（a) Two of the qualitative characteristics of information contained in the IASB’s Conceptu

第1题

Quartile sells jewellery through stores in retail shopping centres throughout the country.

Over the last two years it has experienced declining profitability and is wondering if this is related to the sector as whole. It has recently subscribed to an agency that produces average ratios across many businesses. Below are the ratios that have been provided by the agency for Quartile’s business sector based on a year end of 30 June 2012.

Statement of financial position

Note: The deferred development expenditure relates to an investment in a process to manufacture artificial precious gems for future sale by Quartile in the retail jewellery market.

Required:

(a) Prepare for Quartile the equivalent ratios that have been provided by the agency. (9 marks)

(b) Assess the financial and operating performance of Quartile in comparison to its sector averages. (12 marks)

(c) Explain four possible limitations of the usefulness of the above comparison. (4 marks)

点击查看答案

第2题

The following trial balance relates to Quincy as at 30 September 2012:The following notes

The following trial balance relates to Quincy as at 30 September 2012:

The following notes are relevant:

(i) On 1 October 2011, Quincy sold one of its products for $10 million (included in revenue in the trial balance). As part of the sale agreement, Quincy is committed to the ongoing servicing of this product until 30 September 2014 (i.e. three years from the date of sale). The value of this service has been included in the selling price of $10 million. The estimated cost to Quincy of the servicing is $600,000 per annum and Quincy’s normal gross profit margin on this type of servicing is 25%. Ignore discounting.

(ii) Quincy issued a $25 million 6% loan note on 1 October 2011. Issue costs were $1 million and these have been charged to administrative expenses. The loan will be redeemed on 30 September 2014 at a premium which gives an effective interest rate on the loan of 8%.

(iii) Quincy paid an equity dividend of 8 cents per share during the year ended 30 September 2012.

(iv) Non-current assets:

Quincy had been carrying land and buildings at depreciated cost, but due to a recent rise in property prices, it decided to revalue its property on 1 October 2011 to market value. An independent valuer confirmed the value of the property at $60 million (land element $12 million) as at that date and the directors accepted this valuation. The property had a remaining life of 16 years at the date of its revaluation. Quincy will make a transfer from the revaluation reserve to retained earnings in respect of the realisation of the revaluation reserve. Ignore deferred tax on the revaluation.

Plant and equipment is depreciated at 15% per annum using the reducing balance method.

No depreciation has yet been charged on any non-current asset for the year ended 30 September 2012. All depreciation is charged to cost of sales.

(v) The investments had a fair value of $15·7 million as at 30 September 2012. There were no acquisitions or disposals of these investments during the year ended 30 September 2012.

(vi) The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2011. A provision for income tax for the year ended 30 September 2012 of $7·4 million is required. At 30 September 2012, Quincy had taxable temporary differences of $5 million, requiring a provision for deferred tax. Any deferred tax adjustment should be reported in the income statement. The income tax rate of Quincy is 20%.

Required:

(a) Prepare the statement of comprehensive income for Quincy for the year ended 30 September 2012.

(b) Prepare the statement of changes in equity for Quincy for the year ended 30 September 2012.

(c) Prepare the statement of financial position for Quincy as at 30 September 2012. Notes to the financial statements are not required.

The following mark allocation is provided as guidance for this question:

(a) 11 marks

(b) 4 marks

(c) 10 marks

点击查看答案

第3题

On 1 January 2012, Viagem acquired 90% of the equity share capital of Greca in a share exc

hange in which Viagem issued two new shares for every three shares it acquired in Greca. Additionally, on 31 December 2012, Viagem will pay the shareholders of Greca $1·76 per share acquired. Viagem’s cost of capital is 10% per annum.

At the date of acquisition, shares in Viagem and Greca had a stock market value of $6·50 and $2·50 each, respectively.

Income statements for the year ended 30 September 2012

The following information is relevant:

(i) At the date of acquisition, the fair values of Greca’s assets were equal to their carrying amounts with the exception of two items:

– An item of plant had a fair value of $1·8 million above its carrying amount. The remaining life of the plant at the date of acquisition was three years. Depreciation is charged to cost of sales.

– Greca had a contingent liability which Viagem estimated to have a fair value of $450,000. This has not changed as at 30 September 2012.

Greca has not incorporated these fair value changes into its financial statements.

(ii) Viagem’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Greca’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.

(iii) Sales from Viagem to Greca throughout the year ended 30 September 2012 had consistently been $800,000 per month. Viagem made a mark-up on cost of 25% on these sales. Greca had $1·5 million of these goods in inventory as at 30 September 2012.

