How to get the marks to pass SBR
Happy students

How to get the marks to pass SBR

To pass SBR you not only need to have the technical knowledge but you also need to be able to apply and explain that knowledge in the exam in such a way that earns you the marks! Let’s dissect and understand how you would earn marks at SBR by looking at this question.

The Question

Q Explain to an investor the deferred tax implications of an impairment loss. The impairment loss has arisen after the asset has been put to an alternative use. (4 marks)

My thoughts

My thoughts on planning this answer. It covers two accounting issues. Impairment & deferred tax. Assume two marks each. First you might start with a general explanation of the terms, starting with impairment. Ensure though that the answer relates to the stakeholder’s perspective and is not a regurgitation of facts but is applied. Investors are very interested in the impact of accounting treatments on both profit and cash flow. Plan to use headings. Always write in small paragraphs as it helps the marker give you marks. My answer below applies these points. It gets four out of four. Don’t you agree?

Answer

Impairment loss

Impairment losses are recognised when the carrying value of an asset exceeds the amount that can be recovered from the asset either by selling it or using it. Because the asset is being put to an alternative use then the recoverable amount will be the present value of the future cash flows expected from the asset.

Assuming the asset has not been revalued then the loss will be charged to profit and reduce earnings. There is no immediate cash out flow associated with impairment losses; rather it signals less cash inflows in the future.

Deferred tax

Deferred tax is provided for on all year end temporary differences between the carrying value of an asset and it's tax base. In this case the carrying value of the asset has been reduced by the impairment loss; but as this is a non-cash expense no immediate tax relief will be given and thus the tax base of the asset remains.

Impairment losses give rise to deductible temporary differences and therefore deferred tax assets. The corresponding entry is to acknowledge a tax credit that reduces the tax expense. This results in an impairment loss reducing post tax earnings.

Jayaletchumy Kanaya

Finance Manager at Hong Leong Bank Berhad

4 年

I can understand the Standard better than before. Thank you Sir.

Promise Alerah

FP&A ||Corporate Finance|| Strategic Advisor||Financial Reporting

4 年

So apt sir. On point

要查看或添加评论,请登录

Tom Clendon的更多文章

  • Investor Focus and the SBR exam

    Investor Focus and the SBR exam

    What is meant by “Investor focus”. How relevant to SBR! This is because going forward the ACCA SBR examining team will…

    6 条评论
  • Changes to SBR from September 2023

    Changes to SBR from September 2023

    What changes have been made to ACCA’s SBR examination? From September 2023 the SBR exam will be different. Somethings…

  • Put yourself in the shoes of the marker

    Put yourself in the shoes of the marker

    What if I make a mistake in a preliminary calculation such that I get the actual answer wrong? Will I still earn any…

    1 条评论
  • What is the difference between OCI and OCE?

    What is the difference between OCI and OCE?

    The two are often confused – so let us thrash this out. What is OCI? OCI is an abbreviation for Other Comprehensive…

    17 条评论
  • Let us understand how to account for derivatives!

    Let us understand how to account for derivatives!

    This article is all about understanding how to account for derivatives! Well first we know what we mean by derivatives!…

    2 条评论
  • Sustainability

    Sustainability

    I teach about it. I podcast about it.

  • IFRS9 Financial Instruments

    IFRS9 Financial Instruments

    Financial Liabilities at amortised cost Let us have a look at just one aspect of this most complex accounting standard;…

    24 条评论
  • I hope you can help me understand...Factoring trade receivables.

    I hope you can help me understand...Factoring trade receivables.

    I was recently asked the following question by one of my students on whats app and I thought I would share my it and my…

    8 条评论
  • What is EBITDA?

    What is EBITDA?

    It is an Alternative Performance Measure! In our highly regulated world, financial statements of UK quoted companies…

    5 条评论
  • What technical issues can go wrong with remote invigilated (RI) exams, and what actions can YOU take to prevent them.

    What technical issues can go wrong with remote invigilated (RI) exams, and what actions can YOU take to prevent them.

    The vast majority of students who have sat RI exams successfully completed them without any technical issues. But some…

社区洞察

其他会员也浏览了