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Financial Accounting - Professional Stage – September 2012


The performance of candidates in the September 2012 objective test questions section for the Professional
Stage Financial Accounting paper was consistent with recent sittings and the long-term average.

When practising OT items, care should always be taken to ensure that the principles underlying any particular
item are understood rather than rote learning the answer. In particular, candidates should ensure that they read
all items very carefully.

The following table summarises how well* candidates answered each syllabus content area.

Syllabus area Number of questions Well answered Poorly answered

LO1 4 2 2
LO2 6 3 3
LO3 5 5 0
Total 15 10 5

*If 50% or more of the candidates gave the correct answer, then the question was classified as ‘well answered’.

Comments on the most poorly answered question (below 40% of candidates gave the correct answer), on LO2
(preparation of single company financial statements) are given below:

Item 1
This item tested candidates’ understanding of the impairment (downward valuation) of a revalued non-current
asset. Candidates correctly identified the value of the impairment, by calculating the carrying amount of the
asset following an earlier revaluation and subsequent revised depreciation. Candidates thought that this full
impairment should be recognised in the income statement rather than calculating what amount was remaining in
the revaluation surplus following the annual transfers between the surplus and retained earnings.

Copyright © ICAEW 2012. All rights reserved. Page 1 of 14

Financial Accounting .533 61. this question also required the preparation of the provisions table that would form part of the provisions note.767 Equity 642. All rights reserved.000 378.100 Taxation 25.600 Trade and other receivables 250. Part b) covered conceptual issues.000) 28. Aiskew plc – Statement of financial position as at 30 June 2012 £ £ ASSETS Non-current assets Property.767 Non-current liabilities Bank loan 160.000 – 70. where indicated. Question 1 Overall marks for this question can be analysed as follows: Total: 32 General comments This question was a typical question testing the preparation of an income statement and statement of financial position from a trial balance.000 + (140. Markers are encouraged to use discretion and to award partial marks where a point was either not explained fully or made by implication. However.500 Total assets 899.500(W3)) 31. More marks are available than could be awarded for each requirement. This allows credit to be given for a variety of valid points.700 – 3. plant and equipment (W5) 515.000 Share premium account (155.000 195.000 Provisions (15.500 (table) – 30. with reference to provisions.000 Equity Ordinary share capital (296.000) 366. including an adjustment to inventory. Page 2 of 14 .000 Finance lease (W4) 5.700 – 62. which are made by candidates.000 x 2yrs) 30.500 Current assets Inventories (W2) 55.933) 51. candidates were required to identify and describe the elements of the financial statements which were relevant to the statement of financial position.000 Current liabilities Trade and other payables (34.000) 225. depreciation. A number of adjustments were required to be made.Professional Stage – September 2012 MARK PLAN AND EXAMINER’S COMMENTARY The mark plan set out below was that used to mark these questions.200 Provisions (58.233 Total equity and liabilities 899.000 Retained earnings (114.000 Non-current asset held for sale 5. a held for sale asset and a finance lease.300 Cash and cash equivalents 47.500 383.000 + 70.500 Finance lease (W4) 1.000 Copyright © ICAEW 2012.

600) Provision charge (table) 51.000) + (5% x 30.700 W2 Inventory £ Closing inventory 57.000 51.000 45. Page 3 of 14 .600 W3 Finance costs £ Per nominal ledger 7.500 3.Professional Stage – September 2012 Aiskew plc – Income Statement for year ended 30 June 2012 £ Revenue 974. Financial Accounting .000 – 7.500 Less: adjustment (140.800) 640.500 At 30 June 2012 (W) 3.000 Opening inventory 68.700 121.933) Note: Marks will be awarded if items are included in a different line item in the income statement provided that the heading used is appropriate.000 45.700) Operating loss (83.000 58.500 295.500 10.300 Net loss for the period (62.500) Finance lease interest (W4) 333 4.500 Administrative expenses (W1) (295.500 Less: closing inventory (W2) (55.900) Finance costs (W3) (4.000) = 3.400) 55.000 W1 Expenses Cost of Admin Other sales expenses operating costs Trial balance 601.000 Adjustment: Product B: (£14 – (£16 – £4)) x 700 (1.500 Depreciation charge – plant & machinery (W5) 25.500 Workings Warranties: (10% x 20.000 Income statement charge(β) 3.000 x 5% x 6/12) (3.450 Held for sale asset (W6) 650 Finance lease payment . Provisions and contingencies Warranties Legal Onerous Total claim lease £ £ £ £ At 1 July 2011 – 7.700 72.233) Income taxation 25. All rights reserved.500 295.reversed (1.500) Gross profit 333.500 Onerous lease: (15.333 Copyright © ICAEW 2012.333) Profit before tax (88.000 Cost of sales (W1) (640.000 x 3 yrs) = 45.700) Other operating costs (W1) (121.

