FAE 2016

ACA2015

Hard to know;

1 FR Share Based Payments
1 MA Balance Scorecard (could be BL either...)
1 Finance (Interest rate swap)
1 BL (Ethics, I think it was a BL framework but you could go down the route of bringing in audit and FR ethical type stuff)
1 BL (SO)
1 Tax (cash extraction)

The one with the provision seemed a bit easy to be a FR one on its own but when you see FR it has to be FR. But then there's definately a chunk of audit in there as well. Could it be two? Only one FR indicator is not happening in core and it was an explicit audit one. Not going to worry too much as I gave a good full answer with the FR issue raised, journals and disclosures along with some audit proceedures ect.

The Covenants one is strange. I thought finance at first but the ratios were just a bit too easy for it to be that? It wasn't like a normal ratio question where you were asked to talk about performance, so just doesn't seem chunky enough for finance. And they included other stuff like about getting the audit done in 270 days which seemed ambitious. Breach of covenants is something I've seen more in the audit elective. But then you could bring in about trying to get more finance from the bank when you've breached covenants being impossible...confusion

jdt101

E Coli wasn't a provision, agreed pre year end and paid post. Dr Expense Cr Accruals/Other Payables. IAS 8 error if intentional, IAS 10 adjusting event as audit not yet complete?

Cash extraction, €1.6m of loan on BS that can be repaid tax free, with bank permission?

Gretel2911

jdt101 wrote: »

E Coli wasn't a provision, agreed pre year end and paid post. Dr Expense Cr Accruals/Other Payables. IAS 8 error if intentional, IAS 10 adjusting event as audit not yet complete?

Cash extraction, €1.6m of loan on BS that can be repaid tax free, with bank permission?

No indication that the related party loan was to Paul Ryan! Could have been another RP

Rusty91

ACA2015 wrote: »

Hard to know;

1 FR Share Based Payments
1 MA Balance Scorecard (could be BL either...)
1 Finance (Interest rate swap)
1 BL (Ethics, I think it was a BL framework but you could go down the route of bringing in audit and FR ethical type stuff)
1 BL (SO)
1 Tax (cash extraction)

The one with the provision seemed a bit easy to be a FR one on its own but when you see FR it has to be FR. But then there's definately a chunk of audit in there as well. Could it be two? Only one FR indicator is not happening in core and it was an explicit audit one. Not going to worry too much as I gave a good full answer with the FR issue raised, journals and disclosures along with some audit proceedures ect.

The Covenants one is strange. I thought finance at first but the ratios were just a bit too easy for it to be that? It wasn't like a normal ratio question where you were asked to talk about performance, so just doesn't seem chunky enough for finance. And they included other stuff like about getting the audit done in 270 days which seemed ambitious. Breach of covenants is something I've seen more in the audit elective. But then you could bring in about trying to get more finance from the bank when you've breached covenants being impossible...confusion

I'm not see on the covenants, I agree that it was a bit bulky for Finance and I've seem financial performance included in business leadership. I focused a bit to much on the ratios they had too meet rather than things like the other requirements. Bit under pressure with time. I'd love for it to be finance because then all you'd have to get is a BC rather than a C but I have a feeling it could be a BL one

OHGREAT

Am I the only one to do BL for the rewarding of employees

superb choice of username

That seemed a lot better than previous core exams. Was going to try do some analysis into what topics the indicators were, but from reading the above, remembered there is no point at this stage! Going to chill the head and have a cool beer, you's should too! Good luck tomorrow!

Uncle Mclovin

I had indicators a little different to others:

1. FR - Share options
2. FR - Ecoli correction journals + reverse of accrual ethical issue (didn't use Hodgson's)
3. Finance??? - Covenant - this was the longest indicator
4. Audit - audit approach to Ecoli case
5. Tax - Cash extraction - I made assumption that related party loan was directors account and to draw this down as he needed it tax free
6. BL - strengths and opportunities + fact that Emily shouldn't be preparing the business plan for the bank
7. BL/MA - balance scorecard approach for employee appraisal + draw up template
8. Finance - hedging against the interest rate risk (made a right balls of this)

FrStone

I split the indicators out as follows:

1. FR - Options and Legal costs/damages.
2. Management Acc - Covenants
3. BL Strategy - Business Plan
4. Finance - Interest Rate Swaps.
5. Audit - ISA 500 Managements expert.
6. Tax - Cash Extraction.
7. BL - Balanced Scoreccard.
8. Ethics - Rates.

