - 3 = 12


remember: CA reduce your tax liability
and be aware there may be balancing allowance/charge in final yr

Bal all/charge:

Cost of asset
- sales proceeds
- CA claimed to date (in the case study this should only be 1 year)
= bal all/charge.

if the figure is positive it is a bal allowance. Therefore treat this like CA and use it to reduce tax liability
if the figure is negative it is a bal charge. this will added to the tax liability, and you will pay more tax.

Mypillowface

Does anyone have copies of the SFMA Jan May and Sept 2013 papers and solutions? They aren't available on the website anymore.

y0ssar1an22

Mypillowface wrote: »

Does anyone have copies of the SFMA Jan May and Sept 2013 papers and solutions? They aren't available on the website anymore.

...

Kevint30

Mypillowface wrote: »

Does anyone have copies of the SFMA Jan May and Sept 2013 papers and solutions? They aren't available on the website anymore.

You'll find them here:


http://students.charteredaccountants.ie/Student-Information/Exams/Continuous-Assessment/CAP2-Assessment-Past-Papers/

Mypillowface

y0ssar1an22 wrote: »

...

Thank you

Kevint30

y0ssar1an22 wrote: »

This will give you the same result:

eg: taxable profit: 100
CA: -20
= 80

tax@ 15% = 12

---

taxable profit: 100
tax@ 15% = 15

CA: 20
Tax benefit of CA: 20 @15% = 3

15 - 3 = 12


remember: CA reduce your tax liability
and be aware there may be balancing allowance/charge in final yr

Bal all/charge:

Cost of asset
- sales proceeds
- CA claimed to date (in the case study this should only be 1 year)
= bal all/charge.

if the figure is positive it is a bal allowance. Therefore treat this like CA and use it to reduce tax liability
if the figure is negative it is a bal charge. this will added to the tax liability, and you will pay more tax.

Thanks for that, can't believe I missed that. Feel like a plumb now

Noonster

Help!!

Was thinking that Sensitivity analysis might some up in the 'investment analysis' question and I just can get my head around it. The following example is reflective of cases I have seen in the book and the notes:

A project has an NPV of €100,000. salaries of €15,000 p.a. For 5 years were charged in arriving at this NPV, using a discount rate of 15%.how sensitive is the outcome of the project to the level of salaries?

Solution given:
PV of salaries = €15,000 x 3.352 (annuity factor,5 years,15%)= €50,280.

NPV/PV cost of salaries= 100,000/ 50,280= 199%=> cost of salaries could increase by 199% before the projects NPV would be reduced to zero.
I.e. Cost is salaries could increase to €44,850 before the NPV would be reduced to zero.

I just can't get this. If the cost were €44,850 annually then the PV would be 44,850x3.352=150,337,which is already greater than the 100,000 NPV.

Anyone able to shed any light??

Imported but

Noonster wrote: »

Help!!

Was thinking that Sensitivity analysis might some up in the 'investment analysis' question and I just can get my head around it. The following example is reflective of cases I have seen in the book and the notes:

A project has an NPV of €100,000. salaries of €15,000 p.a. For 5 years were charged in arriving at this NPV, using a discount rate of 15%.how sensitive is the outcome of the project to the level of salaries?

Solution given:
PV of salaries = €15,000 x 3.352 (annuity factor,5 years,15%)= €50,280.

NPV/PV cost of salaries= 100,000/ 50,280= 199%=> cost of salaries could increase by 199% before the projects NPV would be reduced to zero.
I.e. Cost is salaries could increase to €44,850 before the NPV would be reduced to zero.

I just can't get this. If the cost were €44,850 annually then the PV would be 44,850x3.352=150,337,which is already greater than the 100,000 NPV.

Anyone able to shed any light??

Remember the signs +/-...
Before the increase the PV of salaries is (50k) and overall NPV +100k
Salaries PV changes to (150k) bringing overall NPV down to 0.

Noonster

Hi Imported But. So simple.thanks for the explanation.Really appreciate it

TAA_ICAI

Hey,

Anyone know how the interest cost was calculated each quarter from the €20,000 finance cost in IAS 1 Review Question 4 as per below:

Op Bal Repaid Interest Cl Bal
Payment date 140,000 (10,000) 2,500 132,500
01.10.06 132,500 (10,000) 2,333 124,833
01.01.07 124,833 (10,000) 2,167 117,000
01.04.07 117,000 (10,000) 2,000 109,000
01.07.07 109,000 (10,000) 1,833 100,833
01.10.07 100,833 (10,000) 1,667 92,500

Your help would be much appreciated thank you :-)

y0ssar1an22

TAA_ICAI wrote: »