(iv) Viagem’s investment income is a dividend received from its investment in a 40% owned associate which it has held for several years. The underlying earnings for the associate for the year ended 30 September 2012 were $2 million.

(v) Although Greca has been profitable since its acquisition by Viagem, the market for Greca’s products has been badly hit in recent months and Viagem has calculated that the goodwill has been impaired by $2 million as at 30 September 2012.

Required:

(a) Calculate the consolidated goodwill at the date of acquisition of Greca.

(b) Prepare the consolidated income statement for Viagem for the year ended 30 September 2012. The following mark allocation is provided as guidance for these requirements:

(a) 7 marks

(b) 14 marks

(c) The carrying amount of a subsidiary’s leased property will be subject to review as part of the fair value exercise on acquisition and may be subject to review in subsequent periods.

Required:

Explain how a fair value increase of a subsidiary’s leased property on acquisition should be treated in the consolidated financial statements; and how any subsequent increase in the carrying amount of the leased property might be treated in the consolidated financial statements.

Note: Ignore taxation. (4 marks)

点击查看答案

第4题

(a) The methods by which Accounting Standards are developed differ considerably throughout

the world. It is often argued that there are two main systems of regulation that determine the nature of Accounting Standards: a rules-based system and a principles-based system.

Required:

Briefly explain the difference between the two systems and state which system you believe is most descriptive of International Financial Reporting Standards (IFRS). (4 marks)

(b) Baxen is a public listed company that currently uses local Accounting Standards for its financial reporting. The board of directors of Baxen is considering the adoption of International Financial Reporting Standards (IFRS) in the near future. The company has ambitious growth plans which involve extensive trading with many foreign companies and the possibility of acquiring at least one of its trading partners as a subsidiary in the near future.

Required:

Identify the advantages that Baxen could gain by adopting IFRS for its financial reporting purposes. (6 marks)

点击查看答案

第5题

(a) The objective of IAS 36 Impairment of assets is to prescribe the procedures that an en

tity applies to ensure that its assets are not impaired.

Required:

Explain what is meant by an impairment review. Your answer should include reference to assets that may form. a cash generating unit.

Note: you are NOT required to describe the indicators of an impairment or how impairment losses are allocated against assets. (4 marks)

(b) (i) Telepath acquired an item of plant at a cost of $800,000 on 1 April 2010 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of $50,000 and an estimated life of five years, neither of which has changed. Telepath uses straight-line depreciation. On 31 March 2012, Telepath was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Telepath. Even before this information was known, Telepath had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be:

On 31 March 2015, the plant is still expected to be sold for its estimated realisable value.

Telepath has confirmed that there is no market in which to sell the plant at 31 March 2012.

Telepath’s cost of capital is 10% and the following values should be used:

(ii) Telepath owned a 100% subsidiary, Tilda, that is treated as a cash generating unit. On 31 March 2012, there was an industrial accident (a gas explosion) that caused damage to some of Tilda’s plant. The assets of Tilda immediately before the accident were:

As a result of the accident, the recoverable amount of Tilda is $6·7 million

The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of $500,000.

Tilda has an open offer from a competitor of $1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values).

Required:

Calculate the carrying amounts of the assets in (i) and (ii) above at 31 March 2012 after applying any impairment losses.

Calculations should be to the nearest $1,000.

The following mark allocation is provided as guidance for this requirement:

(i) 4 marks

(ii) 7 marks

点击查看答案

第6题

(a) Tangier is a public listed company. Its summarised financial statements for the years

ended 31 March 2012 and the comparative figures are shown below.

Statements of comprehensive income for the year ended 31 March:

Statements of financial position as at 31 March:

The following information is relevant:

Depreciation/amortisation charges for the year ended 31 March 2012 were:

There were no sales of non-current assets during the year, although property has been revalued.

Required:

Prepare the statement of cash flows for the year ended 31 March 2012 for Tangier in accordance with the indirect method in accordance with IAS 7 Statement of cash flows. (11 marks)

(b) The following additional information has been obtained in relation to the operations of Tangier for the year ended 31 March 2012:

(i) On 1 June 2011, Tangier won a tender for a new contract to supply Jetside with aircraft engines that Tangier manufactures under a recently-acquired licence. The bidding process was very competitive and Tangier had to increase its manufacturing capacity to fulfil the contract.