The FR could have been split out into 2 indicators, which would suit me as I was happy with them. The ethics could easily be slotted in somewhere else.

Tax was the indicator that tripped me up. I addressed the 3 options he suggested and then suggessted it would be better to increase contributions to his pension to get a tax free lump sum. However, I completely forgot to put in that he could transfer his shares to his wife tax free - I just presumed he knew that. I wonder will that be enough for me to get BC or will I be NC. So tomorrow I'll be focussing hugely on the tax indicator.

Rusty91

Uncle Mclovin wrote: »

I had indicators a little different to others:

1. FR - Share options
2. FR - Ecoli correction journals + reverse of accrual ethical issue (didn't use Hodgson's)
3. Finance??? - Covenant - this was the longest indicator
4. Audit - audit approach to Ecoli case
5. Tax - Cash extraction - I made assumption that related party loan was directors account and to draw this down as he needed it tax free
6. BL - strengths and opportunities + fact that Emily shouldn't be preparing the business plan for the bank
7. BL/MA - balance scorecard approach for employee appraisal + draw up template
8. Finance - hedging against the interest rate risk (made a right balls of this)

When you say draw up a template on balanced scorecard did you just put in the four headings and list measures under each heading?

Was the reversing on the legal costs a provision or accrual? I thought provision that then affected the reported figures for EBITDA?

I think I made a mess of this now reading all these different approaches

Rusty91

Does anyone know what the fee was on the interest rate swap and what the deal with Jane arranging no fee?

Kristina F

Did anybody else put a provision in for the Ecoli issue?

Rusty91

Kristina F wrote: »

Did anybody else put a provision in for the Ecoli issue?

Yes! Thought is was an adjusting event that confirmed the amount to be recognised at year end

Kristina F

Rusty91 wrote: »

When you say draw up a template on balanced scorecard did you just put in the four headings and list measures under each heading?

Was the reversing on the legal costs a provision or accrual? I thought provision that then affected the reported figures for EBITDA?

I think I made a mess of this now reading all these different approaches

I put the Ecoli issue in as a provision aswell but now that I think of it that might be wrong because it was paid

Rusty91

Kristina F wrote: »

I put the Ecoli issue in as a provision aswell but now that I think of it that might be wrong because it was paid

But because it was paid and settled post year end (the 5 affected accepted the amount) does that not mean that a provision needs to be recognised in 2015.

marmul92

Im almost certain a prevision needed to be recognised. It was not paid until after the year end. Thus, at 31 December there was a present obligation from a past event that could be measured reliably. This satisfied the requirements to recognise a provision.

Kristina F

marmul92 wrote: »

Im almost certain a prevision needed to be recognised. It was not paid until after the year end. Thus, at 31 December there was a present obligation from a past event that could be measured reliably. This satisfied the requirements to recognise a provision.

But post year end the actual amount was paid so it became certain and therefore the provision should now become an accrual ie post balance sheet event (adjusting).

Rusty91

marmul92 wrote: »

Im almost certain a prevision needed to be recognised. It was not paid until after the year end. Thus, at 31 December there was a present obligation from a past event that could be measured reliably. This satisfied the requirements to recognise a provision.

That's what I thought, probably didn't say it as well as that but it's what I done. It ties in nicely with audit of provisions and work around how they would confirm the balance and any subsequent amounts to be recognised

Rusty91

Kristina F wrote: »

But post year end the actual amount was paid so it became certain and therefore the provision should now become an accrual ie post balance sheet event (adjusting).

I'm not sure now tbh. What journal did you propose?

Kristina F

Rusty91 wrote: »

I'm not sure now tbh. What journal did you propose?

I done it wrong in the exam as I recognised the provision but it should be an accrual..Dr P&L and Cr Accrual €350k

Uncle Mclovin

To be honest there isn't a whole pile of difference between a provision and accrual. I think as long as the adjusting event was recognised we'll be grand.

Rusty91, on the balance scorecard - I just drafted a template with the four headings and tried to put in a few areas that it should focus on. I don't think I answered that indicator very well though.

Guin92

I done a provision and referenced IAS 37. Gave audit procedures on the issue. Seen as the the other FR was a given, you'd take a BC but I'd say a provison hopefully gets the C.

Rusty91

Uncle Mclovin wrote: »

To be honest there isn't a whole pile of difference between a provision and accrual. I think as long as the adjusting event was recognised we'll be grand.