Hey,

Anyone know how the interest cost was calculated each quarter from the €20,000 finance cost in IAS 1 Review Question 4 as per below:

Op Bal Repaid Interest Cl Bal
Payment date 140,000 (10,000) 2,500 132,500
01.10.06 132,500 (10,000) 2,333 124,833
01.01.07 124,833 (10,000) 2,167 117,000
01.04.07 117,000 (10,000) 2,000 109,000
01.07.07 109,000 (10,000) 1,833 100,833
01.10.07 100,833 (10,000) 1,667 92,500

Your help would be much appreciated thank you :-)

on my initial reading it appears finances costs are 25000

TAA_ICAI

y0ssar1an22 wrote: »

on my initial reading it appears finances costs are 25000

Hi y0ssar1an22,

Thank you for your reply :-). Could you please explain how you arrived at 25,000 for the finance costs?

As I was thinking it was:

Total repayments 160,000
Cost 140,000
Finance charge 20,000

Thank you for you help :-)

y0ssar1an22

TAA_ICAI wrote: »

Hi y0ssar1an22,

Thank you for your reply :-). Could you please explain how you arrived at 25,000 for the finance costs?

As I was thinking it was:

Total repayments 160,000
Cost 140,000
Finance charge 20,000

Thank you for you help :-)

Is this the TVs ‘R’ Us question? I just had a look and got it from the trial balance

y0ssar1an22

TAA_ICAI wrote: »

Hi y0ssar1an22,

Thank you for your reply :-). Could you please explain how you arrived at 25,000 for the finance costs?

As I was thinking it was:

Total repayments 160,000
Cost 140,000
Finance charge 20,000

Thank you for you help :-)

BTW if it is that question they are CAP2 standard. The exam is on CAP1 material only (I think)

TAA_ICAI

y0ssar1an22 wrote: »

BTW if it is that question they are CAP2 standard. The exam is on CAP1 material only (I think)

Hi y0ssar1an22,

Yea it is that question, I thought the 25,000 in trial balance was separate from the lease in note (ii) .... Not sure though ...

Actually just looked at competency statement again it is only CAP 1 examinable ... Good job u mentioned thank you :-)

y0ssar1an22

TAA_ICAI wrote: »

Hi y0ssar1an22,

Yea it is that question, I thought the 25,000 in trial balance was separate from the lease in note (ii) .... Not sure though ...

Not sure ... I thought everything on the IAS's & IFRS's in the competency statement for C.A. is examinable ....

I had another look at the question there and I dont know how to approach it. In the year ending 06 there is 1 repayment of 10000, split between interest and capital repayments.
According to solution the interest = 2500. I dont know how they got this figure. There must be a formula that works this out.

Imported but

TAA_ICAI wrote: »

...
Actually just looked at competency statement again it is only CAP 1 examinable ... Good job u mentioned thank you :-)

FYI For SFMA CA, my understanding (based on the attached) is that it

• Contains both CAP 1 & CAP 2 Material
• Area 1 – Typically taken form CAP 1 Finance Syllabus (Competency Statement)
• Area 2 – Typically taken form CAP 1 Management Accounting Syllabus (Competency Statement)
• Area 3 – Typically a research element taken from CAP 2 SFMA Syllabus (Competency Statement)

So - unless it's changed since last year - there could be some CAP2 theory (from the first few sessions perhaps) in there as well.
Can anyone clarify if it's changed?

y0ssar1an22

Imported but wrote: »

FYI For SFMA CA, my understanding (based on the attached) is that it

• Contains both CAP 1 & CAP 2 Material
• Area 1 – Typically taken form CAP 1 Finance Syllabus (Competency Statement)
• Area 2 – Typically taken form CAP 1 Management Accounting Syllabus (Competency Statement)
• Area 3 – Typically a research element taken from CAP 2 SFMA Syllabus (Competency Statement)

So - unless it's changed since last year - there could be some CAP2 theory (from the first few sessions perhaps) in there as well.
Can anyone clarify if it's changed?

from the competency statement:

Practical case study assignment:
Main case study narrative is released 4 weeks in advance.
Case study is expected to focus on:
o Areas covered by CAP1
o Some new areas from CAP2 (candidates expected to research these areas themselves: self-directed learning)
On the day of the assessment, candidates will be provided with the original narrative, the requirements and supplementary material to the case study (if needed).

