Required:Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(b) the costs incurred in extending the network; (7 marks)
Required:
Discuss the principles and practices which should be used in the financial year to 30 November 2008 to account
for:(b) the costs incurred in extending the network; (7 marks)
相关考题：
(c) Discuss the ways in which budgets and the budgeting process can be used to motivate managers toendeavour to meet the objectives of the company. Your answer should refer to:(i) setting targets for financial performance;(ii) participation in the budget-setting process. (12 marks)
(b) Ambush loaned $200,000 to Bromwich on 1 December 2003. The effective and stated interest rate for thisloan was 8 per cent. Interest is payable by Bromwich at the end of each year and the loan is repayable on30 November 2007. At 30 November 2005, the directors of Ambush have heard that Bromwich is in financialdifficulties and is undergoing a financial reorganisation. The directors feel that it is likely that they will onlyreceive $100,000 on 30 November 2007 and no future interest payment. Interest for the year ended30 November 2005 had been received. The financial year end of Ambush is 30 November 2005.Required:(i) Outline the requirements of IAS 39 as regards the impairment of financial assets. (6 marks)
(ii) Explain the accounting treatment under IAS39 of the loan to Bromwich in the financial statements ofAmbush for the year ended 30 November 2005. (4 marks)
(b) Misson has purchased goods from a foreign supplier for 8 million euros on 31 July 2006. At 31 October 2006,the trade payable was still outstanding and the goods were still held by Misson. Similarly Misson has sold goodsto a foreign customer for 4 million euros on 31 July 2006 and it received payment for the goods in euros on31 October 2006. Additionally Misson had purchased an investment property on 1 November 2005 for28 million euros. At 31 October 2006, the investment property had a fair value of 24 million euros. The companyuses the fair value model in accounting for investment properties.Misson would like advice on how to treat these transactions in the financial statements for the year ended 31October 2006. (7 marks)Required:Discuss the accounting treatment of the above transactions in accordance with the advice required by thedirectors.(Candidates should show detailed workings as well as a discussion of the accounting treatment used.)
5 International Financial Reporting Standards (IFRSs) are primarily designed for use by publicly listed companies andin many countries the majority of companies using IFRSs are listed companies. In other countries IFRSs are used asnational Generally Accepted Accounting Practices (GAAP) for all companies including unlisted entities. It has beenargued that the same IFRSs should be used by all entities or alternatively a different body of standards should applyto small and medium entities (SMEs).Required:(a) Discuss whether there is a need to develop a set of IFRSs specifically for SMEs. (7 marks)
(c) Wader is reviewing the accounting treatment of its buildings. The company uses the ‘revaluation model’ for itsbuildings. The buildings had originally cost $10 million on 1 June 2005 and had a useful economic life of20 years. They are being depreciated on a straight line basis to a nil residual value. The buildings were revalueddownwards on 31 May 2006 to $8 million which was the buildings’ recoverable amount. At 31 May 2007 thevalue of the buildings had risen to $11 million which is to be included in the financial statements. The companyis unsure how to treat the above events. (7 marks)Required:Discuss the accounting treatments of the above items in the financial statements for the year ended 31 May2007.Note: a discount rate of 5% should be used where necessary. Candidates should show suitable calculations wherenecessary.
4 (a) Router, a public limited company operates in the entertainment industry. It recently agreed with a televisioncompany to make a film which will be broadcast on the television company’s network. The fee agreed for thefilm was $5 million with a further $100,000 to be paid every time the film is shown on the television company’schannels. It is hoped that it will be shown on four occasions. The film was completed at a cost of $4 million anddelivered to the television company on 1 April 2007. The television company paid the fee of $5 million on30 April 2007 but indicated that the film needed substantial editing before they were prepared to broadcast it,the costs of which would be deducted from any future payments to Router. The directors of Router wish torecognise the anticipated future income of $400,000 in the financial statements for the year ended 31 May2007. (5 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.
(c) At 1 June 2006, Router held a 25% shareholding in a film distribution company, Wireless, a public limitedcompany. On 1 January 2007, Router sold a 15% holding in Wireless thus reducing its investment to a 10%holding. Router no longer exercises significant influence over Wireless. Before the sale of the shares the net assetvalue of Wireless on 1 January 2007 was $200 million and goodwill relating to the acquisition of Wireless was$5 million. Router received $40 million for its sale of the 15% holding in Wireless. At 1 January 2007, the fairvalue of the remaining investment in Wireless was $23 million and at 31 May 2007 the fair value was$26 million. (6 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.
