ACCA financial reporting paper f7 BPP study program for f7

Financial Reporting (UK) Fundamentals Level – Paper F7 Study Text Edition June 2008 AH08 – F7 (UK) For exams in December 2008 and June 2009 STUDY TEXT EDITION: JUNE 2008 Financial Reporting (UK) Introduction Welcome to the ACCA Home Study programme for Paper F7 Financial Reporting (UK) This programme provides a step by step guide through your study thus enabling you to study more effectively This programme will guide you through the June 2008 edition of the BPP Study Text Make sure your Study Text has this date on the cover – if it does not, please contact BPP BPP's '3 steps to success' This Home Study Programme follows BPP’s ‘3 steps to success’: Work through the syllabus using the detailed study periods and the personal study planner This step starts on page Use questions from the BPP Practice and Revision Kit to test your knowledge and exam technique See page 37 for details of Step A full mock exam that is marked by the BPP Professional Education marking team You can also think about enrolling on a BPP revision course to supplement your Home Study programme See page 39 for details of this step Supporting you all the way BPP prides itself on the level of support it offers to Home Study students There are various ways in which we can help Technical and study support The principal author for this paper is Mary Maclean If you have any difficulty with your studies, you can get in touch with Mary or one of her team by emailing accaqueries@bpp.com Alternatively, please telephone (0845 0751 100 for UK-based students or + 44 (0)20 8740 2338 from outside the UK) You can fax your query to + 44 (0)20 8740 2293 or write to the Home Study Administrators at BPP Professional Education ACCA Home Study BPP House Aldine Place 142 – 144 Uxbridge Road London W12 8AA Your query will then be passed onto the ACCA F7 authoring team i STUDY TEXT EDITION: JUNE 2008 Please help us to save both your time and our time by giving us the following details about your query • • • • Paper name/number Material reference and version (eg Study Text 2008, Practice and Revision Kit 2009) Page or question number A brief description of your query Remember to include your name, student number and a contact number if necessary Please make your query as specific as possible BPP i-Pass support To help us answer BPP i-Pass queries you might have quickly and effectively, please follow the steps below (This procedure is necessary as question numbers change each time the CD is used.) With the question you wish to query on-screen, push the Print Scrn (Print Screen) button on your keyboard (usually located to the right of the F12 key) This will copy the image of the question to your computer's 'clipboard' Start Microsoft Word (You can this while i-Pass is running – click on the start button, then select Microsoft Word from the programs option.) Paste the image from the clipboard into a new Word document Do this by selecting Edit, Paste – or by using the Paste button on the Word toolbar Save the document with a meaningful name, eg iPass_PaperF7_query.doc E-mail the document, with details of your query, to accaqueries@bpp.com If you make contact by phone, you will be asked to e-mail or post a copy of the document Course administration support If you have any course administration issues, such as amending exam submission dates, then please call BPP Professional Education on 0845 0751 100 (UK only, local rate) or + 44 (0)20 8740 2338 if calling from outside the UK Study Guidance on MP3s and Learning to Learn Accountancy Listen to BPP tutor guidance on your computer or MP3 player by downloading MP3 files from www.bpp.com/acca/homestudy/mp3s Whether you are about to start your studies or continuing them, BPP's Learning to Learn Accountancy will help you learn efficiently and effectively It also provides essential guidance on dealing with your exam If you would like to obtain a copy e-mail accaqueries@bpp.com with your details 'Put it right' BPP Professional Education is committed to providing its customers with the highest levels of customer service If you have any general issues with the standard of service you have received, please e-mail putitright@bpp.com and we will our utmost to resolve these quickly and effectively Feedback Towards the end of your course you will be sent an email questionnaire which will give us valuable feedback on your experiences with the Home Study Programme If you have any issues or ideas before you receive the