Some statements were simply very messy.000 x 15% x 9/12) 1. Financial Accounting . with the vast majority preparing a complete statement of financial position and income statement. showing a gap in their understanding in this area (see below). All rights reserved.000 158.600 Held for sale (12.500 Finance lease machine (8.000 Fair value (8. However. The most common error in respect of closing inventory was to add a correctly calculated net realisable value write-down of £1.500) (4.000 W5 Fixtures & fittings adjustment £ Land Plant & machinery Cost – b/fwd 450. although a small minority did not complete the statement of financial position.000 SOTD = (5 x 6) ÷ 2 = 15 Year ending B/fwd (£) Interest (£) Payment (£) c/fwd (£) 30 June 2012 8. administrative expenses and other operating expenses. The preparation of a correct provisions table was extremely variable and candidates clearly struggled with this requirement.800) 5.000 Finance lease machine 8.850 Carrying amount at 30 June 2012 450.Professional Stage – September 2012 W4 Finance lease £ Instalments (£1.900) Depreciation charge for year 150. Most candidates correctly calculated figures for closing inventory and the finance lease. as opposed to deducting it.150 Fair value (5. as instructed by Copyright © ICAEW 2012. Page 4 of 14 .000 65.000 = 267 (1.000 \ 5yrs) 1.000 – 7.000 Accumulated depreciation b/fwd (72.000 162.450) Classified as held for sale: Acc depreciation (12.533 30 June 2013 6.500 W6 Held for sale asset £ Carrying amount (7. The vast majority of candidates used a “costs matrix” to calculate the figures for cost of sales.500) Dep in yr (1.350 (25.533 4/15 x 1.500) 650 Most candidates produced a reasonable answer to this question.500 515.350) 5. The most common omissions were to fail to show an operating profit/loss line on the income statement and/or to complete totals and/or sub-totals on the statement of financial position.800 x 5yrs) 9.000 = 333 (1. although most candidates allocated their main depreciation charge to cost of sales.000 Held for sale asset (12.000 5/15 x 1.000 x 15% 22.400 to the original figure for inventory.350) 6. Presentation of the income statement and statement of financial position was mixed with few candidates achieving the maximum presentation marks available.000) Interest 1.500 – 1.800) 6.000) 150.

a large number then took some other element of depreciation. plant and equipment with most of the errors centring around the elimination of the held for sale asset. Other errors within property.Professional Stage – September 2012 the question. Even if candidates did manage to credit the tax refund to the income statement they then went on to show the figure as a liability (either positive or negative) in the statement of financial position.  Depreciating the leased asset at 15% instead of over the five year lease term. and often candidates wasted time by recalculating/adding these figures again. plant and equipment calculations included the following:  Not including the leased asset in property. thereby increasing the loss rather than decreasing it. even where some attempt had been made to deal with it within property. It was also rare to see the held for sale asset included at the correct amount. Total possible marks 29½ Maximum full marks 27 Copyright © ICAEW 2012. even where they had calculated other figures in respect of this lease. missing the land was a common mistake. Only a minority of candidates arrived at a completely correct figure for property.000. Others failed to bring all their calculated depreciation charge elements through to the costs matrix/income statement. on the face of the statement of financial position. And although most did attempt to calculate an impairment loss. rather than providing for the most likely outcome of £10. but then failed to back that amount out of property. often coming to different figures from their note. plant and equipment. Many candidates calculated a depreciation charge for the year up to the point of sale on that asset. instead of leaving this within that category. Another common error was to include the £72. in the correct position. Similarly. or to calculate an impairment loss. A significant number who did show the refund as a current asset failed to disclose it separately.  Charging depreciation on the held for sale asset for a whole year. plant and equipment. it was often incorrectly calculated and few then took it to the income statement. plant and equipment calculations together for the final figure for the face of the statement of financial position. or the impairment loss. most commonly where there was a loss before tax. Some candidates were clearly so confused by the concept of a tax refund that they failed to account for this at all. All rights reserved. with many candidates then adding the refund. as opposed to only nine months. The treatment of the tax refund confused many candidates. to a different cost category. Page 5 of 14 . such as the deprecation charge on the leased asset. Financial Accounting . plant and equipment. Only around half of candidates correctly split their closing figure between current and non-current liabilities (recognising that the onerous lease had a long-term element to it). With regard to the calculations underlying the closing provisions balance the most common errors were failing to include the onerous lease and calculating a weighted average figure for the legal claim. many failed to add all their property.000 other operating costs under administrative expenses. instead only backing out the opening accumulated depreciation on the asset. A common failing was to prepare a note but then not take the correct figures from that note to the income statement and statement of financial position.