(d) Additionally Router purchased 60% of the ordinary shares of a radio station, Playtime, a public limited company,on 31 May 2007. The remaining 40% of the ordinary shares are owned by a competitor company who owns asubstantial number of warrants issued by Playtime which are currently exercisable. If these warrants areexercised, they will result in Router only owning 35% of the voting shares of Playtime. (4 marks)Required:Discuss how the above items should be dealt with in the group financial statements of Router for the year ended31 May 2007.
5 Financial statements have seen an increasing move towards the use of fair values in accounting. Advocates of ‘fairvalue accounting’ believe that fair value is the most relevant measure for financial reporting whilst others believe thathistorical cost provides a more useful measure.Issues have been raised over the reliability and measurement of fair values, and over the nature of the current levelof disclosure in financial statements in this area.Required:(a) Discuss the problems associated with the reliability and measurement of fair values and the nature of anyadditional disclosures which may be required if fair value accounting is to be used exclusively in corporatereporting. (13 marks)
(c) On 1 May 2007 Sirus acquired another company, Marne plc. The directors of Marne, who were the onlyshareholders, were offered an increased profit share in the enlarged business for a period of two years after thedate of acquisition as an incentive to accept the purchase offer. After this period, normal remuneration levels willbe resumed. Sirus estimated that this would cost them $5 million at 30 April 2008, and a further $6 million at30 April 2009. These amounts will be paid in cash shortly after the respective year ends. (5 marks)Required:Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment ofthe above elements under International Financial Reporting Standards in the financial statements for the yearended 30 April 2008.
4 The transition to International Financial Reporting Standards (IFRSs) involves major change for companies as IFRSsintroduce significant changes in accounting practices that were often not required by national generally acceptedaccounting practice. It is important that the interpretation and application of IFRSs is consistent from country tocountry. IFRSs are partly based on rules, and partly on principles and management’s judgement. Judgement is morelikely to be better used when it is based on experience of IFRSs within a sound financial reporting infrastructure. It ishoped that national differences in accounting will be eliminated and financial statements will be consistent andcomparable worldwide.Required:(a) Discuss how the changes in accounting practices on transition to IFRSs and choice in the application ofindividual IFRSs could lead to inconsistency between the financial statements of companies. (17 marks)
3 Johan, a public limited company, operates in the telecommunications industry. The industry is capital intensive withheavy investment in licences and network infrastructure. Competition in the sector is fierce and technologicaladvances are a characteristic of the industry. Johan has responded to these factors by offering incentives to customersand, in an attempt to acquire and retain them, Johan purchased a telecom licence on 1 December 2006 for$120 million. The licence has a term of six years and cannot be used until the network assets and infrastructure areready for use. The related network assets and infrastructure became ready for use on 1 December 2007. Johan couldnot operate in the country without the licence and is not permitted to sell the licence. Johan expects its subscriberbase to grow over the period of the licence but is disappointed with its market share for the year to 30 November2008. The licence agreement does not deal with the renewal of the licence but there is an expectation that theregulator will grant a single renewal for the same period of time as long as certain criteria regarding network buildquality and service quality are met. Johan has no experience of the charge that will be made by the regulator for therenewal but other licences have been renewed at a nominal cost. The licence is currently stated at its original cost of$120 million in the statement of financial position under non-current assets.Johan is considering extending its network and has carried out a feasibility study during the year to 30 November2008. The design and planning department of Johan identified five possible geographical areas for the extension ofits network. The internal costs of this study were $150,000 and the external costs were $100,000 during the yearto 30 November 2008. Following the feasibility study, Johan chose a geographical area where it was going to installa base station for the telephone network. The location of the base station was dependent upon getting planningpermission. A further independent study has been carried out by third party consultants in an attempt to provide apreferred location in the area, as there is a need for the optimal operation of the network in terms of signal qualityand coverage. Johan proposes to build a base station on the recommended site on which planning permission hasbeen obtained. The