(ii) Tangier also decided to invest in Raremetal by acquiring 8% of its equity shares in order to secure supplies of specialised materials used in the manufacture of the engines. No dividends were received from Raremetal nor had the value of its shares changed since acquisition.

(iii) Tangier revalued its property during the year to facilitate the issue of the 10% loan notes.

On seeing the results for the first time, one of the company’s non-executive directors is disappointed by the current year’s performance.

Required:

Explain how the new contract and its related costs may have affected Tangier’s operating performance, identifying any further information that may be useful to your answer.

Your answer may be supported by appropriate ratios (up to 4 marks available), but ratios and analysis of working capital are not required. (14 marks)

点击查看答案

第7题

The following trial balance relates to Fresco at 31 March 2012:The following notes are rel

The following trial balance relates to Fresco at 31 March 2012:

The following notes are relevant:

(i) The suspense account represents the corresponding credit for cash received for a fully subscribed rights issue of equity shares made on 1 January 2012. The terms of the share issue were one new share for every five held at a price of 75 cents each. The price of the company’s equity shares immediately before the issue was $1·20 each.

(ii) Non-current assets:

To reflect a marked increase in property prices, Fresco decided to revalue its leased property on 1 April 2011. The Directors accepted the report of an independent surveyor who valued the leased property at $36 million on that date. Fresco has not yet recorded the revaluation. The remaining life of the leased property is eight years at the date of the revaluation. Fresco makes an annual transfer to retained profits to reflect the realisation of the revaluation reserve. In Fresco’s tax jurisdiction the revaluation does not give rise to a deferred tax liability.

On 1 April 2011, Fresco acquired an item of plant under a finance lease agreement that had an implicit finance cost of 10% per annum. The lease payments in the trial balance represent an initial deposit of $2 million paid on 1 April 2011 and the first annual rental of $6 million paid on 31 March 2012. The lease agreement requires further annual payments of $6 million on 31 March each year for the next four years. Had the plant not been leased it would have cost $25 million to purchase for cash.

Plant and equipment (other than the leased plant) is depreciated at 20% per annum using the reducing balance method.

No depreciation/amortisation has yet been charged on any non-current asset for the year ended 31 March 2012. Depreciation and amortisation are charged to cost of sales.

(iii) In March 2012, Fresco’s internal audit department discovered a fraud committed by the company’s credit controller who did not return from a foreign business trip. The outcome of the fraud is that $4 million of the company’s trade receivables have been stolen by the credit controller and are not recoverable. Of this amount, $1 million relates to the year ended 31 March 2011 and the remainder to the current year. Fresco is not insured against this fraud.

(iv) Fresco’s income tax calculation for the year ended 31 March 2012 shows a tax refund of $2·4 million. The balance on current tax in the trial balance represents the under/over provision of the tax liability for the year ended 31 March 2011. At 31 March 2012, Fresco had taxable temporary differences of $12 million (requiring a deferred tax liability). The income tax rate of Fresco is 25%.

Required:

(a) (i) Prepare the statement of comprehensive income for Fresco for the year ended 31 March 2012.

(ii) Prepare the statement of changes in equity for Fresco for the year ended 31 March 2012.

(iii) Prepare the statement of financial position of Fresco as at 31 March 2012.

The following mark allocation is provided as guidance for this requirement:

(i) 9 marks

(ii) 5 marks

(iii) 8 marks (22 marks)

(b) Calculate the basic earnings per share for Fresco for the year ended 31 March 2012. (3 marks)

Notes to the financial statements are not required.

点击查看答案

第8题

On 1 April 2011, Pyramid acquired 80% of Square’s equity shares by means of an immediate s

hare exchange and a cash payment of 88 cents per acquired share, deferred until 1 April 2012. Pyramid has recorded the share exchange, but not the cash consideration. Pyramid’s cost of capital is 10% per annum.

The summarised statements of financial position of the two companies as at 31 March 2012 are:

The following information is relevant:

(i) At the date of acquisition, Pyramid conducted a fair value exercise on Square’s net assets which were equal to their carrying amounts with the following exceptions:

– An item of plant had a fair value of $3 million above its carrying amount. At the date of acquisition it had a remaining life of five years. Ignore deferred tax relating to this fair value.

– Square had an unrecorded deferred tax liability of $1 million, which was unchanged as at 31 March 2012.

Pyramid’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose a share price for Square of $3·50 each is representative of the fair value of the shares held by the non-controlling interest.

(ii) Immediately after the acquisition, Square issued $4 million of 11% loan notes, $2·5 million of which were bought by Pyramid. All interest due on the loan notes as at 31 March 2012 has been paid and received.