I wonder what areas these will be? Hopefully some theory but ROCE will be on. Hopefully no yield/mix variances.

y0ssar1an22

Question in relation to NPV:

sometimes the finance costs are not included as a cash outflow, because the repayments are reflected in the WACC. Do you ever/when do you include finance costs as a cash outflow?

miii

I have query re jan13 paper for FR Q1. the depreciation for buildings is 61350 in solution worked out o total cost of 1227000 should it not be worked out on 1007000 and have depn of 50350? Am i missing something here
Any help appreciated x

Ms.Cosmo

miii wrote: »

I have query re jan13 paper for FR Q1. the depreciation for buildings is 61350 in solution worked out o total cost of 1227000 should it not be worked out on 1007000 and have depn of 50350? Am i missing something here
Any help appreciated x

You need to include depreciation for the building that was disposed within the year until November, it sums to 11,00 giving the total of 61350.

y0ssar1an22

Help me please. The more I study the more confused I'm getting and now my brain is all scrambled.

TR in the SoFP: Is this equal to TR - (old Bad debt provision + movement on new provision)?

I am doing may 2013 Q2, and trying to figure out how they got the net result of crediting TR 25000?

Louised86

Hi will the discount factors be provide in the exam or will you have to bring them in with you? Thanks

y0ssar1an22

Louised86 wrote: »

Hi will the discount factors be provide in the exam or will you have to bring them in with you? Thanks

I'm gonna presume you get them, but I'm bringing in a copy to be safe.

Imported but

y0ssar1an22 wrote: »

I'm gonna presume you get them, but I'm bringing in a copy to be safe.

And if you get stuck they are in appendix 4 and 5 of Ward textbook

Kevint30

y0ssar1an22 wrote: »

Question in relation to NPV:

sometimes the finance costs are not included as a cash outflow, because the repayments are reflected in the WACC. Do you ever/when do you include finance costs as a cash outflow?

Hi
Did you get an answer for this? I always gathered that finance costs are a financing decision and included there whereas npv is an investment decision so no finance related costs should be included

TAA_ICAI

y0ssar1an22 wrote: »

Help me please. The more I study the more confused I'm getting and now my brain is all scrambled.

TR in the SoFP: Is this equal to TR - (old Bad debt provision + movement on new provision)?

I am doing may 2013 Q2, and trying to figure out how they got the net result of crediting TR 25000?

Hey y0ssar1an22,

I think the Trade Rec 25,000 Credit is made up of the following:

Credit Sales 475,000 Note 2 -[600-100=500-(500*.05)]
Bad Debt W/O (20,000)
Receipts (480,000) Note 6[560-80]
Bad Debt Rec 5,000 Note 5&6
Bad Debt Rec (5,000)
(25,000)

Hope this helps ...

y0ssar1an22

TAA_ICAI wrote: »

Hey y0ssar1an22,

I think the Trade Rec 25,000 Credit is made up of the following:

Credit Sales 475,000 Note 2 -[600-100=500-(500*.05)]
Bad Debt W/O (20,000)
Receipts (480,000) Note 6[560-80]
Bad Debt Rec 5,000 Note 5&6
Bad Debt Rec (5,000)
(25,000)

Hope this helps ...

i figured that might be the case. I guess the confusion came from me including the opening TR of 450000 as well. Is this ignored?

TAA_ICAI

y0ssar1an22 wrote: »

i figured that might be the case. I guess the confusion came from me including the opening TR of 450000 as well. Is this ignored?

Hi y0ssar1an22,

Yea I think its just the change that's included in the net adj journal but if you had to inc TR fig in the SOFP it would be the net of 450+(25)-7.75=417.25* (I think) but I don't think this is req in this Q.
*Sorry the 13.5 shouldn't be in there as its inc in the Op bal

y0ssar1an22

TAA_ICAI wrote: »

Hi y0ssar1an22,

Yea I think its just the change that's included in the net adj journal but if you had to inc TR fig in the SOFP it would be the net of 450+(25)-13.5-7.75=403.75 (I think) but I don't think this is req in this Q.

Thanks alot. That had me freaking out yesterday.

TAA_ICAI

Hey Everyone,

What are you guys bringing into the SFMA exam?

Don't want to bring too much/too little - Is anyone bringing the books?

Not sure if I will as I doubt they will add much value ...

y0ssar1an22

TAA_ICAI wrote: »

Hey Everyone,

What are you guys bringing into the SFMA exam?

Don't want to bring too much/too little - Is anyone bringing the books?

Not sure if I will as I doubt they will add much value ...

I'm bringing in my Finance and MA notes/folder from last year, and the SFMA notes I have from this year.
I've never looked at the books so for me they would be pointless.

Jas30

I am bringing in SFMA Toolkit. In the answers part at the back it has all really useful theory answers in relation to all topics I have tabbed the ones I think are appropriate for the assessment. Not bringing text books too much I think.