questionnaire to complete, please contact the course administrator, on 020 8740 2233 or via e-mail at accaqueries@bpp.com We also welcome your feedback on the Course Exams and markers so we can make sure that you get valuable and speedy marking Go to www.bpp.com/examfeedback to give your feedback and perhaps win a prize ii STUDY TEXT EDITION: JUNE 2008 STEP – LEARN Using the Home Study Programme This Home Study Programme is made up of 24 Study Periods (see page 3) Each Study Period consists of the following elements Exam Guidance This gives an introduction to each Study Period by explaining the emphasis that the examiner has placed on the topics to be covered on the basis of the pilot paper, past exams and discussions with BPP Introduction to the session Here you are introduced to the subject and the main issues that you should understand when you have finished your study You are also directed to the relevant BPP Learn Online or i-Learn module Tips for using Learn Online can be found at www.bpp.com/acca/learnonline and selecting FAQs Guidance through the Study Text This provides you with important instructions on how to work through the BPP Study Text You must follow the guidance in this table for time efficient study, as you will be told which areas of each chapter must be worked through in detail and which can be skimmed over It contains key points, summarising the most vital areas of the Study Period Try any examples in the Study Text as you go along Question Practice The Big Picture Revisit the Big Picture as directed to see how what you have studied fits into the overall syllabus Once you have studied the subject you are ready to test your understanding and application skills Use the Quick Quizzes, i-Pass and Study Text Question Bank questions as directed Revisit any areas where you are weak STUDY TEXT EDITION: JUNE 2008 Your Personal Study Planner You will find a detailed Personal Study Planner on page of this Home Study programme This will help you plan the dates on which you will complete each study period and when to submit your course exams Progress Tests Some of the Study Periods are 'Progress Tests' which you can use to assess the work you have done on a limited number of Study Periods You should mark the tests yourself using the solutions at the end of this Study Programme Course Exams You are required to submit two course exams which are incorporated into the Learn stage of your studies (see Personal Study Planner) You should send these exams to BPP Professional Education for marking You will receive a detailed analysis of your performance, together with suggested solutions, which should help to improve your exam technique as well as pointing out strengths and weaknesses in your understanding This feedback will be invaluable leading up to the 'Practise and Revise' and 'Final Rehearsal' steps in your study Exam Timetable To help you plan your study time, you will receive separately an Exam Timetable with recommended dates for submission of course exams Should these dates prove impractical, please feel free to amend them to suit your own planned schedule To gain the greatest benefit from the exams you must set aside a period of three hours and fifteen minutes during which you will have no interruptions BPP's i-Pass CD Rom Your Home Study Course includes BPP's i-Pass CD-Rom It enables you to attempt tests, making it an ideal practice and revision tool i-Pass has two modes (or three for F1, F2 and F3) The first one is 'Test as you learn' This allows you to test yourself on the areas that you are studying at the time or a combination of different areas Use the sliders to choose the number of questions to to fit the time you have available The second mode provides exam practice by creating an exam containing questions selected at random from those within 'Test as you learn' for you to answer or, if appropriate to your paper, exam scenarios for you to attempt Papers examined by Computer Based Exam (F1, F2 and F3) include a third mode, 'Final mock exam' The Final mock exam contains questions not included within 'Test as you learn' Attempt this to check you're ready for the real thing Each mode gives you comprehensive feedback on the questions and your performance BPP's 'Big Picture' The 'Big Picture' diagrams provide you with an overview of the subject and build up a framework containing the key techniques and knowledge required to perform well in the exam They allow you to clearly see the key topics and how they relate to each other, before