liabilities and equity. Aiskew plc has a contractual obligation to continue to pay rental on an unused property for the next three years. Total possible marks 7 Maximum full marks 5 Copyright © ICAEW 2012. As there is an element of uncertainty involved it does not meet the definition of an asset and instead should be disclosed rather than recognised in the financial statements. which is not relevant to IAS 37). Most candidates correctly gave the elements of financial statements relevant to the statement of financial position as assets. therefore a provision should be recognised as a liability exists. Many then went on to give some correct definitions from the open book text for these terms (including for equity. So a contractual obligation exists. A number of candidates chose to not even attempt this part. Although. If it is not probable that an outflow of economic benefits will be needed to settle the obligation or the amount of the settlement cannot be measured reliably then it does not meet the definition of a liability and instead the amount may need to be disclosed as a contingent liability. Where there is more than one item the estimation of the amount of the liability is made using expected values. contingent liabilities and contingent assets A provision is a liability of uncertain timing or amount and should be recognised if there is a present obligation from a past event. less still using examples from Aiskew plc. Page 6 of 14 . Probable means that it is more likely than not to occur. Financial Accounting . it is probable that an outflow of economic benefits will be needed to settle the obligation and that a reliable estimate can be made of that amount. the amount that will be paid under warranties is not certain it is possible to make a reliable estimate based on the number and amount of past claims under warranties. If one or more of these requirements are not met then a provision should not be recognised as it is not a liability. All rights reserved. Aiskew plc’s warranties policy instead raises an obligation as it has a published policy that it will rectify any defect on its products under the warranty.Professional Stage – September 2012 (b) Elements of financial statements and provisions The three elements of financial statements are assets. an obligation has arisen from past events (the sale of the goods) and a reliable estimate can be made and therefore a provision should be recognised as a liability exists. For example. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. Provisions. Very few went on to attempt to show how these definitions related to the accounting treatment set out in IAS 37. they are obliged to continue to pay the annual rental and the rental is for a known amount. In summary. liabilities and equity.

000) Purchase of intangible non-current asset (64.000 + 4.800 Site preparation costs 90.000) .220 + 2.000) Proceeds from sales of property. plant and equipment (1.800 Copyright © ICAEW 2012.000) 171.000 Professional fees 7.200 Research costs ((96.145 Amortisation (29.500 Launch event 5. Cawood Ltd (i) Statement of financial position as at 30 June 2012 (extracts) £ Non-current assets Property.297.acc depreciation (1.000 Profit on disposal of PPE (1.375. Financial Accounting .800) (1.500.400.000 x 4%) (136.419.925 + 136.800 Fixtures & fittings (W3) 257.000 / 6months) x 2 months) 32.000 .000 1.455 W2 Cost of new retail outlet £ £ Construction costs 1.297.depreciation (3.Professional Stage – September 2012 Question 2 Overall marks for this question can be analysed as follows: Total: 15 General comments This question was a single topic question covering non-current assets.800 4.959. plant and equipment (W1) 4.000 (iii) Extracts from Statement of cash flows for the year ended 30 June 2012 £ £ Cash flows from investing activities Purchase of property.200) General overheads 30.655 4. Page 7 of 14 .000) Constructions costs (W2) 1.cost 3.800) + 1.800 + 78.400) Workings W1 PPE – Carrying amounts £ £ Land & buildings Land 1.500 (ii) Summary of amounts included in income statement for the year ended 30 June 2012 £ Administrative expenses: Depreciation (32.200.701. All rights reserved.959.360.000 Staff relocation costs 10.000 Property .400 Net cash used in investing activities (1. plant and equipment ((32.297. both tangible and intangible in nature.000 – 12.400.455 Intangible assets (W4) 219. The question required the preparation of extracts from the statement of financial position and the statement of cash flows along with a summary of amounts that would be recognised in the income statement.200) 20.000) 33.

