business-reporting-july-2010-marks-plan

C discount rate for obligations this is the unwinding

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(c) Discount rate for obligations: This is the unwinding of the present value of the pension liability due to employees who are one year closer to retirement at the end of the accounting period. A charge of £52,000 (4% x £2.6 million x 6/12) should therefore be made in the income statement. Because it relates to a present value, I have added this to finance costs, but once again IAS19 is silent on the issue. The actuarial difference reflects that some of the above figures are estimates, and also the increase in the net liability in the pension fund to £670,000. (£2.75m - £2.08m). This figure will appear in the statement of financial position as a liability. Per appendix 5 there is a net actuarial difference of £193,000. IAS 19 allows a number of methods of dealing with gains and losses. Dipper’s accounting policy in relation to pensions is to recognise immediately gains and losses. IAS 19 permits immediate recognition in both profit or loss and as other comprehensive income. Goodwill impairment The goodwill impairment should be charged to the income statement rather than other comprehensive income. This will impact on EPS Summary of adjustments As a result of these adjustments EPS has increased from £1.21 to £1.41 per share from the previous year. The diluted earnings per share is £1.38, and therefore should be disclosed as lower than basic. EPS.
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TI BR – Advanced Stage – July 2010 © The Institute of Chartered Accountants in England and Wales 2010 4 Appendices Appendix 1 Flynt plc: Revised statement of comprehensive income for year ended 31 May 2010 2010 Options Lease Pension Goodwill Total £'000 £'000 £'000 £'000 £'000 £'000 Revenue 14,725 14,725 Cost of sales (7,450) (7,450) Gross Profit 7,275 7,275 Operating costs (3,296) (378) 122+1 (80) (3,631) Goodwill impairment (400) (400) Other operating income 150 (150) 0 Operating profit 4,129 3,244 Investment income 39 61 55 155 Finance Costs (452) (52) (504) Profit before tax 3,716 2,895 Taxation (1,003) (810) Profit after tax 2,713 2,085 Other comprehensive income Actuarial loss on pension (193) (193) Goodwill impairment (400) 400 0 (400) 2,313 (193) 1,892 Appendix 2: PV of lease agreement at 10% Year Cash Flow £’000 PV £’000 1 150 136 2 150 124 3 150 113 4 150 103 5 211 131 Unguaranteed 5 9 6 Total 613 Fair value plus the direct costs is equal to the net investment in the lease £612,100 + 1,000 = 613,100 Appendix 3: Net investment in lease Bal b/f £’000 Interest Income £’000 Installment £’000 At 31 May £’000 1 June 2009 613 61 (150) 1 June 2010 524 52 (150) 524 426
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