Imported but

TAA_ICAI wrote: »

Hey Everyone,

What are you guys bringing into the SFMA exam?

Don't want to bring too much/too little - Is anyone bringing the books?

Not sure if I will as I doubt they will add much value ...

Good luck everyone. My advice based on when I did this SFMA assessment last year: I made the mistake of thinking the open-book format would mean there would have to be an element of looking up some theory so I prepared in the wrong way completely by trying to have to hand everything that could come up, instead of just having the answers to the obvious questions written out for reference. So, I ran out of time altogether in the exam, screwed it up completely, because I hadn't practiced the calculations.
So, if you're like me and you're trying to get prepared for this quickly, then just make some assumptions on what will be asked, and *practice writing it out*. Time is a huge factor in both these assessments.

TAA_ICAI, I would advise that you don't forget your books - bring them both, along with your workings on the case study. Leave the books on the floor by your desk during the exam perhaps. The back of Ward has discount rate tables in appendix 4 (PV) and 5 (Annuity) at if nothing else, you might need these.

*EDIT* As per JAS30 above bring the CAP2 SFMA toolkit too. Has *excellent* sample answers in there, from about page 130 onwards. Gold.

FYI the suggested solution from the very first exam (Jan 2011, Lately Limited) is worth a read on the explanations of the variances in the operating statement, maybe make a few notes from that, I think our price/usage variance on the Beef is likely to be a similar situation to the Marble in that case, maybe also adding the effect on labour cost. Obviously if the cut of meat is cheaper it will take more time to prepare and lead to more wastage.
Someone already posted a link to where you can download the past papers.

Just a side note - it's kind of annoying that the people who write these cases are unable to do a little bit of reality checking before they put the numbers in. Have any of them ever bought beef that you'd use in a stew? I wonder if any of them have even been to a butcher or supermarket? A restaurant would not be paying 45 euro per kg of beef. Perhaps a third of that at the most. I guess it's just numbers in the end, but it annoys me...

Noonster

For the FR paper, are people putting much effort into practising consolidation questions?? Or do you think that it is likely to be restricted to some journal entries as per previous years?? I presume that in theory a full question could come up as far as it was covered in CAP1

y0ssar1an22

Noonster wrote: »

For the FR paper, are people putting much effort into practising consolidation questions?? Or do you think that it is likely to be restricted to some journal entries as per previous years?? I presume that in theory a full question could come up as far as it was covered in CAP1

I'm gonna do 2-3 full consol questions from the CAP 1 notes.

Noonster

TAA_ICAI wrote: »

Hey Everyone,

What are you guys bringing into the SFMA exam?

Don't want to bring too much/too little - Is anyone bringing the books?

Not sure if I will as I doubt they will add much value ...

Yeah, going with Cap1 and cap2 notes and textbooks and,most importantly, the 3-4 pages whee I have done out my tables for investment analysis and standard costing and some theory bits.....

Santi101

are the dublin exams taking place where that cap 2 introductory financial reporting exam took place in the RDS in october? I know theres a few different entrances into the RDS.

Just says RDS Simmonscourt on the CA website.

Imported but

Santi101 wrote: »

are the dublin exams taking place where that cap 2 introductory financial reporting exam took place in the RDS in october? I know theres a few different entrances into the RDS.

Just says RDS Simmonscourt on the CA website.

It's away from the main complex, top of diagram here http://www.rds.ie/index.jsp?p=102&n=129

y0ssar1an22

Imported but wrote: »

It's away from the main complex, top of diagram here http://www.rds.ie/index.jsp?p=102&n=129

thanks for putting that up. I just presumed they are on the same place as the CAP1's.

TAA_ICAI

Best of luck to everyone today :-)

Santi101

Looking forward to getting these out of the way!

Expecting a tricky FR paper, not as best prepared as I'd like with juggling work but hopefully it goes well enough.

miii

Is it just me r was that an awful paper?! Depressed was terrible not prepared at all

Kevint30

miii wrote: »

Is it just me r was that an awful paper?! Depressed was terrible not prepared at all

Fr was a disaster cash flow and 30 marks consol question was a disaster

CIARAN_BOYLE

Neither SOFP or Balance Sheet balanced but I'm happy that I got a good chunk of marks anyway.

The Consol and journals went very well.

Happy enough coming out of it.

cluray

FR - Did ok in first question but if was very long, left with bout 30 mins for questions 2&3. Paniced a bit and started puttin in figures without showing d workings as i hadnt time and i know some were wrong. Would have been better off leaving out d casflow statement and moving on. If nothing else it was a lesson learned on time management. Wud be happy with anything over 4% out of d 10.

SFMA went ok.