FIN 214 Candidates When undertaking calculation questions for equity accounting candidates will find that these may either be journal entry related like the Worked Example 17.2 coverage or alternatively the question may just require the calculation of a closing balance like Step 3 in Worked Example 17.3. As you would expect unless candidates employ appropriate exam technique it is possible that where a balance has been requested that candidates may extend more into the journal entries as opposed to simply calculating a balance therefore costing themselves time. With respect to the calculation of closing balance we would suggest that candidates build not only an appreciation of the adjusting items to the cost of the investment but that they also consider the zero balance rule and the different ways the Institute may present information. The zero balance rule is quite simply that the investment cannot move to be a negative so is frozen at zero until the notional balance moves back to positive. This point is illustrated in the Institutes Worked Example 17.3. The other point to watch is that most candidates understand that the original cost is adjusted for share of the associates profits or losses. What they miss however is that in some questions the Institute have presented the profit figure of the associate where candidates take the % entitlement whilst in others they present the investors share of the associates profit in which case all you do is pick up that figure in your calculation.
Posted on: Thu, 28 Aug 2014 02:22:46 +0000
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