FR IV Tutorials notes
Foreign operations
Tut 7.2
Interest income @ Avg Rate
Interest receivable/payable @ spot rate on
date
Cost of sales @ Avg Rate
Add back unrealized profit to COS for
balance (if calc cos)
NCI @ spot rate on the date
When pay anything, receive any money it
will be a DR/CR on that date of amount *
spot rate at that date because what
actually paid. Then the difference between
that and what it was when you got it is the
gain/loss
Tut 7.3
When lose control must transfer FCTR to
profit/loss
Do AOE when determining how much to
include in loss of control
Dividends @ spot rate on date paid
RE for prior period @ Avg rate
Step 1: Do NAV and get total
Step 2 : The total foreign currency * by rate
@ date
Step 3: Difference between Step 2 and
Rand amounts is the FCTR
Don’t forget about goodwill for FCTR
Tut 7.4
FCTR is only PEH amounts
Goodwill is full amount if NCI measured at
proportionate share
For JEs, need to do FCTR for each item that
may have changed at a specific date
Prior year JEs
DR SC
DR RE ….
DR RE
CR NCI (prior profits)
Dr Property (asset)
Cr FCTR
Dr FCTR
Cr NCI(E) (prior year FCTR Attributable)
Dr Goodwill
Cr FCTR
Control
8.2
If we are part of a joint venture either use
Cost or Equity method, for equity method
you must take out unrealized profit
because the JV makes it so that you have
control
Work through control requirements and do
relevant calculations of shareholding
- If there is only one other major
holder of shares determine if they
can pose a threat
8.3
Factors to consider:
• Who makes decisions about the
relevant activities?
• How are voting rights determined?
• Who has the majority of votes?
• How is profit sharing determined?
• Nature of investment:
• Type of accounting:
• Effective interest attributable to
parent:
Leasing
9.1
For Pro formas of leasing, must reverse all of
the transactions
Dr Acc Dep
Cr Dep
Dr Lease income
Cr Interest expense
Dr Lease liability
Cr RoU
9.4 Gross investment = PMT * N
Net investment = PV (normal fin calc)
UFI = Gross - Net
Talk about the non-financing components, as
lessor have to split – take
(financing/unfinancing)/ financing + financing *
PMT gives you the relative amounts for each
April test 2021
IAS40.9(c) property help for employees has to
be PPE
Liquidation sale not willing buyer for IFRS13
Mention for IFRS 13 to consider using more
than one approach
If s13sex for DT and didn’t construct * 55% and
then the remainder is exempt from tax
EFA: Profit on deemed disposal Proceeds –
original cost – profits up to date *%
Foreign groups:
Need to do FCTR portion for NCI (Dr FCTR Cr
NCI (LY) and Dr FCG/L(OCI) Cr NCI (CY))
Remember Div, Dr Div income, Dr NCI, Cr Div
declared
Foreign groups pro formas:
Dr Share Capital
Dr Retained Earnings
Dr Goodwill
Cr Investment in David
Cr NCI (E)
Dr RE
Cr NCI
Dr FCTR (if positive – reverse if neg)
Cr NCI
Dr Goodwill (if positive – reverse if neg)
Cr FCTR
Dr FCTR
Cr FCG/L
----
Dr NCI (P/L)
Cr NCI
Dr NCI (OCI)
Cr NCI
Dr Div inc
Dr NCI
Cr Div declared
Dr Goodwill (if positive – reverse if neg)
Cr FCG/L (OCI)
---
Sale on Part of group:
Dr Inv in x (NAV * %)
Dr profit on disposal (Profit in parent)
Dr FCTR (Total FCTR * %)
Cr RE (Group profit = Proceeds – NAV *% -
FCTR*%)
Cr NCI
Dr RE
Cr Tax expense (sale of investment)
Machinery in group from ass = SP – (SP-CA*%)
+(SP-CA*%)/EUL * months
Basically recognize it at cost – unrealized +
realized
Depreciation used average rate
April Test 2022
If money is only going to be received at later
date, trigger for FC G/L
JE for separate books of dividends * %
shareholding
JE for separate books, do not speak about IIA
and EFA that is for group
Tax rate recon reconciling items:
- FV gains
- Foreign profits (SA% -Foreign%)
- Profit on loss of control
- FCTR reclassification on sale
- Foreign dividends (if different WHT)
- Equity accounted profits
JULY STUDY
8.4 Apportion applicable transaction costs to equity
portion of the hybrid debt
If there is a conversion option, CANNOT be
solely of principle and interests \ FV P/L
No SFC \ lifetime credit loss allowance
Variable Lease – IFRS 16 IE 14A
Basically want to work out for one period, then
add back pmt, work out next period pv and add
back pmt and subtract gives you the gain/loss
Foreign profit @ Avg rate
8.5 Transfer from PPE to IP reval through OCI
No DT on the cost model for land
State – Prior year is misstated, likely material,
note disclosure is needed for correction of
error
IFRS 9 uses simplified approach for impairing
credit losses the issue relates to time period
with 12 months or expected lifetime
Investment in H ltd is a non-monetary item \
no exchange difference
Deposit is non-monetary \ no exchange
difference
Bond, Coupon rate on principle amount
Foreign trade payables, amt (spot rate @ date
due – avg rate) is the gain/loss
IFRIC 19 for share settlement of a liability: FV
when settle obligation not CA of liability unless
FV can’t be found
Revenue
15.1 If need to choose a rate for SFC, IFRS 15:64,
between customer and entity (take that instead
of what bank charged)
Bill and hold can give rise to a SFC as customer
paid upfront but we haven’t performed yet
If agent, amount we keep is the revenue
15.3 The transaction price is what you are going to
receive from the contract
If not given a SA-SP need to use a method to
estimate one, choose one and calculate