2019年ACCA考试《会计师与企业（基础阶段）》考点：Nature of a contract

正确答案：
(b) (i) Cost of investment on acquisition of Dylan Co
Matters to consider
According to the schedule provided by the client, the cost of investment comprises three elements. One matter to
consider is whether the cost of investment is complete.
It appears that no legal or professional fees have been included in the cost of investment (unless included within the
heading ‘cash consideration’). Directly attributable costs should be included per IFRS 3 Business Combinations, and
there is a risk that these costs may be expensed in error, leading to understatement of the investment.
The cash consideration of $2·5 million is the least problematical component. The only matter to consider is whether the
cash has actually been paid. Given that Dylan Co was acquired in the last month of the financial year it is possible that
the amount had not been paid before the year end, in which case the amount should be recognised as a current liability
on the statement of financial position (balance sheet). However, this seems unlikely given that normally control of an
acquired company only passes to the acquirer on cash payment.
IFRS 3 states that the cost of investment should be recognised at fair value, which means that deferred consideration
should be discounted to present value at the date of acquisition. If the consideration payable on 31 January 2009 has
not been discounted, the cost of investment, and the corresponding liability, will be overstated. It is possible that the
impact of discounting the $1·5 million payable one year after acquisition would be immaterial to the financial
statements, in which case it would be acceptable to leave the consideration at face value within the cost of investment.
Contingent consideration should be accrued if it is probable to be paid. Here the amount is payable if revenue growth
targets are achieved over the next four years. The auditor must therefore assess the probability of the targets being
achieved, using forecasts and projections of Maxwell Co’s revenue. Such information is inherently subjective, and could
have been manipulated, if prepared by the vendor of Maxwell Co, in order to secure the deal and maximise
consideration. Here it will be crucial to be sceptical when reviewing the forecasts, and the assumptions underlying the
data. The management of Rosie Co should have reached their own opinion on the probability of paying the contingent
consideration, but they may have relied heavily on information provided at the time of the acquisition.
Audit evidence
– Agreement of the monetary value and payment dates of the consideration per the client schedule to legal
documentation signed by vendor and acquirer.
– Agreement of $2·5 million paid to Rosie Co’s bank statement and cash book prior to year end. If payment occurs
after year end confirm that a current liability is recognised on the individual company and consolidated statement
of financial position (balance sheet).
– Board minutes approving the payment.
– Recomputation of discounting calculations applied to deferred and contingent consideration.
– Agreement that the discount rate used is pre-tax, and reflects current market assessment of the time value of money
(e.g. by comparison to Rosie Co’s weighted average cost of capital).
– Revenue and profit projections for the period until January 2012, checked for arithmetic accuracy.
– A review of assumptions used in the projections, and agreement that the assumptions are comparable with the
auditor’s understanding of Dylan Co’s business.
Tutorial note: As the scenario states that Chien & Co has audited Dylan Co for several years, it is reasonable to rely on
their cumulative knowledge and understanding of the business in auditing the revenue projections.

正确答案：
3 VOLCAN
(a) Store impairment
(i) Matters
■ Materiality
? The cost of goodwill represents 3·1% of total assets and is therefore material.
? However, after three years the carrying amount of goodwill ($2·2m) represents only 1·2% of total assets –
and is therefore immaterial in the context of the balance sheet.
? The annual amortisation charge ($1·1m) represents 11·6% profit before tax (PBT) and is therefore also
material (to the income statement).
? The impact of writing off the whole of the carrying amount would be material to PBT (23%).
Tutorial note: The temporary closure of the supermarket does not constitute a discontinued operation under IFRS 5
‘Non-Current Assets Held for Sale and Discontinued Operations’.
■ Under IFRS 3 ‘Business Combinations’ Volcan should no longer be writing goodwill off over five years but
subjecting it to an annual impairment test.
■ The announcement is after the balance sheet date and is therefore a non-adjusting event (IAS 10 ‘Events After the
Balance Sheet Date’) insofar as no provision for restructuring (for example) can be made.
■ However, the event provides evidence of a possible impairment of the cash-generating unit which is this store and,
in particular, the value of goodwill assigned to it.
■ If the carrying amount of goodwill ($2·2m) can be allocated on a reasonable and consistent basis to this and the
other two stores (purchased at the same time) Volcan’s management should have applied an impairment test to
the goodwill of the downsized store (this is likely to show impairment).
■ If more than 22% of goodwill is attributable to the City Metro store – then its write-off would be material to PBT
(22% × $2·2m ÷ $9·5m = 5%).
■ If the carrying amount of goodwill cannot be so allocated; the impairment test should be applied to the
cash-generating unit that is the three stores (this may not necessarily show impairment).
■ Management should have considered whether the other four stores in Urvina (and elsewhere) are similarly
impaired.
■ Going concern is unlikely to be an issue unless all the supermarkets are located in cities facing a downward trend
in demand.
Tutorial note: Marks will be awarded for stating the rules for recognition of an impairment loss for a cash-generating
unit. However, as it is expected that the majority of candidates will not deal with this matter, the rules of IAS 36 are
not reproduced here.
(ii) Audit evidence
■ Board minutes approving the store’s ‘facelift’ and documenting the need to address the fall in demand for it as a
supermarket.
■ Recomputation of the carrying amount of goodwill (2/5 × $5·5m = $2·2m).
■ A schedule identifying all the assets that relate to the store under review and the carrying amounts thereof agreed
to the underlying accounting records (e.g. non-current asset register).
■ Recalculation of value in use and/or fair value less costs to sell of the cash-generating unit (i.e. the store that is to
become the City Metro, or the three stores bought together) as at 31 March 2005.
Tutorial note: If just one of these amounts exceeds carrying amount there will be no impairment loss. Also, as
there is a plan NOT to sell the store it is most likely that value in use should be used.
■ Agreement of cash flow projections (e.g. to approved budgets/forecast revenues and costs for a maximum of five
years, unless a longer period can be justified).
■ Written management representation relating to the assumptions used in the preparation of financial budgets.
■ Agreement that the pre-tax discount rate used reflects current market assessments of the time value of money (and
the risks specific to the store) and is reasonable. For example, by comparison with Volcan’s weighted average cost
of capital.
■ Inspection of the store (if this month it should be closed for refurbishment).
■ Revenue budgets and cash flow projections for:
– the two stores purchased at the same time;
– the other stores in Urvina; and
– the stores elsewhere.
Also actual after-date sales by store compared with budget.

正确答案：