you study the detail Keep these pictures in the back of your mind when studying and refer back to them if you get bogged down They will help refocus your mind on what is really important You will find a 'Big Picture' at the start of the course followed by a written summary of the scope and contents of the subject There are also 'Big Pictures' situated before the point at which you take Course Exams and to help consolidate what you have learnt so far and to help you revise STUDY TEXT EDITION: JUNE 2008 Your Personal Study Planner Use this schedule and your exam timetable to plan the dates on which you will complete each Study Period The letters 'H' and 'M' tell you whether the topic is high or medium priority Detailed guidance and prioritisation of each Study Period begins on page BIG PICTURE Study Period Topic Due Date Study Period Topic Due Date The conceptual framework H 13 Stocks and long-term contracts H The regulatory framework M 14 H Presentation of published financial statements H Provisions, contingent liabilities and contingent assets 15 Financial assets and liabilities H Fixed assets H 16 H Intangible assets H Impairment of assets H The legal versus the commercial view of accounting Reporting financial performance H 17 Leasing H 18 H Introduction to groups M Accounting for taxation 19 Earnings per share H The consolidated balance sheet H 20 H 10 The consolidated profit and loss account H Analysing and interpreting financial statements 21 M 11 Accounting for associates H Limitations of financial statements and interpretation techniques 12 Progress Test H 22 Statements of cash flows H 23 Alternative models and practices/ Not-for profit entities M 24 Progress Test H BIG PICTURE BIG PICTURE COURSE EXAM COURSE EXAM A practice exam covering Study Periods – 11 A mock exam covering the whole syllabus REVISION PHASE Your revision, using the questions and guidance in the BPP Learning Media Passcards and the BPP Learning Media Practice & Revision Kit, will begin when Course Exam is complete This should, at the latest, be four weeks before the final exam STEP - LEARN Big Picture Diagram Financial Reporting (F7) Conceptual framework Financial statements Business combinations Regulatory framework Analysing and interpreting financial statements STEP - LEARN Financial Reporting Summary This is a broad syllabus dealing with all aspects of financial reporting The format of the exam allows the examiner to test a large part of the syllabus at each sitting, and he will so He wants this paper to act as a good basis for your later studies in Paper The two main areas are preparation of financial statements for single companies and for groups After looking at the conceptual and regulatory frameworks within which financial statements are prepared, we go on to deal with the profit and loss account and balance sheet formats and the application of financial reporting standards dealing with fixed assets, leases, provisions, tax and long-term contracts The cash flow statement is another important topic 25% of the exam is on group accounts, which appears under the ‘Business combinations’ section of the Big Picture Diagram You have to be able to prepare a consolidated balance sheet and profit and loss account and deal correctly with an associate Under the heading ‘Analysing and interpreting financial statements’ the syllabus requires you to be able to calculate all the key ratios, analyse a set of financial statements and demonstrate awareness of any limitations to your analysis Under this section we also look at the more peripheral issues of alternatives to historical cost accounting and financial reporting by not-for-profit entities Study Period The conceptual framework High Priority Examined: Pilot Paper Step Exam Guidance Step The Big Picture This could form part of question or 5, as in the pilot paper This session is reflected in the Conceptual framework part of the 'Big Picture' diagram Step Introduction to the session Step Question Practice This chapter deals with the ASB Statement which is the conceptual underpinning to FRSs When you have finished the chapter the Quick Quiz If you have any problems, make sure you go back and re-read the chapter section This is covered in i-Learn module ‘Framework for financial statements’ i-Pass module 'The conceptual and regulatory frameworks' Try question in the Question Bank of the Study text Step Guidance through the Study Text The Statement will be referred to throughout the text and you should become familiar with its