Financial Accounting .000) 60.500 The best candidates used a property.  The addition to the fixtures and fittings.000) 328. So. as their answers demonstrated that each item had been completely dealt with. plant and equipment “table” to calculate the figures for the non-current assets section of the statement of financial position.000 Disposal 1 July 2011 (32. for example. All rights reserved. Others calculated the accumulated depreciation on a reducing balance basis instead of on a straight-line basis.220) Additions 1 April 2012 78. even where a lesser amount had been capitalised.  The depreciation for the year on the buildings.000 Amortisation (290. but then failed to take the amounts not capitalised to their income statement amounts and/or to their statement of cash flow extracts.Professional Stage – September 2012 W3 Fixtures & fittings £ Cost at 30 June 2011 360.075 Carrying amount 257.500) 159. They also appeared to deal with the income statement amounts and statement of cash flow extracts at the same time. and depreciation charge thereon (although a number depreciated this for the whole year or for an incorrect number of months).000 / 4yrs) x 3/12) (4. Some simply capitalised the whole £96. It was also common to see the whole £96.000 as an outflow in the statement of cash flows.000 x 20% x 2yrs) 12. The most common errors on the former were to capitalise the wrong number of months and to charge a full year’s depreciation on the amount capitalised.200) 214. often failing to take all of their calculated figures through to the required extracts/amounts.000.800 Less: depreciation (214. Most candidates dealt with the following correctly:  Capitalising the site preparation costs. Page 8 of 14 . failing to recognise that costs incurred prior to the appliance being judged economically viable should not be capitalised. Copyright © ICAEW 2012. with messy workings. In relation to the fixtures disposed of during the year most candidates correctly excluded £32. In the example above.000 Carrying amount 219.brand 290. having decided what part of the costs incurred during the year on the retail unit to capitalise they then took the remaining costs to their income statement amounts and to their statement of cash flow extract. The same difference applied to the research and development costs – weaker candidates capitalised part of the £96. Most difficulties were in relation the treatment of the research and development costs and the fixtures disposed of during the year.500 Development costs (96.000 – 32.  The depreciation charge for the year on the brand. when the fixtures were sold on the day the new policy came into force and therefore would have been subject to straight-line depreciation.925) 75.000 Accumulated depreciation (126.000 x 15% x 3/12) (2.000 Less: depreciation (78.000 / 10yrs) (29. construction costs and professional fees.000 I/S) 64. they usually did capitalise some of the costs incurred during the year on the retail unit. Weaker candidates adopted a more sporadic approach. The most common error was also to capitalise the general overheads.000) Disposal 1 July 2011 (32.000 (not always the correct part) but then failed to take the remainder to the income statement.655 W4 Intangibles £ Cost b/fwd .000 Amortisation ((64.000) Accumulated amortisation (101.800 x 15%) (32.000 from cost.800 (113. but then reduced accumulated depreciation by the carrying amount.

 Depreciating the capitalised costs. Candidates also need to be careful that costs and income are also shown appropriately when preparing income statement figures. when the retail unit was not opened until the last day of the year. Page 9 of 14 . and inflows without brackets – a comment made repeatedly by the examiners. Financial Accounting . forgetting to also include the £78. which lost candidates presentation marks when used in the statement of financial position or statement of cash flow extracts. Abbreviations such as “PPE” were also rife.000 spent on fixtures. Other common errors included the following:  In the statement of cash flow extracts showing only the capitalised costs as “Purchase of property. Total possible marks 16 Maximum full marks 15 Copyright © ICAEW 2012.Professional Stage – September 2012 Many candidates lost marks in the statement of cash flow extracts by not showing outflows in brackets. All rights reserved. plant and equipment”.

