[patlat]

I also had this confusion. This confusion relates to legal cases where the question says that cost will be incurred whether case is won or lost. I saw that in some cases provision was created while in other the solution said that legal costs will be recognized when paid no provison.

I emailed Study hub about this and I got the response that , in whatever question if question asks about this type of legal costs the correct answer is to not create a provision.

For example, this was the confusion I asked with study hub in email:-

‘I am a lot confused about study hub treatment on legal costs related to IAS 37.
I am sending two different scenarios and their solutions. I feel both scenerios are almost same but the answers as per study hub are just opposite.
As the exam is near, it troubles me.

The first scenerio is from Study Questions Ch 3 : question 2 ‘CANDEL’ and the second one is from Study Questions Ch 15 : ‘ROVERS’ (scenario b).’

And this was their response:-

‘Thank you for drawing our attention to this issue. We can advise that legal costs should be recognised as a liability when an obligation to pay them exists. For exam purposes, this is generally when legal services have been provided, as reflected in the solution to question Rover. I can confirm the solution to Candal is being amended in line with Rover, but hasn’t yet been updated in the Study Hub. This will be actioned in September.’

[patlat]

I actually enjoyed this discussion dear friend. But I got my answer from the Study hub creators themselves. I had emailed them about the issue and they responded that the answer of ‘Rover’ is correct and the ‘Candel’ needs to be amended.

So thank you friend for this experience. Really enjoyed it.

[patlat]

Then why can’t we apply the same logic of past question to the other scenerio?

Can you please clearly state the difference between two scenarios which is causing two different solution.
I feel both scenerios are similar.
If you don’t feel so , please explain why and how!

[patlat]

But the individual accounts would have already deducted the interest in calculating the profit so why deduct again?

[patlat]

Can you clarify then about why provision for legal costs was created in the first scenerio?

[patlat]

Sir/ma’am, I don’t think you read carefully.

In the first scenerio, the solution is telling to create a provision but in the second scenerio the question is telling not to do anything and telling that the legal cost will be paid when it will occur i.e. in the future so right now there is no provision no contingent liabilities no anything else , full ignorance.

It’s clearly inconsistent. Both answers are different.

[patlat]

So the 4m at reporting date is fair value adjustment or is it post acquisition revaluation surplus?

[patlat]

I also have problem in this SAME question, I think the intra group interest should rather be ignored. I found many questions in which it was ignored, but In few it was deducted. Please clarify.
This question is from BPP.

[patlat]

Is it a fair value adjustment or a revaluation reserve at the date of acqn?

[patlat]

From this same question, I have another confusion. The note no 1 said that ”Highveldt Co has a policy of revaluing land and buildings to fair value. At the date of acquisition Samson Co’s land and buildings had a fair value $20 million higher than their carrying amount and at 31 March 20X5 this had increased by a further $4 million (ignore any additional depreciation).”. Please tell how to record this

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