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Statement of financial performance for the year ended 31 December 2014

Sales revenue
4,050,000
Less: Cost of sales
Opening inventories
225,000
Purchases
2,700,000
Closing inventories
-270,000
2,655,000
Gross profit
1,395,000
Expenses
Depreciation
Net profit

450,000
126,000
819,000

Statement of financial position as at 31 December 2014

Non-current assets
Property, Plant & Equipment (PPE)
Inventories
Other net current assets
Net Assets

3,888,000
270,000
1,161,000
5,319,000

Share capital (1 shares)


Retained profits
Equity

4,500,000
819,000
5,319,000

1 January 2014
30 June 2014
30 November 2014
31 December 2014

Part B

RPI
200
220
230
240

PPE
200
240
260
300

Inventories
250
270
280
290

Statement of financial performance for the year ended 31 December 2014

Index
Sales revenue
4,050,000
Less: Cost of sales
Opening inventories
225,000
Purchases
2,700,000
Closing inventories
-270,000
2,655,000
Gross profit
1,395,000
Expenses
Depreciation
Net profit
Non-current asset: Unrealised
Inventory: Unrealised
Non-current asset: Realised
Inventory: Realised
Retained profit

450,000
126,000

819,000

4,050,000
1.08
0.96

243,000
2,700,000
-260,357
2,682,643
1,367,357

1.50

450,000
189,000
728,357
1,944,000
9,643
63,000
27,643
2,772,643

Statement of financial position as at 31 December 2014

Index

Non-current assets
Property, Plant & Equipment (PPE)
Inventories
Other net current assets
Net Assets

3,888,000
270,000
1,161,000
5,319,000

Share capital (1 shares)


Retained profits
Equity

4,500,000
819,000
5,319,000

Non-current asset: Real Unrealised

FSCVA
5,832,000
CVA*CPP

CPP
4,665,600
HCA*CPP

279,643
CVA*CPP

281,739
HCA*CPP

Part C

Inventory: Real Unrealised

1.50
1.04

5,832,000
279,643
1,161,000
7,272,643
4,500,000
2,772,643
7,272,643

1,166,400

-2,096

Non-current asset: Real Realised

189,000
151,200
CVA*CPP
HCA*CPP
Note: in the above three calculations, CPP=1 for FSCVA as the CVA are all stated at year end values

37,800

Inventory: Real Realised - Method A


2,926,519
2,896,364
Note: This method assumes we only a single Cost of Sales total and not individual
constituents (i.e., opening & closing inventory; purchases) making up Cost of Sales

30,156

Inventory Real Realised - Method B


2,926,519
2,933,715
Note: We calculate CPP for each constituent figure in the Cost of Sales, and the sum of these
gives the CPP Cost of Sales; We choose this method if we have all the detailed information provided

-7,196

Inventory Real Realised - Method C


2,926,519
2,920,909
Strictly speaking if the average (30 June RPI) is affected by the removal of closing inventory
we have to use 30June RPI for closing inventory instead of 30Nov RPI

5,610

Holding gains (NCA & Inventories, real realised and real unrealised) all in the Statement of Financial Performance

Part A

FSCVA Fully Stabilised Current Value Accounting (CVA/CPP in combination) would indicate whether the company's financial
capital (shareholder's funds) is maintained in real terms. The basic approach is to restate CVA accounts into Current
Purchasing Power (CPP).
Advantages
Main advantage is to overcome limitations of CPP (which only deals with general price rises) or
CVA (which only deals with specific price rises). The reality is often that both are occuring at the same time
For example, any holding gains on assets under CVA may be fictitious since, although it may be a money gain, it may
not actually be a real gain in a period of high inflation.
Disadvantages
High complexity - significant uncertainty already exist with either CVA or CPP assumptions, let alone both combined
Individual problems of CVA / Replacement Cost (any of below will do)
Problematic for assets with no liquid markets to assess value

Problems of aggregation
Replacement cost is a 'cost' and not a value
Individual problems of CPP (any of below will do)
Still based on Historic Cost Accounting (HCA) rather than current values
Problems interpreting figures (unit CPP is not the same as )
Companies have to have monetary working capital and thus will always report
purchasing power losses on those
Subtotal
Grand total