400) 80% 5.  Incorrectly deducting either the PURP or dividends when calculating the share of profit of the associate.800 Kippax share of Warlaby PURP .£2. although a significant number then went on to deduct the PURP from this amount.275 Less: PURP adjustment (W2) (980) 60.000 + (25.Professional Stage – September 2012 Question 3 Overall marks for this question can be analysed as follows: Total: 11 General comments This question was a mixed topic question. All rights reserved. (a) Kippax plc (i) Share of profit of associate (62.600 20% Warlaby .  Incorrectly deducting dividends when calculating the investment in associate. The majority of candidates did manage to calculate the share of associate profit. Total possible marks 4½ Maximum full marks 4 Copyright © ICAEW 2012.000 x £1. Page 10 of 14 .295 (2) Unrealised profit £ 28. Common errors were:  Failing to multiply by 35% for the share of profit of associate and the PURP to reflect the appropriate holding.£5. Financial Accounting . As a result a lot wasted time by doing some sort of net assets working.000 100% (22.40)) 45. A minority also still seem to be trying to calculate a goodwill figure. Part b) required the preparation of extracts from the consolidated statement of changes in equity.275 (ii) Investment in associate – Warlaby Ltd £ Cost (10. part a) centred around the workings for an associate for inclusion in the consolidated financial statements.000 Add: Share of post-acquisition profits (as above) 16.600 x ½ = £2.000 x 9/12 x 35%) 16. For the investment in associate. most candidates correctly calculated the cost (although a minority used the year end share price) but few seemed to understand that as the associate was acquired within the year the post acquisition profit was simply the figure from part (i).800 x 35% = £980 Answers generally were slightly disappointing with fewer candidates than expected getting full marks.

The majority of candidates included the correct brought forward figures (although a few missed one out or combined share capital and share premium).000 Issue of shares (25.800 Share of associate (part a)) 16. generally candidates adjusted for the bad debt and many made an attempt to adjust for the associate (although frequently not realising that they just had to use the figures already calculated in part (a)).550. although a few did make a very good attempt at it.000 x 40p) 25.900) 1.712.000) (940. A number of students lost marks by showing these figures as adjustments to retained earnings on the face of the SOCIE rather than adjusting profit (ie the Income Statement).000) Total comprehensive income for the year (W) – – 1. Total possible marks 7 Maximum full marks 7 Total possible marks 11½ Maximum full marks 11 Copyright © ICAEW 2012.196.250.695 At 30 June 2012 1. As total comprehensive income needed to be included in the SOCIE a number of adjustments were required to the profit figure. Many candidates wasted time by attempting to do a non-controlling interest column even though the question clearly stated that all subsidiaries were wholly-owned. as a negative.945 Working £ Draft profit for year 1. worryingly.000 x 2) 1. Financial Accounting .275 Less: associate dividend (35.695 A number of students struggled with part (b).000 300.000 – 3.000 – Interim dividend (625. For the issue to acquire the associate some put the nominal value into share capital but ignored share premium and a minority put it in. Page 11 of 14 . Many candidates correctly calculated the dividends figure (although occasionally not including the shares issued on 1 October even where they had actually included that issue in the SOCIE).Professional Stage – September 2012 (b) Consolidated statement of changes in equity (extract) for year ended 30 June 2012 Share Share Retained capital premium earnings At 1 July 2011 600.875.800 x 50%) (4.000 (310.543.550.000 3. This seems to suggest that candidates think a non- controlling interest should be recognised for an associate. All rights reserved.750) Issue of bonus shares (625.000 x 10p) (3. Candidates again seemed to struggle with the double entry often realising that the most that could be debited to share premium was to reduce it to zero but not then debiting the balance to retained earnings. A significant number of candidates were clearly confused over the bonus issue treating it as a 1 for 2 issue rather than a 2 for 1 issue.500) Less: PURP (980) Less: Bad debt (9. Disappointingly the majority of candidates seemed to struggle with the basic double entry for both issues of shares.000 x 15p) – – (93. Few candidates realised that they needed to deduct the dividend from the associate.000 10.

175.300 + 104.300 Total equity and liabilities 3.800 + 118.Professional Stage – September 2012 Question 4 Overall marks for this question can be analysed as follows: Total: 22 This question required the preparation of a consolidated statement of financial position.968.500 537.300 Current assets Inventories (96.000 – 24.505.505.100 Total assets 3.800 484.400 + 600) 14.000) – 1.000 Retained earnings (W7) 1.400 (W8) + 6.580 Equity 2.000 PURP (2.500) 133.000 320.800 7. Purston plc (a) Consolidated statement of financial position as at 30 June 2012 £ £ Assets Non-current assets Property. Financial Accounting .700 872.500) Cash and cash equivalents (7.200 + 26.800 Taxation (75.000 Retained earnings 535. The group had two subsidiaries.968.800 + 6.600 + 110.000 – 2.000 + 53.000 FV – depreciation (100. The treatment of a gain on bargain purchase was covered and inter-company trading had taken place during the year between the two subsidiaries.600 296.400 Workings (2) Net assets – Ruswarp Ltd 30 June Acquisition Post acq 2012 £ £ £ Share capital 320.515.000 215.500 Trade and other receivables (145.000) 403. Page 12 of 14 .400 + 1. one of which was acquired during the year.000 + 5.400 3.400 Equity and liabilities Equity Ordinary share capital 950.520 Non-controlling interest (W6) 452.000 / 25yrs) x 5yrs (20.520 Attributable to the equity holders of Purston plc 2.021.000 + 46.100 Current liabilities Trade and other payables (198.000) 205.000 – 263.400 – 24.000 Share premium account 156.000 156.900) – FV adj 100.700 + 79.900 Goodwill (W4) 52. plant and equipment (W9) 2.087.000 Share premium account 390. All rights reserved.700 Copyright © ICAEW 2012.500) (3.000 100.