Rusty91, on the balance scorecard - I just drafted a template with the four headings and tried to put in a few areas that it should focus on. I don't think I answered that indicator very well though.

Yeah me too. I though it was had to come up with measures for a bar and restaurant. I probably got 4 under each heading. The opportunities and strengths were also difficult. Not a pile of obvious information. Suppose that's what distinguishes RC and C though

FrStone

Kristina F wrote: »

But post year end the actual amount was paid so it became certain and therefore the provision should now become an accrual ie post balance sheet event (adjusting).

It couldn't be a post balance sheet event as it had been agreed that the amount would be paid before year end.

However, I don't think it matters too much of it was treated as a provision of a payable. They are essentially the same thing once you ensure it hits the p/l and you have a liability in the sofp you should be fine.

Uncle Mclovin

FrStone wrote: »

It couldn't be a post balance sheet event as it had been agreed that the amount would be paid before year end.

However, I don't think it matters too much of it was treated as a provision of a payable. They are essentially the same thing once you ensure it hits the p/l and you have a liability in the sofp you should be fine.

Feck. I missed that. Only read it properly now. Ah well it's only a small part of the exam. Just need to forget about it and focus on tomorrow.

jemmyboy

Did anyone else spot the FV of the share option was €1? I took it was €2.20 in the exam but probably incorrect now that I look at it!

valowilliams

jemmyboy wrote: »

Did anyone else spot the FV of the share option was €1? I took it was €2.20 in the exam but probably incorrect now that I look at it!

Do you not use the FV at the grant date? The nominal value was €1 which is what they are issued at, I think 😬

Kristina F

jemmyboy wrote: »

Did anyone else spot the FV of the share option was €1? I took it was €2.20 in the exam but probably incorrect now that I look at it!

It's €2.20

Rusty91

jemmyboy wrote: »

Did anyone else spot the FV of the share option was €1? I took it was €2.20 in the exam but probably incorrect now that I look at it!

Was €1 not the nominal value of the share, €1.20 the cost of the option and €2.20 the FV?

FrStone

Rusty91 wrote: »

Was €1 not the nominal value of the share, €1.20 the cost of the option and €2.20 the FV?

Core comp 2011 the FR indicator was similar, they used €1, as €2.20 is the fv of the share, whereas you need to use the fair value of the share option, which the examiner calculated as the diff between the share price at grant date and the exercise price.

TG860

Rusty91 wrote: »

Was €1 not the nominal value of the share, €1.20 the cost of the option and €2.20 the FV?

I think it was that 2.20 was the fair value of the shares at the grant date.
So I took that and subtracted the grant exercise price of 1.20 to get a fair value of the option of 1 euro.

That seemed to be the approach suggested by the Connolly FR book too when I looked at it, the question was worded very deliberately I think.

Rusty91

TG860 wrote: »

I think it was that 2.20 was the fair value of the shares at the grant date.
So I took that and subtracted the grant exercise price of 1.20 to get a fair value of the option of 1 euro.

That seemed to be the approach suggested by the Connolly FR book too when I looked at it, the question was worded very deliberately I think.

Do you think this would result in a RC?

FrStone

Rusty91 wrote: »

Do you think this would result in a RC?

Reading the core 2011 making scheme you would get a C, no need to worry!

Sean987

FrStone wrote: »

Reading the core 2011 making scheme you would get a C, no need to worry!

IFRS 2 requires the share-based payment trans­ac­tion to be measured at fair value for both listed and unlisted entities. IFRS 2 permits the use of intrinsic value (that is, fair value of the shares less exercise price) in those "rare cases" in which the fair value of the equity in­stru­ments cannot be reliably measured. However this is not simply measured at the date of grant. An entity would have to remeasure intrinsic value at each reporting date until final set­tle­ment.

FrStone

Sean987 wrote: »

IFRS 2 requires the share-based payment trans­ac­tion to be measured at fair value for both listed and unlisted entities. IFRS 2 permits the use of intrinsic value (that is, fair value of the shares less exercise price) in those "rare cases" in which the fair value of the equity in­stru­ments cannot be reliably measured. However this is not simply measured at the date of grant. An entity would have to remeasure intrinsic value at each reporting date until final set­tle­ment.

You are correct, even though that is surely a bit much for the FAE, maybe if you are aiming for HC.