provisions and understand their relevance to financial reporting Make sure you know: • The elements of financial statements • The qualitative characteristics of financial statements Need a hand? E-mail accaqueries@bpp.com Study Period 21 Limitations of financial statements and interpretation techniques Medium Priority Examined: Pilot Paper Step Exam Guidance Step The Big Picture This covers issues that are relevant to an interpretation of accounts Question You are unlikely to get a full question on this This session is reflected in the Analysing and interpreting financial statements part of the 'Big Picture' diagram Step Introduction to the session Step Question Practice In this session we look at how financial statements and analyse based on them can be misleading When you have finished the chapter the Quick Quiz If you have any problems, make sure you go back and re-read the chapter section See i-Learn module ‘Interpreting financial statements’ i-Pass module 'Analysing and interpreting financial statements' Study Text Question Bank – Question 27 Step Guidance through the Study Text This chapter enhances your understanding of how financial statements should be viewed Because, despite regulations and accounting standards, financial misrepresentation still takes place There is not much technical content to absorb here, but you should be aware of these issues 30 Need a hand? E-mail accaqueries@bpp.com Study Period 22 Cash flow statements High Priority Examined: Pilot Paper Step Exam Guidance Step The Big Picture Question of your exam will be a cash flow statement or an interpretation of accounts question, so this is a key exam topic You may get a question which combines both cash flow and interpretation This session is reflected in the Financial Statements part of the 'Big Picture' diagram Step Introduction to the session Step Question Practice This session deals with cash flow statements, which you have covered at lower level When you have finished the chapter the Quick Quiz If you have any problems, make sure you go back and re-read the chapter section See i-Learn module ‘Cash flow statements’ i-Pass module 'Cash flow statements' Study text Question Bank – Question 28 Step Guidance through the Study Text This is one of the more straightforward topics in the syllabus and you should be able to score high marks on a cash flow statement You should already know the basics; the more complex bits to be expected at F7 level are: • Leases • Asset revaluations • Share issues • Deferred tax adjustments Need a hand? E-mail accaqueries@bpp.com 31 Study Period 23 Alternative models and practices/ Not for-profit entities Medium Priority Examined: Pilot Paper Step Exam Guidance Step The Big Picture These are not major topics but could feature in Questions 3, or Question (c) in the pilot paper was a 5–mark question on not-for-profit organisations This session is reflected in the Analysing and interpreting financial statements part of the 'Big Picture' diagram Step Introduction to the session Step Question Practice In this session we look at the alternatives to historical cost accounting and at accounting for not-for-profit entities When you have finished the chapter the Quick Quiz If you have any problems, make sure you go back and re-read the chapter section i-Pass module 'Alternative models; not-for-profit and public sector entities' Study text Question Bank – Questions 3(b) and 29 Step Guidance through the Study Text This session covers Chapters 22 and 23 of the Study Text You will not have complex calculations to on CCA or CPP and you are only expected to have very general knowledge of issues relating to not-for-profit entities The examiner has stated that Question (c) in the pilot paper is typical of what he will ask 32 Need a hand? E-mail accaqueries@bpp.com Study Period 24 Progress Test High Priority In order to reinforce what you have learnt so far, answer the following multiple choice questions without referring to your Study Text or notes The test should take you no longer than 30 minutes You will find the solutions are at the back of this Study Programme Every income measure has a particular capital maintenance concept associated with it The concept associated with current cost accounting is most closely described as maintaining the: A B C D Current value of the original shareholders' investment Capacity of the firm to replace its original assets Capacity of the firm to continue its operations Current value of the firm's assets The following information