000 300.400 1.Professional Stage – September 2012 (3) Net assets – Skeeby Ltd 30 June Acquisition Post acq 2012 £ £ £ Share capital 180.000 587.000 Skeeby Ltd 527.000 – 20.000 (W2) x 20%) 174.400 Ruswarp Ltd (215.040 452. plant and equipment £ Purston plc 1.600 603.000) 80.900 2.800) (6) Non-controlling interest Ruswarp Ltd – share of net assets (1.520 (8) PURP Ruswarp Ltd % £ £ SP (24.400 52.240) Gain on bargain purchase (W5) 181.087.000 (15.000) Non-controlling interest at acquisition (603. Most candidates correctly calculated the PURP and did go on to deduct this correctly from the net assets working and inventory.400) (OF) x 60%)) (9.400 (5) Goodwill – Skeeby Ltd £ Consideration transferred 180. Page 13 of 14 .000 FV property adj (100.800 1.700 (W2) x 20%) 217.968.175.000) Non-controlling interest at acquisition (872.580 (7) Retained earnings £ Purston plc 830.000 x 125%) 125 12.096. The fair value adjustment in respect of Ruswarp Ltd was dealt with well (although a number of students failed to realise that the adjustment for depreciation was cumulative ie for the 5 years since acquisition).600 123.000 Net assets at acquisition (W3) (603. non-controlling interest and retained earnings.000 / 125% x /2) (100) (9.000 (W3) x 40%) 241.000 Ruswarp Ltd 1.500 (9) Property.700 (OF) (W2) x 80%) 172.600 (W3) x 40%) 235.560 Skeeby Ltd ((15. Almost all candidates correctly identified two subsidiaries and prepared the two net assets tables and workings for goodwill.000 Net assets at acquisition (W2) (872.600) (6.200 (181. Fewer realised that the net assets also had to be adjusted for the PURP for the goods in transit. All rights reserved.000 7.540 Skeeby Ltd – share of net assets (587.400) (4) Goodwill – Ruswarp Ltd £ Consideration transferred 750.000 Retained earnings 107.000 x ½) / (6. this question was very well answered with many students achieving close to full marks.500 1 Cost (24.900 Generally.265.000 180.000 Revaluation surplus 300. Financial Accounting . Copyright © ICAEW 2012.000) GP 25 2.

As we have seen over numerous sittings a significant number of candidates lost marks by failing to show an audit trail both on the face of the statement of financial position and also in the non-controlling interest and consolidated retained earnings workings by not showing clearly which figures from the net assets working were being used. Most candidates struggled with the adjustments to trade receivables and trade payables for the inter group balances. All rights reserved. Many candidates dealt with the discount on acquisition correctly although some ignored it or netted it off the positive goodwill or deducted it from consolidated retained earnings. Very few candidates finish off their consolidated statement of financial position completely and therefore miss out on additional presentation marks available. Worryingly a number of candidates combined the goodwill workings for the two subsidiaries together into one working which is dangerous where. Total possible marks 22 Maximum full marks 22 Copyright © ICAEW 2012. In particular the adjustments relating to the goods in transit were rarely dealt with correctly. it may have been helpful if they had written out a journal to ensure the double entry worked.Professional Stage – September 2012 Most candidates struggled with the revaluation surplus in Skeeby Ltd indicating that they did not understand the difference between a revaluation that had taken place prior to acquisition and one that takes place after acquisition. as in this question. there is positive goodwill on one acquisition but a discount on acquisition for the other. Finally although most candidates ended up with a reduction in net assets for Skeeby Ltd in their net assets working many then added it rather than deducting it from consolidated retained earnings. A number of candidates also seemed to think that the post acquisition profit figure to use in consolidated retained earnings is simply the movement on the subsidiary’s retained earnings rather than the movement in net assets. Page 14 of 14 . In this instance. Financial Accounting .