One could also argue, that in measuring the fair value a further discount should be applied to the intrinsic value to take account of the time value of money.

Rusty91

What are people thinking for tomorrow for FR? 2 or 3?

15YemenRoad

Rusty91 wrote: »

What are people thinking for tomorrow for FR? 2 or 3?

Depends how many we had today....
I thought it was just one but reading back it does make sense that the ethics would have been FR.
If there was 1 today, 2 or 3 tomorrow. If 2 today, 1 or 2 more tomorrow

daisy chain

How did people find today?

I think the indicators were:

Sim 1

1. IAS 17- finance lease? I originally though operating lease but changed my mind?

2. IAS 20

3. Tax comp- horrific

4. Outsourcing- was this BL?

Sim 2:

1. CG- board composition, whistle blowing mechanism and group audit committee

2. Internal controls for revenue and receivables- audit and second person from external auditors ethics

3. Bonus structure- MA?

4. NPV

trooperdx3117

I got the same as you.

That lease thing really threw me for a loop. I couldn't figure out if it was an operating or finance lease, but I saw that tangible non-current assets increased by 120 same as the rent expense decreased. So I went with operating lease and advised to reduce the Tangibles by 120, absolute shot in the dark ha.

I was really surprised to see Performance measures come up again in the same year.

Obrieski

Really cannot decide how the break-down between subjects works at all!

Tax comp was a rough one, wasn't expecting that. Was easy though I would imagine. NPV was nice.

FR was also nice if it was as I expected.
I also treated it as an operating lease although I spent the whole exam doubting myself after re-reading the standard about ten times. I would say if you made a valid assumption it couldn't be taken off you.

Despite having sat exams for many years, I have never felt this way during an exam of self doubt and worry! Like, I imagine overall the exam is fair but I just feel I didn't do myself justice over the 2 days which is frustrating!

Rusty91

Not sure on FR at all.

I could not see any indication of a finance lease so just took it at face value that it was an operating and recognised it over 5 years so increased the rent expense for half the year. Have no idea though...seems too easy.

Grants threw me too. I didn't think it was appropriate to recognise it because conditions hadn't been met yet.

Tax...just awful! Spent ages reading the tax book and they threw on a comp. Can't remember when I last did one. And yesterday I made a big mistake so I'd say I'm borderline.

Really don't know think I've passed on breath anyway.

How much finance was over the two days?

ACA2015

Tax comp wasn't difficult if you had a book or could remember your Cap 2. Capital Allowances I couldn't remember and it wasn't in the Cap 2 book or FAE one, I think I got it out but not sure. It's back to Cap 1 with that. Got enough for the RC there I'd hope though which is needed as I just threw a load of crap on the page about cash extraction yesterday. I've heard of a good few people stung by a Comp coming up, it's unusual I suppose with Tax and BL being the only real areas where substantial new stuff comes up at FAE, for them to go back to well. But it was very doable to be fair.

CG question was okay but I was nagging myself on what the deal with subsidiaries is. Touch and go for the C there. Hopefully Outsourcing brings that up if I go down, I'd be annoyed if I didn't bag a C between those two.

FR was fine - whilst I wasted so much time on consols I'm glad I didn't see one on the day. Still a bit of confusion on that audit/FR indicator yesterday.

NPV- fine. Made a reasonable attempt at the calculation anyway. Came out negative.

The bonus was okay. It was the Management one but like the Balance Scorecard yesterday could have been BL. Both sort of similar in they were tied to motivation and staffing. Very strange for those to be the two management ones I thought (hope I didn't miss something).

Audit was fine. I split it between the controls and mentioned the external auditors ethical position there.

Across the two papers there didn't appear to be anything especially challenging (swap was yesterday but not beyond a RC) but I still don't know. It seemed to be a little more integrative than normal, or maybe that's just how I answered them. Might not have got enough out for BL indicators but at the same time when I consider my answers on the whole for BL stuff over the two days I'd be annoyed if I fell down on that.

GusFring

Rusty91 wrote: »

Not sure on FR at all.

I could not see any indication of a finance lease so just took it at face value that it was an operating and recognised it over 5 years so increased the rent expense for half the year. Have no idea though...seems too easy.

Grants threw me too. I didn't think it was appropriate to recognise it because conditions hadn't been met yet.

Tax...just awful! Spent ages reading the tax book and they threw on a comp. Can't remember when I last did one. And yesterday I made a big mistake so I'd say I'm borderline.

