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Free cash flow to Firm Model(FCFF)- Through Cash FLow method
AFM
answered on 16-Jul-24 20:08
The FCFF found via Cash flow method comprises of the following format in ICAI institute material. FCFF= Cash flow From operations + Interest (1-Tax) -/+ Capital Expenditure. But in our class we use Interest*Tax rate? Can you clarify sir?
latest answer
Excellent question Per IND AS Int expense is financing activity so when we compute CFO we add back full interest - refer page 265 of my ex employer coromandel AR 23 https://www.coromandel.biz/wp-content/uploads/2023/07/Integrated-Annual-Report-FY-2022-23.pdf Also refer pg 704 & 705 pt 18 & 20 of IND AS 7 from link below https://www.mca.gov.in/Ministry/pdf/INDAS7.pdf Per USGAAP Int expense is operating activity Refer attached screenshot of FASB . You can visit FASB and look for standard on presentation of cashflows, para ref available in screenshot. Also giving below links of US GAPP vs IFRS diff https://rsmus.com/pdf/us_gaap_ifrs_cash_flows.pdf https://kpmg.com/us/en/articles/2022/ifrs-accounting-standards-us-gaap.html#:~:text=Under%20US%20GAAP%2C%20while%20restricted,the%20statement%20of%20cash%20flows. US GAAP - When Int is part of operating activities, it is not added back to Net Income in US GAAP when we compute CFO. So when we have to adjust for Int to arrive at FCFF, we directly add back Int x ( 1-t) IND AS - when int has already been fully added back to NI when computing CFO, we have to only deduct to the extent of tax from CFO in order to arrive at FCFF - so we multiply int expense with tax ICAI material - they have copied stuff directly from international material without applying their mind Abt diff between US gaap and INDAS . Sharing copy of CFA material which shows how to compute FCFF under US GAAP ( also refer links below) https://www.cfainstitute.org/en/membership/professional-development/refresher-readings/free-cash-flow-valuation#:~:text=FCFF%20and%20FCFE%20are%20related,%E2%80%93%20Tax%20rate)%20%E2%80%93%20FCInv. https://www.investopedia.com/terms/f/freecashflowfirm.asp Conclusion - i am right ICAI material is wrong
S Shriram
CA Final
★ 0
1
398
Preparation of Financial Statement
Accountancy
answered on 16-Jul-24 12:48
why aren't we transferring profit on sale of machinery to capital reserve but showing it in other income in this question?
latest answer
Gain on sale of fixed assets is recognised in P&L
Niveta Rajkumar
CA Inter
★ 6K+
1
350
Additional condition
Direct Taxation
answered on 26-Jul-24 13:35
Whether to satisfy first Additional condition ie 2 out 10 preceeding py. Whether in Y1- 190 Y2- 200 Satisfy first add condition?
latest answer
OK thanks sir
SURYA NARAYANAN v
CA Inter
★ 6K+
4
187
Cost of debt, preference,jan 21 exam Q
Financial Management
answered on 16-Jul-24 15:55
In this solution ICAI has used face value as issue price to calculate Kp,Kd.Instead of face value shouldn't we be taking market price as issue price when we are not given issue price specifically.
latest answer
Thank you Sir.
Joel Maleppillil
CA Inter
★ 0
4
332
Title of Video
Financial Reporting
asked on 16-Jul-24 07:10
Sir, Actually this video discusses questions that are not in the text. But it is titled as Illustrations 15 - 18.
latest answer
No answers yet!!
Antara MuraliKrishnan
CA Final
★ 20K+
0
237
Title of Video
Financial Reporting
answered on 16-Jul-24 07:09
Sir, Actually this video discusses Illustrations 14 & 15 in the text. But the title is Illustrations 19 & 20
latest answer
Thanks for highlighting. Will check and update
Antara MuraliKrishnan
CA Final
★ 20K+
1
254
MISTAKE
AFM
answered on 16-Jul-24 05:55
given as Less interest accrued instead of Add
latest answer
Corrected. Thanks for highlighting the same.
ezy pan
CA Final
★ 130
1
168
Depreciation - practical sum3
Accountancy
answered on 17-Jul-24 08:45
How did the value of depreciation is Rs.8350000 in dec 31?
latest answer
One truck is sold in october. So remaining 9 trucks we calculate depreciation for 12 months which is 81,00,000 and a new truck is purchased for 50,00,000 on that we calculate depreciation for 3 months which is 2,50,000 . So total sepreciation is 83,50,000
Dharshini S
CA Foundation
★ 1K+
3
297
Marginal relief
Direct Taxation
answered on 15-Jul-24 22:50
In illustration 8, why we haven't considered marginal relief option under default tax regime whereas it has been considered in normal regime?
latest answer
Got it ... Thanks 👍
Sagar Kathuria
CA Final
★ 3K+
2
450
PSLC
Indirect Taxation
answered on 22-Jul-24 19:43
Is it legal to trade PSLC sir? X bank got that certificate by lending money to the priority sector what will Y bank use that certificate for in the 1st place?? It didn't lend enough money by getting that certificate from another bank How will it reach the limit sir?
latest answer
A bank which gives less loans to priority sector will buy that PSLC. It is legal.
Revathy N
CA Final
★ 9K+
1
306