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CIMAPRA19-F03-1 Exam - Topic 3 Question 61 Discussion

An unlisted software development business is to be sold by its founders to a private equity house following the initial development of the software. The business has not yet made a profit but significant profits are expected for the next three years with only negligible profits thereafter. The business owns the freehold of the property from which it operates. However, it is the industry norm to lease property.Which THREE of the following are limitations to the validity of using the Calculated Intangible Value (CIV) method for this business?
A) The business owns the freehold property from which it operates. and C) The business has not yet made a profit. and E) The intellectual property representing the software development has not been included in the accounts.
B) Significant profits are forecast for the next three years with only negligible profits thereafter.
D) The CIV method cannot be applied to an unlisted company.

CIMAPRA19-F03-1 Exam - Topic 3 Question 61 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 61
Topic #: 3
[All CIMAPRA19-F03-1 Questions]

An unlisted software development business is to be sold by its founders to a private equity house following the initial development of the software. The business has not yet made a profit but significant profits are expected for the next three years with only negligible profits thereafter. The business owns the freehold of the property from which it operates. However, it is the industry norm to lease property.

Which THREE of the following are limitations to the validity of using the Calculated Intangible Value (CIV) method for this business?

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Suggested Answer: A, C, E

by Tyra at Dec 11, 2022, 03:53 AM

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Malcom
10 months ago
Don't forget about the missing intellectual property in the accounts!
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Narcisa
10 months ago
The CIV method can be tricky for unlisted companies, for sure.
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Karina
10 months ago
Wait, they haven't made a profit yet? That raises some red flags.
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Coral
11 months ago
I disagree, the forecasted profits are a valid point too.
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Kattie
11 months ago
The business owns the freehold property, that's a big deal!
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Providencia
11 months ago
I feel like the CIV method can be tricky for unlisted companies, but I can't recall if that's a strict limitation or just a consideration.
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Veda
11 months ago
I practiced a similar question where the forecasted profits were a concern. I wonder if the significant profits expected could actually be a limitation here too.
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Devorah
11 months ago
I think the fact that the business hasn't made a profit yet is definitely a limitation for the CIV method, but I need to double-check that.
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Dorthy
11 months ago
I remember discussing how owning freehold property could complicate the CIV method, but I'm not sure if it's a direct limitation.
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Leota
11 months ago
Okay, I've got a good strategy for this. I'll mentally walk through each code snippet and consider how the string will be transformed. That should help me identify the right solution.
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Malcom
11 months ago
Wait, the search index one - is that actually required? I'm not 100% sure about that. The other three seem straightforward, but I want to make sure I'm not missing anything on the search index part.
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Thersa
11 months ago
I'm leaning towards "Materiality" as a fundamental characteristic. It was emphasized in our last lecture, right?
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Joni
11 months ago
Hmm, I'm a bit unsure about the difference between risk tolerance and risk management. I'll need to think carefully about the nuances of each option.
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Jean
11 months ago
I feel like OPUS has some advantages with flexibility and quality, but I need to double-check if it's suitable for this specific scenario.
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James
11 months ago
I think H.460.18/19 is definitely one of the protocols since we practiced that in class. Not sure about the second one though.
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