CA Final Financial Reporting Paper May 17 Analysis
for all who are demanding CA Final Financial Reporting Paper May 17 Analysis, below is question wise analysis of CA Final may 17 financial reporting Paper. do go through the same and remove all your doubts.
Q.1.(a) Amortisation of intangible assets based on revenue is discouraged by IND AS 38. However the question was meant to be solved in the proportion of Cash Flows generated by the intangible asset. The question would have been better answered with reference to AS 26 rather than IND AS 38.
Intention of ICAI could be known only when suggested answers are released.
Q.1.(b) The answer can be answered using the para of IND AS 2 which requires that inventory should be valued at “COST – Est Future Loss” if the finished good is expected to be sold below cost.
Q.1(c) Para 35 of AS 7 (IND AS 11) – “ESTIMATED FUTURE LOSS FROM CONTACT”
Percentage completion = 76%
Loss recognised upto 31.03.17 = 76% of 200 i.e 152
Est. Future Loss = 48 should be recognised as provision as on 31.3.17
Q.1(d) REVENUE as per AS 9 (IND AS 18)
Discount offered subsequent to sale cannot be adjusted to Sales.
Sale of Land can be recognised if substantial risk & rewards incidental to ownership are transferred to the buyer. Registration is only relating to transfer of title which is not necessary to recognise revenue.
2. Consolidation with Joint Ventures (Using Proportionate Consolidation Method) & Consolidation with Subsidiary (Using Full Consolidation Method)
Check Q.22 in Practice Manual (Figures Changed) issued by ICAI
3. (a) Financial Instruments
Check Q.13(b) of RTP (Pg.72) ISSUED BY ICAI – Exact same question without change in figures
3. (b) Valuation – PE MODEL
Value PER share = EPS x PE
Sona Ltd . – 200 & Hira Ltd. – 36
Swap ratio 36/200
4. NBFC Provision Norms – Refer RTP for May 2017 issued by ICAI
4 (b) Valuation – Determination of NRR
3 determinants of NRR –
(i) yield on tangible assets – (Unfavourable)
(ii) Dividend payout ratio – (favourable)
(iii) Regularity of dividend payments (favourable)
5. (a) Market Oriented Approach for Valuation of Brand. Wouldn’t claim this question as an easy one considering the fact that the such computations have not been converted extensively in ICAI publications.
5. (b) Valuation of Business – Discounted Incremental Cash Flow Approach
Value of Business = Sum of (Incremental CF X Discount factor)
Illustration 2 of Study Material (Pg. 9.81) ISSUED BY ICAI
6. Leverage Effect on Goodwill = Goodwill for Long Term funds – Goodwill for Equity Funds
Refer Q.3 of Practical Manual (Pg.9.9) issued by ICAI
7. (a) Uncertainty of Realisation existing on date of sale – Defer Revenue Recognition until such Uncertainty is eliminated [ AS 9 or IND AS 18 on “REVENUE”]
7. (b) Such benefits are certain to devolve on the company in the event of Retirement of the employee & hence should be treated as “Termination Benefits as per AS 15- Accounting for Employee Benefits”
They should be recognised as an expense on retirement whether such amount is claimed by the employee or not.
7. (c) Additional Amount paid on Rescheduling = 90lakhs – (50lakhs + interest due but not paid until 8th year)
7.(d) Business Combinations as per IND AS 103 vs Amalgamation as per AS 14
Acquisition Method vs Purchase or Merger method
7. (e) Incentive payment should be included in Contract Price as per AS 7 (or IND AS 11) only when the contract is at an advanced stage that it is probable for the specific performance entitling the incentive being either met or exceeded by the enterprise.
The enterprise name is mentioned as Sky Ltd in the first paragraph but Another name of DEE Ltd appeared in the next paragraph referring to the same company.
Overall Assessment – Fairly an easy paper for someone who has practiced Study Material , Practice Manual & RTP issued by ICAI