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IFRS 9 tips

Impairmemt of Financial assets

This involves two approaches
1. General approach (With 3 stages)
2. Simplified approach (With 1 stage and apply to financial assets without significant financing component)

Expected credit loss is calculated as = PD x LGD

where PD = probability of default
LGD = Loss given default

General approach
stage 1 - 12 month expected credit loss
This is recognised on the initial recognition of the financial asset as this represents the inherent cost of investing.

Interest is calculated on Gross carrying amount for financial asset classfied at amortised costs under stage 1,

Stage 2
This will be due to increased risk of default by the borrower.
still interest income is calculated on gross carrying amount.

Record the movement in expected credit loss from stage 1

Stage 3
This is when the financial asset is credit impaired totally
interest is calculated on adjusted carrying amount, net of expected credit losses.

Still for expected losses, record the movement.

IFRS 10 principles

How to calculate consolidated profit on the disposal of subsidiary (control lost):

First derecognise all assets and liabilities of the sub including goodwill on the date of disposal,
Secondly derecognise NCI portion as the subsidiary nolonger exist,
Thirdly add the consideration received
lastly add fair value of the remaining shares or option if applicable

The difference of the above amounts will be profit or loss from subsdiary disposal

ABOUT EXCELLING TEAM

INNOCENT CHARUMBIRA (Tutor)

• Innocent obtained his Bachelor of Accounting degree with cm laude from the university of Johannesburg in 2017.
• He was ranked number 8 out of 588 students in his honours year (UJ, CTA class of 2018)
• He was also a member of the UJenius club at the University of Johannesburg from 2015 to 2018. Membership to the club is only by invitation and is limited to the top 1% of the students at UJ with a weighted average of 75% and no module pass below 70%.
• Innocent passed SAICA ITC in January 2019 and APC in December 2020 at first attempt.
• He is currently employed in a small to medium firm based in Sandton in an auditing role.
• Innocent has more than 3 years of experience in assisting students with Financial accounting, Taxation and Financial Management.

You are making us proud sir Inno. (CA) (SA) designation is underway.
Congratulations/Makorokoto/Amhlope

Capital budgeting principle:
1. Relevant costing principles must be applied
2. Revenues and costs should be adjusted by nominal rate
3. Nominal rate = (1+ real rate) x(1 +inflation rate) - 1
4. Net working capital capital should be recouped at the end of the project
5. We discount cashflows using WACC
6. Accept the project if NPV > 0

Taxation tips

Leasehold improvements (section 18C of the VAT Act )
If the leasee erect improvements on lessor's place, it will be a deemed supply of such a structure however the value of supply is nil.

The leasee can claim input tax to the extent of making taxable supplies
And claim sec 16(3) adjustment for the non taxable portion once the lessor has been levied output tax.

The lessor will be levied output tax to the extent that lease improvement will be used for non taxable supply.

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