Foxcoon is a technological solution provider business with a year-end 31 March 2021.You have recently been...

 

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Foxcoon is a technological solution provider business with a year-end 31" March 2021.You have recently been appointed as a financial accountant, and the following issues are outstanding in the financial statements. i) Foxcoon issued a convertible loan on 1 April 2020 at its par value of £500,000. The loan has a nominal interest rate of 6%, and can be converted in four years' time into five shares for every £200 nominal held. A similar bond without conversion rights would carry an interest rate of 9%. The full value of £500,000 was credited to liabilities on 1 April 2020, and the annual interest has been paid and recorded within finance costs. No other entries have been made in relation to this. ii) Foxcoon purchased a new fleet of vehicies for its supply chain on 1 April 2020. The fleet cost £150,000 in total, and the vehicles have a useful life of five years, with no residual value. The vehicles are entitled to first year capital allowances of 50%. Foxcoon have not recorded any deferred tax in relation to these vehicles, and do not have any other taxable differences. The corporation tax rate for Foxcoon is 20%. ii) In order to finance this acquisition, Foxcoon took out a loan from an overseas bank on 1 Otober 2020. The loan value was B$10 million, and interest is payable annually of 5%. Exchange rates are as follows: 1 October 2020 B$1.5:£1. 31 March 2021 BŞ1.6:£1. Average rate for year ended 31 March 2021 B$1.55:£1 iv) Foxcoon has been in need of additional finance in the current year, and decided to factor some trade receivables. Trade receivables of £1 million were factored on 31 March 2021 for £800,000. The trade receivables balance of £1 million has been de-recognised, and the difference between this and the proceeds of £800,000 received from the factor has been debited to operating expenses. Foxcoon has to refund any sums relating to trade receivables that are uncollected by the factor after a period of six months. Requirement: Explain the required IFRS/IAS accounting treatment of the above issues. Foxcoon is a technological solution provider business with a year-end 31" March 2021.You have recently been appointed as a financial accountant, and the following issues are outstanding in the financial statements. i) Foxcoon issued a convertible loan on 1 April 2020 at its par value of £500,000. The loan has a nominal interest rate of 6%, and can be converted in four years' time into five shares for every £200 nominal held. A similar bond without conversion rights would carry an interest rate of 9%. The full value of £500,000 was credited to liabilities on 1 April 2020, and the annual interest has been paid and recorded within finance costs. No other entries have been made in relation to this. ii) Foxcoon purchased a new fleet of vehicies for its supply chain on 1 April 2020. The fleet cost £150,000 in total, and the vehicles have a useful life of five years, with no residual value. The vehicles are entitled to first year capital allowances of 50%. Foxcoon have not recorded any deferred tax in relation to these vehicles, and do not have any other taxable differences. The corporation tax rate for Foxcoon is 20%. ii) In order to finance this acquisition, Foxcoon took out a loan from an overseas bank on 1 Otober 2020. The loan value was B$10 million, and interest is payable annually of 5%. Exchange rates are as follows: 1 October 2020 B$1.5:£1. 31 March 2021 BŞ1.6:£1. Average rate for year ended 31 March 2021 B$1.55:£1 iv) Foxcoon has been in need of additional finance in the current year, and decided to factor some trade receivables. Trade receivables of £1 million were factored on 31 March 2021 for £800,000. The trade receivables balance of £1 million has been de-recognised, and the difference between this and the proceeds of £800,000 received from the factor has been debited to operating expenses. Foxcoon has to refund any sums relating to trade receivables that are uncollected by the factor after a period of six months. Requirement: Explain the required IFRS/IAS accounting treatment of the above issues.

Answer rating: 100% (QA)

i C onvertible Loan presentation Under IAS 32 39 FINANCIAL INSTRUMENTS Presentation and Recognition Measurement Convertible loan should be classified ... View the full answer