ACCOUNTING ISSUES.docVIP

　　ACCOUNTING ISSUES 　　 　　SHARE ON EMAILEMAIL SHARE ON PRINTPRINT SHARE ON TWITTERTWITTER SHARE ON FACEBOOKFACEBOOK SHARE ON LINKEDINLINKEDIN MORE SHARING SERVICESADD THIS 　　 　　RELATED LINKS 　　 　　Student Accountant hub page 　　 　　TAP into Paper P7 　　 　　A very common theme in Paper P7 questions is to present you with information that embodies an accounting issue. Sometimes the information is presented as a standalone requirement but is often, for example, included in a set of notes of a conversation with an audit client’s finance director. 　　 　　For example: 　　 　　December 2012 Question 1 contains: 　　 　　Work has recently started on a new production line which will ensure that Grohl Co meets new regulatory requirements prohibiting the use of certain chemicals, which come into force in March 2013. In July 2012, a loan of $30m with an interest rate of 4% was negotiated with Grohl Co’s bank, the main purpose of the loan being to fund the capital expenditure necessary for the new production line. 　　 　　June 2012 Question 1 contains: 　　 　　Starling Co received a grant of $35m on 1 March 2012 in relation to redevelopment of its main manufacturing site. The government is providing grants to companies for capital expenditure on environmentally friendly assets. Starling Co has spent $25m of the amount received on solar panels which generate electricity, and intends to spend the remaining $10m on upgrading its production and packaging lines. 　　 　　December 2011 Question 1 contains: 　　 　　On 1 July 2011, Oak Co entered into a lease which has been accounted for as a finance lease and capitalised at $5m. The leased property is used as the head office for Oak Co’s new website development and sales division. The lease term is for five years and the fair value of the property at the inception of the lease was $20m. 　　 　　Typically the question requirements will then be something along the lines of: 　　 　　Evaluate the business risks faced by X Co. 　　 　　Identify and explain the risks of material