So, explain how we should account - here it says two types of issues but we just got one
issue here, so explain how we should account for this issue. So our year ended
30 September. At the start of the year, we have a property in our accounts of 3.5
and we sold it for 5, therefore profit on sale 1.5
all so far so good. And it says part of the terms of the
sale is that we will rent the property back for a period of 5 years. So the
question is then if we rent it back, so we've put Laidlaw rent it back. The question is
is it a sale in substance. Remember there is always substance over form. Okay, so let's
see if we have really sold it then. We're gonna rent it back at annual rental of
four hundred thousand, okay, at the end of this period the property will company
will sell it at it's fair value, which is supposed to be 6.5 million
and we'll be given the opportunity to purchase it back at its fair value. So
everything here is at fair value.We can or Laidlaw can rent it at fair value. And
buy it back at fair value. But that's just like any normal thing we can always
buy a property with regardless of who we are, we could always buy at fair value
so no effect on the substance then. So in fact everything seems okay so the
treatment is correct! They have actually solved it in substance
for five million we and then we just put the rentals to the income statement as
an operating lease as a normal. Okay there's nothing strange going on here
that suggests we haven't really sold the property because everything's at
fair value, everything is normal.
For more infomation >> ACCA F7 Past Paper Exam Question: Faithful representation (Video 7) - Duration: 2:35.-------------------------------------------
ACCA F7 Full Video Lectures: Enhancing characteristics & Good information (Video 9) - Duration: 2:38.
So in the last video we talked about fundamental characteristics of good
information. Faithful representation, relevance. Useless without them.
Now we'll look at the enhancing characteristics of good information
where things are just less useful without these and they are Comparable,
Verifiable, Timely and Understandable. Let's go through those individually then.
Comparable - think of things like an accounting policy. If you change
your accounting policy what you must also change is your comparative last
year, mustn't you. You change your comparative last year so then it also
equals the current year. You can see any trends so
comparability is good for trend analysis. So an accounting policy change
is a good example of it. We change it this year in the current year and then we
go back and we pretend it happened last year. We change the comparative as well
so that it is comparable so that allows us to do trend analysis. Verifiable, that
just means that independent users would agree on how we've treated the item,
ensure that it is faithfully represented. Timely enough, in time for users
to make decisions. No that I've given the information really late a lot less
useful then. And understandable that just means that the account should be clear
and concise. That doesn't mean no complex information, you still include
complex information, you just don't try to make it seem even more complex. If
it's complex its complex but try to keep it clear and concise, include
complex information. How do you do this? Well you do this by doing things like
categorising, don't we, so if you think of the income statement we don't write
every expense out, we help categorise them, we use materiality, we would put things in
according to their character, assets, liabilities etc. And also one thing worth
knowing is, we do expect that users have a
reasonable FR knowledge, so we don't have to explain depreciation to them etc.
We do expect they've got a reasonable knowledge those who are reading the
accounts. OK, so that is that! They're the qualities of good information
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Hello Kitty Toys Jumping on the Bed🎵 Music video with Five Little Monkeys Song for kids - Duration: 1:37.
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Four little monkeys
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Afternoon Video Forecast - Duration: 0:54.
For more infomation >> Afternoon Video Forecast - Duration: 0:54. -------------------------------------------
ACCA F7 : Full Video Lecture: The Conceptual framework and Relevance (Video 8) - Duration: 0:28.
Don't forget we said TWO fundamental characteristics, faithful
representation and of course relevance. Relevance is something to be
relevant to a user, it has to have either a confirmatory value or a predictive
value. We gave the example, didn't we, of the discontinued operations
that would help us predict the future because we know it's not gonna carry
on.
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Người Tình Hờ - SuMin |Video Lyrics - Duration: 3:43.
For more infomation >> Người Tình Hờ - SuMin |Video Lyrics - Duration: 3:43. -------------------------------------------
ACCA F7 Exam Question: Faithful representation within the IASB's Conceptual Framework (Video 6) - Duration: 5:10.
So this is all about faithful representation so let's have a quick
chat about faithful representation. What we mean here is, it's the substance, it's
the substance being more important in the
form. Form meaning the legal situation so the whole idea of substance is, it
represents is the word they use. It represents the true economic phenomenon.
Now I'm going to give you a quick example of this where it's better to go
for the true economic phenomena but let's go for the substance than the
actual legal situation. So let me give you an example. You sell some goods
to a bank for 400 and there's a sales invoice etc so legally / form wise that's
the same, isn't it, you've got a sales invoice, done! But actually
there's an agreement to buy it back for 500 in one year's time and if you think
about the true economic phenomena, there's true substance of what's going
on here, we are going to receive 400
from a bank. We are going to pay back
500 in one year and if you look at as a whole, in substance I'm
hoping you can see that 400 is just a loan a one-year loan.
Why we paid back 500, well 100 needs to go to interest paid
that is the substance, that is how you show it. Not the legal form of just a
sale and then the legal form of 500 being a purchase later
that's not what's happened. The true economic phenomena is that it's a loan. So
you always go for that so you never go for the legal situation you always go
for the true substance which means the companies can't try and be too clever
because you should always show the principle of what's happening. And that's
what this question is asking, it says, which of the following then correctly
applies this principle of faithful representation. So let's have a look at
it. Part A or first bit. Reporting the transaction based on it's legal status
rather than it's economic substance. Well no, that's the opposite isn't it. We're
saying that you should show the true economic substance you should show the
true economic phenomena not the legal status. And doing that is
definitely wrong. That's the whole point of faithful representation is do it the
other way around. Excluding the subs and not consolidating a subsidiary
just because its activities are different from the group. Well no, that's
not substance over form at all. Recording the whole of the net proceeds so all of
the loan or the whole of the net proceeds from the issue of a loan which
potentially could go to equity shown it all as debts. Well no because some of it
could go to equity the best thing to do on this convertible loan you always show
a convertible loan as mainly debt but a little bit of equity too because it might
get converted, that's the substance of it. So no, showing it all as a debt that's
wrong so the answer must be "D" allocating part of the sales proceeds of a motor
vehicle to interest received even though it was sold with interest free finance.
That is true because if you go to a shop and you see a car available for 10,000
and you can get zero percent interest on it for two years well
somebody's paying for that interest somewhere and what's really happening is
that the car is probably worth 12,000 cars, it's probably worth
8,000 and 2,000 of that would be they're giving you
interest for the next four years so the car is only worth 8,000
so you'd put 8,000 to the sale of the car and 2000 interest receipt. Not
just putting the whole 10,000 to a car because even though it looks like you're
getting a bargain, you are not. Somebody, somewhere is paying for the interest so
the car itself must be worth less. So just have a read at that again
allocating part of the sales proceeds of a motor vehicle to interest received, yes
instead of putting the whole 10,000 in, put 2,000 of it to interest received even
though there is always 0% yet that's why you've put in some to interest received
you have to make up a figure , based on what the market interest is. Somebody,
somewhere is paying for it. Okay, so the answer is D!
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