2019 Q1 iii b

Discussion in 'SA2' started by Cynthia Foong, Sep 27, 2019.

  1. Cynthia Foong

    Cynthia Foong Member

    Hi

    For this question on increase in maintainance expense, I'm wondering why the value of asset would remain unchanged, as stated in the marking scheme?

    In addition, how is this question different from 2018 Sep, where the increase in lapses reduces the asset value?

    Thank you,
    Cynthia
     
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    Hi
    Maintenance expenses normally refer to future renewal expenses, as opposed to initial expenses. Therefore they will impact future cashflows (ie the BEL) and not the assets. If they were initial expenses, then assets would be impacted.
    Thanks
    Em
     

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