relates to Pony Ltd at 31 December 20X2: Debtors Cash on deposit Trade creditors Bank overdraft £ 90,000 8,000 75,000 90,000 At the request of the company's bankers the company intends to take the following steps to reduce the overdraft: (1) Stock with a book value of £7,500 will be disposed of at a loss of £2,500 (2) Special cash discount terms of 10% will be offered, and debtors of book value £25,000 are expected to respond As a result of the above steps, the company's bankers agree to advance £50,000 by way of a loan, which will be applied immediately for the purchase of new machinery This loan will be repayable by five equal annual instalments, the first of which falls due on 31 December 20X3 If all the above transactions had taken place on 31 December 20X2, what would the revised quick, or acid test, ratio have been on that date? A B C D 0.48 0.50 0.51 0.53 Need a hand? E-mail accaqueries@bpp.com 33 Study Period 24 Progress Test (con't) High Priority Furry plc entered into a finance lease in order to obtain the use of an asset from January 20X8 The lease agreement requires Furry plc to make ten half-yearly payments of £13,000 each, commencing on January 20X8 The asset could have been purchased on the open market for £100,000 on January 20X8 Furry plc calculates the allocation of interest over the lease term on a half-yearly basis The interest rate implicit in the lease is 13% per annum Assume that each half-yearly payment includes the interest that has accrued during the previous half year period On 31 December 20X8 the total obligation arising under finance leases falling due within one year is A B C D £17,204 £20,667 £21,331 £21,636 Gamal plc had the same million ordinary shares in issue on both April 20X1 and 31 March 20X2 On April 20X1 the company issued million £1 units of 12% convertible loan stock Each unit of stock is convertible into ordinary shares on April 20X9 at the option of the holder The following is an extract from Gamal plc's profit and loss account for the year ended 31 March 20X2: £'000 413 (120) 293 (98) 195 Operating profit Interest payable on 12% convertible loan stock Profit on ordinary activities before taxation Taxation : Corporation tax at 33% What was the diluted earnings per share for the year ended 31 March 20X2? A B C D 2.44 pence 3.44 pence 3.90 pence 3.94 pence The freehold land and buildings of Tabby plc were shown at a net book value of £305,000 at 31 December 20X3 This figure had risen to £400,000 at 31 December 20X4 During 20X4 the buildings were depreciated by £45,000 and some of the freehold land was revalued at £83,000 higher than its net book value at 31 December 20X3 Also in 20X4 some property was sold for £60,000, giving a profit of £7,000 over its net book value Finally a government grant of £20,000 was received on the purchase of a building Company policy was to treat such government grants as deferred credits What figure should be included for purchase of freehold land and buildings in Tabby plc's cash flow statement for the year ended 31 December 20X4? A B C D 34 £130,000 £124,000 £117,000 £110,000 Need a hand? E-mail accaqueries@bpp.com Study Period 24 Progress Test (con't) High Priority Haider plc acquires a freehold building for cash by issuing for cash 200,000 £1 ordinary shares at a premium of £1 per share In its cash flow statement this transaction would be stated as: Inflow Outflow A B C D £400,000 £400,000 Nil Nil £400,000 Nil £400,000 Nil Intangible fixed assets on the balance sheets of Teddy Limited were as follows: 20X1 £'000 180 (124) 56 Development costs Amortisation 20X0 £'000 165 (83) 82 How would these movements be reflected in the cash flow statement for 20X1? A B C D Capital expenditure Reconciliation of operating profit to net cash inflow Outflow of £15,000 Outflow of £15,000 Outflow of £26,000 Outflow of £26,000 Deduct Add back No effect Deduct £41,000 £41,000 £41,000 You will find the answers to this test at the end of this Study Programme Once you have reviewed how you have performed, go back over topics where you feel your understanding is poor Need a hand? E-mail accaqueries@bpp.com 35 Big Picture Diagram Financial Reporting (F7) Conceptual framework [1] Financial statements Presentation of published financial statements [3] Fixed and intangible assets [4,5,6] Reporting financial performance [7] Stocks and long-term contracts [12] Provisions and contingencies [13] Financial assets and liabilities [14] Legal versus commercial view of accounting [15] Leasing [16] Accounting