(iii) Pyramid sells goods to Square at cost plus 50%. Below is a summary of the recorded activities for the year ended 31 March 2012 and balances as at 31 March 2012:

On 26 March 2012, Pyramid sold and despatched goods to Square, which Square did not record until they were received on 2 April 2012. Square’s inventory was counted on 31 March 2012 and does not include any goods purchased from Pyramid.

On 27 March 2012, Square remitted to Pyramid a cash payment which was not received by Pyramid until 4 April 2012. This payment accounted for the remaining difference on the current accounts.

(iv) Pyramid bought 1·5 million shares in Cube on 1 October 2011; this represents a holding of 30% of Cube’s equity. At 31 March 2012, Cube’s retained profits had increased by $2 million over their value at 1 October 2011. Pyramid uses equity accounting in its consolidated financial statements for its investment in Cube.

(v) The other equity investments of Pyramid are carried at their fair values on 1 April 2011. At 31 March 2012, these had increased to $2·8 million.

(vi) There were no impairment losses within the group during the year ended 31 March 2012.

Required:

Prepare the consolidated statement of financial position for Pyramid as at 31 March 2012.

点击查看答案

第9题

Bertrand issued $10 million convertible loan notes on 1 October 2010 that carry a nominal

interest (coupon) rate of 5% per annum. They are redeemable on 30 September 2013 at par for cash or can be exchanged for equity shares in Bertrand on the basis of 20 shares for each $100 of loan. A similar loan note, without the conversion option, would have required Bertrand to pay an interest rate of 8%.

When preparing the draft financial statements for the year ended 30 September 2011, the directors are proposing to show the loan note within equity in the statement of financial position, as they believe all the loan note holders will choose the equity option when the loan note is due for redemption. They further intend to charge a finance cost of $500,000 ($10 million x 5%) in the income statement for each year up to the date of redemption.

The present value of $1 receivable at the end of each year, based on discount rates of 5% and 8%, can be taken as:

Required:

(a) (i) Explain why the nominal interest rate on the convertible loan notes is 5%, but for non-convertible loan notes it would be 8%. (2 marks)

(ii) Briefly comment on the impact of the directors’ proposed treatment of the loan notes on the financial statements and the acceptability of this treatment. (3 marks)

(b) Prepare extracts to show how the loan notes and the finance charge should be treated by Bertrand in its financial statements for the year ended 30 September 2011. (5 marks)

点击查看答案

第10题

(a) IAS 37 Provisions, contingent liabilities and contingent assets prescribes the account

ing and disclosure for those items named in its title.

Required:

Define provisions and contingent liabilities and briefly explain how IAS 37 improves consistency in financial reporting.

(b) The following items have arisen during the preparation of Borough’s draft financial statements for the year ended 30 September 2011:

(i) On 1 October 2010, Borough commenced the extraction of crude oil from a new well on the seabed. The cost of a 10-year licence to extract the oil was $50 million. At the end of the extraction, although not legally bound to do so, Borough intends to make good the damage the extraction has caused to the seabed environment. This intention has been communicated to parties external to Borough. The cost of this will be in two parts: a fixed amount of $20 million and a variable amount of 2 cents per barrel extracted. Both of these amounts are based on their present values as at 1 October 2010 (discounted at 8%) of the estimated costs in 10 years’ time. In the year to 30 September 2011 Borough extracted 150 million barrels of oil.

(ii) Borough owns the whole of the equity share capital of its subsidiary Hamlet. Hamlet’s statement of financial position includes a loan of $25 million that is repayable in five years’ time. $15 million of this loan is secured on Hamlet’s property and the remaining $10 million is guaranteed by Borough in the event of a default by Hamlet. The economy in which Hamlet operates is currently experiencing a deep recession, the effects of which are that the current value of its property is estimated at $12 million and there are concerns over whether Hamlet can survive the recession and therefore repay the loan.

Required:

Describe, and quantify where possible, how items (i) and (ii) above should be treated in Borough’s statement of financial position for the year ended 30 September 2011.

In the case of item (ii) only, distinguish between Borough’s entity and consolidated financial statements and refer to any disclosure notes. Your answer should only refer to the treatment of the loan and should not consider any impairment of Hamlet’s property or Borough’s investment in Hamlet.

Note: the treatment in the income statement is NOT required for any of the items.

The following mark allocation is provided as guidance for this requirement:

(i) 5 marks

(ii) 4 marks

点击查看答案