Really don't know think I've passed on breath anyway.

How much finance was over the two days?

There was 3 finance over the two days which included:

1.Interest rate swap
2.Covenants
3.NPV

TG860

Rusty91 wrote: »

I could not see any indication of a finance lease so just took it at face value that it was an operating and recognised it over 5 years so increased the rent expense for half the year. Have no idea though...seems too easy.


How much finance was over the two days?

Agreed. I didn't see anything that would indicate a finance lease.
I think the trick to that question was how you treated the rent free period.
There's a little standard in the standards book called SIC 15 which explains how to approach that and I'd say is where they got the idea from.
I took the the total payments of the lease (so 80% of the 2014 rent x 4 years) and divided that by 5 years to get the annual cost to recognise.
Then proposed a journal to recognise 6 months of that for 2015 as it started in July.

Agree with others that it's been quite hard to judge which subjects some of the indicators are falling under.
It does feel like the 2 days were quite finance heavy.

daisy chain

I thought the conditions for grants were not met either.

I think there were either three finance or three management accounting depending where covenants yesterday falls. I would be leaning towards finance though?

Finance

Interest rate swap

Npv

Management accounting

Bsc- performance appraisal yesterday

Bonus structure today

ACA2015

Rusty91 wrote: »

Not sure on FR at all.

I could not see any indication of a finance lease so just took it at face value that it was an operating and recognised it over 5 years so increased the rent expense for half the year. Have no idea though...seems too easy.

Grants threw me too. I didn't think it was appropriate to recognise it because conditions hadn't been met yet.

Tax...just awful! Spent ages reading the tax book and they threw on a comp. Can't remember when I last did one. And yesterday I made a big mistake so I'd say I'm borderline.

Really don't know think I've passed on breath anyway.

How much finance was over the two days?

There wasn't any indicators that it was finance lease for me. Disclosures on operating leases are a big deal as they're off balance sheet so I went with the same route as yourself and then threw down a disclosure.

Rusty91

TG860 wrote: »

Agreed. I didn't see anything that would indicate a finance lease.
I think the trick to that question was how you treated the rent free period.
There's a little standard in the standards book called SIC 15 which explains how to approach that and I'd say is where they got the idea from.
I took the the total payments of the lease (so 80% of the 2014 rent x 4 years) and divided that by 5 years to get the annual cost to recognise.
Then proposed a journal to recognise 6 months of that for 2015 as it started in July.

Agree with others that it's been quite hard to judge which subjects some of the indicators are falling under.
It does feel like the 2 days were quite finance heavy.

Exactly how I treated it. I remember Liam Doran going on about it before in CGS and just went for it. I was second guessing myself. Still wondering about it though. Very difficult to actually judge them. I think the ethics in Day 1 could fall under FR which would bring FR up to 5 and BL to 4 by my thinking.

Rusty91

daisy chain wrote: »

I thought the conditions for grants were not met either.

I think there were either three finance or three management accounting depending where covenants yesterday falls. I would be leaning towards finance though?

Finance

Interest rate swap

Npv

Management accounting

Bsc- performance appraisal yesterday

Bonus structure today

Yeah I didn't think grant conditions were met either. I think the covenants thing could have been BL just because there was a bit in it. I definitely only got a yellow if it is. Just focused on the calculations too much

giftgrub1991

I think the issue with the grant was that it was recognised as revenue when it should have been recognised as deferred income in sofp, this would subsequently have a knock on effect for tax comp and the losses used.

Guin92

Nothing suggested there were grant conditions. Or even a grant. I took it as A letter saying you're eligible to a grant up to 200k is not assurance it will be received, so derecoginse it. Which makes no ct payabe when you take the 200 off the net profit. I'd say once you stated your assumption you'll be grand.

Otherwise only 1.5 audit indicators overall ??

Rusty91

I thought the grant shouldn't have been recognised. I said to disclose it though because it was contingent on the expenditure being incurred and was for up to €200,000 not actually €200,000. Plus it didn't relate to 2015. I really don't know though.

I made a mess of tax. I talked about paying into the company pension on the first day and only realised afterwards that they actually said the company didn't have a pension set up. I discussed the loan and dividend too and about maximising the std cut off rate if his wife joined the company. The tax comp was a disaster for me. So I think I may have got NC in both of those. Would my discussion on pensions be a fundamental error? Could I scrape a RC?