for taxation [17] Earnings per share [18] Cash flow statements [21] Business combinations Introduction to groups [8] The consolidated balance sheet [9] The consolidated profit and loss account [10] Accounting for associates [11] 36 Regulatory framework [2] Analysing and interpreting financial statements Analysing and interpreting [19] Limitations of financial statements and interpretation techniques [20] Alternative models and practices [22] Specialised, not for profit and public sector entities [23] STEP – PRACTISE AND REVISE STEP – PRACTISE AND REVISE For your revision phase, your Home Study Course includes the following (a) The NEW BPP Home Study Revision Skills Bank, which explains and demonstrates the key skills required to enable you to maximise your chances of exam success (b) The BPP Passcards, which give short summaries of the content of each chapter of the Study Text (c) The BPP Practice & Revision Kit, which contains exam standard questions and other useful practice questions The Kit also contains a Question Plan which highlights the key questions to attempt to maximise your chances of exam success BPP Revision Cycle Stage Look at the Home Study Revision Skills Bank to get an insight into the main skills needed to pass your exam Stage Stage Look at the appropriate Passcard session to make sure you are aware of the full scope of the knowledge needed For a change, test yourself on i-Pass Stage You should spend most of your time on this step Do the suggested questions from the Revision Guidance in the Revision Kit and make sure you leave time to review your performance, both the contents and the timing Think what you could better next time and if you need to brush up on any knowledge The feedback you received on Course Examinations and will also be useful here You might be interested in attending a BPP Revision Course, which can help to focus your revision Details on the types of revision courses available and how to book can be found at www.bpp.com/acca/courses/practice_revision.html Need a hand? E-mail accaqueries@bpp.com 37 STEP – PRACTISE AND REVISE 38 Need a hand? E-mail accaqueries@bpp.com STEP – THE FINAL REHEARSAL STEP – THE FINAL REHEARSAL Now that you have completed the ‘Practise and Revise’ phase of the programme, you should be ready for the ‘Final Rehearsal’ We believe that the best way to prepare for an exam is to attempt a full mock exam under timed conditions You have already had some experience of this when you attempted Course Exam It would be useful at this stage to revisit this exam, paying particular attention to the feedback you received, and perhaps attempt it again Your Final Rehearsal should be focused on perfecting exam technique There are the three mock exams at the back of your Practice and Revision Kit Try these under exam conditions and mark them using the comprehensive solutions included in the kit You might also be interested in BPP’s NEW Final Mock with online brief product For an additional fee, you will be provided with: • An exam-targeted mock exam • Suggested solutions • A password to access the online brief to the exam If you can attend a BPP centre, you may be interested in booking onto a BPP Question Day This one day course – normally held the week before the actual exam – gives you the opportunity to attempt mock exam questions under timed conditions, which will then be marked and returned to you with feedback on the same day Further details of these products can be found at www.bpp.com/acca/rehearsal At this crucial final step, it is worthwhile emphasising some advice about exam technique which you must follow (1) Make full use of the reading time (2) Decide in which order to tackle the questions (3) Plan how you are going to use your time (4) Read the questions and requirements carefully (5) Answer the questions you are actually asked! (6) DO NOT spend too long on any one question – remember 1.8 minutes per mark (7) Make full use of the hours' writing time – if you have time left at the end, check your work and complete any parts you may have missed Once you have completed the '3 steps to success' you will hopefully feel prepared to face the real exam Best of luck on the day! Need a hand? E-mail accaqueries@bpp.com 39 STEP – THE FINAL REHEARSAL 40 Need a hand? E-mail accaqueries@bpp.com Solutions Progress Test 1 C Goodwill is what is left after deducting the fair value of separable net assets acquired from the total consideration paid In this case: £'000 £'000 Consideration 1,000 Plant and machinery 