Ans to financial reporting paper

03 May 2012

Please post Answers of the Paper -1 of May-12.

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See attached question paper.

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7 Replies

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 03 May 2012

Ans:- Q1 (a)

Sr No	Particulers	Million	Currency
1	Borrowed Sum	12.5	US$
2	Interest in foreign country	0.625	US$
3	Converted @ 48	30	INR
4	Exchange difference (48-45)*12.5	38	INR
5	Interest if borrowed in India	62	INR
6	Difference between interest (62-30)	32	INR

7	Borrowing Cost (38-32)	6	INR

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 04 May 2012

Q1 (b)

Particulers

AS per Books

AS per Tax

WDV

999

777

Depreciation Rate

13.91%

15%

Depr

138.96

116.55

DTA (138.96 - 116.55)

22.41

Tax Rate

33%

Includind Surcharge 10%

DTA (22.41 * 33%)

7.40

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 04 May 2012

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 04 May 2012

Q1 (d)
AS-25 - Interim Financial Reporting
As per As-25 Income Tax are assed on annual basis
Interim period income tax expense is calculated by applying to an interim period’s pre-tax income the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate
Due to insufficient data INR 80,000/- should be allocated according to period
So the Taxes for the 6Months should be added in the Profit of Six Months
Example

Profit as on 30-09-11	XXXXXXXX
Add Back:- 6 Months Tax paid.	40000

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 04 May 2012

Note 1	Pre & Post Acqusion of Profit


	Particulars	B Ltd (Subsidiary)		C Ltd (Associate)
		Pre Acq	Post Acq	Pre Acq	Post Acq
	Reserve & Surplus - Opening	-	300	100	100
	Profit for the year	-	120		80

	Total	-	420	100	180
	A ltd	-	420	-	72


Note 2	Computation of Goodwill / Surplus		B Ltd	C Ltd

	Investment in shares of….		100	100

	Less - Value as on date of B/s
	Share Cap		100	40
	Pre Acqusion profit		-	100

	Goodwill		-	40

Note 3	Presentation of Associate
	Particulars			Amt INR
	Investment (Including G/W 8)			100
	Add:- Profit for the period			72
	Investment to be shown at			172

Note :- G/W amortized over period of 5yr so balanced in G/W 40/5=8

Consolidated Balance Sheet of Altd & Its Subsidiary B Ltd
as on 31-03-2012
	Liabilities	Amt INR		Asset		Amt INR

	Share Capital	400		Investment in C Ltd		172
	Reserve & Surplus	1042		(Including G/W of 8)
	(550 + 420+72)
				Other Asset		1800
	Liabilities	530		(1000+800)
	(250+280)

		1972				1972

Attached File : 49658 974907 q2 consolidation.xls downloaded: 274 times

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 07 May 2012

Q6 (b)

Note 1	Calculation of Avg Beta

	Year	Beta
	1	0.48
	2	0.52
	3	0.60
	4	1.10
	5	0.99
	Total	3.69

		Avg Beta	=3.69/5	0.738

	Calcutaion of Ke			Ke=Cost of Equity = ?
				Rf=Risk Free Rate=12%
	Ke = Rf + Beta (Rm-Rf)			Rm=Long term Mkt Rate=15.50%
				Beta=0.738

	=12+0.738(15.50-12)
Ke=	14.583	After Tax	10.93725

Note 2	Clculation of Interest
			Rate after Tax		Interest after Tax
	S.H Fund	740	10.94%		80.94
	Long Term	37	-		4.85
	Total Funds	777			85.79


	Calculation Of Economic Value Added
	Particulers				Amt INR
	PAT				205.90
	Less:- Interest on SH Fund				80.94
	Add:- Interest on Long Term Loan				4.85
				EVA	129.81

C.A. M.Com. Suhas A. Nagpure (CA) (1175 Points)
Replied 07 May 2012

Q6 (b)

Note 1	Calculation of Avg Beta

	Year	Beta
	1	0.48
	2	0.52
	3	0.60
	4	1.10
	5	0.99
	Total	3.69

		Avg Beta	=3.69/5	0.738

	Calcutaion of Ke			Ke=Cost of Equity = ?
				Rf=Risk Free Rate=12%
	Ke = Rf + Beta (Rm-Rf)			Rm=Long term Mkt Rate=15.50%
				Beta=0.738

	=12+0.738(15.50-12)
Ke=	14.583	After Tax	10.93725

Note 2	Clculation of Interest
			Rate after Tax		Interest after Tax
	S.H Fund	740	10.94%		80.94
	Long Term	37	-		4.85
	Total Funds	777			85.79


	Calculation Of Economic Value Added
	Particulers				Amt INR
	PAT				205.90
	Less:- Interest on SH Fund				80.94
	Add:- Interest on Long Term Loan				4.85
				EVA	129.81