350 Trade marks 45 Stock 310 705 Goodwill 295 Even though Deborah has bought an item of goodwill which had been purchased by the previous owners of the business, this goodwill can't be considered as a separable asset Trade marks can, although intangible, because they can be sold without disposing of the business as a whole This is not possible with goodwill B £'000 20,000 7,500 27,500 Freehold office accommodation Building constructed for warehousing C £'000 100 Cash 200,000 × 50p 200,000 × 100 Equity Fair value of shares issued 100 200,000 × 500 500 Share premium Reserves Bruce Ltd P & L account Share premium account 400 Bruce Ltd £'000 400 400 800 Bruce Group £'000 400 400 800 Note that Sheila's profit and loss account balance is pre-acquisition B Consolidated sundry net assets Bruce Ltd net assets before combination Less cash paid to Sheila's shareholders Sheila's Ltd net assets Negative goodwill Need a hand? E-mail accaqueries@bpp.com £'000 900 (100) 800 800 (200) 1,400 41 Solutions Progress Test (con't) Consolidated share capital £'000 500 100 600 Bruce Ltd: before combination Issued to Sheila's shareholders Negative goodwill arising on consolidation £'000 600 (200) (600) (200) Investment at cost Nominal value of shares acquired Reserves acquired Negative goodwill This is a simple question designed to remind you not to forget to adjust net assets and share capital before consolidation! B (753,000 – 150,000 + 68,000) B The fall in value from carrying value (£960,000) to depreciated HC (£800,000) of £160,000 is recognised in the STRGL The additional fall in value from depreciated HC to recoverable amount of £40,000 is recognised in the P&L a/c Finally, the difference between recoverable amount and EUV of £60,000 is also recognised in the STRGL B The gross profit margin on Nut's sales to Shell is 25% and so £6,000 (25% × £24,000) unrealised profit has been recorded and must be eliminated In addition, only external sales should be recorded in the consolidated P & L account and so this intra-group sale must be ignored for consolidation purposes B The closure must be completed within months of the balance sheet date A Turnover = 460 + 120 – 60 = 520 10 B Cost Net assets acquired 80% × £150,000 42 £ 77,000 (120,000) (43,000) Need a hand? E-mail accaqueries@bpp.com Solutions Progress Test C The capacity of the firm to continue its operations B 73 90 + − 25 (Debtors) = = 0.50 75 + 90 − (Stock) − 22.5 (Debtors) + 10 (Loan) 147.5 C £ 100,000 (13,000) 87,000 5,655 92,655 (13,000) 79,655 5,177 84,832 (13,000) 71,832 4,669 76,501 (13,000) 63,501 Open market value of asset 1.1.X8 instalment paid Interest to 30.6.X8 6.5% 1.7.X8 instalment paid Interest to 31.12.X8 Balance at 31.12.X8 1.1.X9 instalment paid 6.5% Interest to 30.6.X9 6.5% 1.7.X9 instalment paid Balance at 31.12.X8 Balance at 31.12.X9 (before interest accrual) Amount due within one year Payments due Less interest B 84,832 (63,501) 21,331 (13,000 x 2) 26,000 (4,669) 21,331 Earnings £'000 195 80 275 PAT Interest saving 1,000 @ 12% × 67% No of shares Basic On conversion FD EPS = D 5,000,000 3,000,000 8,000,000 275,000 = 3.44p 8,000,000 Fixed Assets b/f Revaluation β Addition Need a hand? E-mail accaqueries@bpp.com £'000 305 83 110 498 Depreciation Sale (60-7) c/f £'000 45 53 400 498 43 Solutions Progress Test (con't) A FRS states that a minimum of netting off should take place, hence both elements of the transaction are disclosed in the statement The assumption here is that the shares were issued for cash and the cash used to buy the building The outflow is classified under 'Capital expenditure' The inflow is classified under 'Financing' B Development costs have risen from £165,000 to £180,000 This is classified as an outflow of capital expenditure Amortisation of development costs £124,000 - £83,000 is a non cash expense in the profit and loss account and therefore must be added back 44 Need a hand? E-mail accaqueries@bpp.com ... STUDY TEXT EDITION: JUNE 2008 Financial Reporting (UK) Introduction Welcome to the ACCA Home Study programme for Paper F7 Financial Reporting (UK) This programme provides a... please contact BPP BPP's '3 steps to success' This Home Study Programme follows BPP s ‘3 steps to success’: Work through the syllabus using the detailed study periods and the personal study planner... www .bpp. com/examfeedback to give your feedback and perhaps win a prize ii STUDY TEXT EDITION: JUNE 2008 STEP – LEARN Using the Home Study Programme This Home Study Programme is made up of 24 Study