third party consultants have charged $50,000 for the study. Additionally Johan has paid$300,000 as a single payment together with $60,000 a month to the government of the region for access to the landupon which the base station will be situated. The contract with the government is for a period of 12 years andcommenced on 1 November 2008. There is no right of renewal of the contract and legal title to the land remains withthe government.Johan purchases telephone handsets from a manufacturer for $200 each, and sells the handsets direct to customersfor $150 if they purchase call credit (call card) in advance on what is called a prepaid phone. The costs of selling thehandset are estimated at $1 per set. The customers using a prepaid phone pay $21 for each call card at the purchasedate. Call cards expire six months from the date of first sale. There is an average unused call credit of $3 per cardafter six months and the card is activated when sold.Johan also sells handsets to dealers for $150 and invoices the dealers for those handsets. The dealer can return thehandset up to a service contract being signed by a customer. When the customer signs a service contract, thecustomer receives the handset free of charge. Johan allows the dealer a commission of $280 on the connection of acustomer and the transaction with the dealer is settled net by a payment of $130 by Johan to the dealer being thecost of the handset to the dealer ($150) deducted from the commission ($280). The handset cannot be soldseparately by the dealer and the service contract lasts for a 12 month period. Dealers do not sell prepaid phones, andJohan receives monthly revenue from the service contract.The chief operating officer, a non-accountant, has asked for an explanation of the accounting principles and practiceswhich should be used to account for the above events.Required:Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(a) the licences; (8 marks)
Discuss the principles and practices which should be used in the financial year to 30 November 2008 to accountfor:(c) the purchase of handsets and the recognition of revenue from customers and dealers. (8 marks)Appropriateness and quality of discussion. (2 marks)
(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increaseddisclosure of information in financial statements. (14 marks)Quality of discussion and reasoning. (2 marks)
(b) Calculate the percentage of maximum capacity at which the zoo will break even during the year ending30 November 2007. You should assume that 50% of the revenue from sales of ticket type ZC is attributableto the zoo. (7 marks)
(ii) Briefly discuss FOUR non-financial factors which might influence the above decision. (4 marks)
(ii) The percentage change in revenue, total costs and net assets during the year ended 31 May 2008 thatwould have been required in order to have achieved a target ROI of 20% by the Beetown centre. Youranswer should consider each of these three variables in isolation. State any assumptions that you make.(6 marks)
(c) Briefly outline the corporation tax (CT) issues that Tay Limited should consider when deciding whether toacquire the shares or the assets of Tagus LDA. You are not required to discuss issues relating to transferpricing. (7 marks)
(iii) The extent to which Amy will be subject to income tax in the UK on her earnings in respect of dutiesperformed for Cutlass Inc and the travel costs paid for by that company. (5 marks)Appropriateness of format and presentation of the report and the effectiveness with which its advice iscommunicated. (2 marks)Note:You should assume that the income tax rates and allowances for the tax year 2006/07 and the corporation taxrates and allowances for the financial year 2006 apply throughout this questio
(c) Explanatory notes, together with relevant supporting calculations, in connection with the loan. (8 marks)Additional marks will be awarded for the appropriateness of the format and presentation of the schedules, theeffectiveness with which the information is communicated and the extent to which the schedules are structured ina logical manner. (3 marks)Notes: – you should assume that the tax rates and allowances for the tax year 2006/07 and for the financial yearto 31 March 2007 apply throughout the question.– you should ignore value added tax (VAT).
6 Certain practices have developed that threaten to damage the integrity and objectivity of professional accountants andthe reputation of the accounting profession.Required:Explain the following practices and associated ethical risks and discuss whether current ethical guidance issufficient:(a) ‘lowballing’; (5 marks)
3 You are the manager responsible for the audit of Lamont Co. The company’s principal activity is wholesaling frozenfish. The draft consolidated financial statements for the year ended 31 March 2007 show revenue of $67·0 million(2006 – $62·3 million), profit before taxation of $11·9 million (2006 – $14·2 million) and total assets of$48·0 million (2006 – $36·4 million).The following issues arising during the final audit have been noted on a schedule of points for your attention:(a) In early 2007 a chemical leakage from refrigeration units owned by Lamont caused contamination of some of itsproperty. Lamont has incurred $0·3 million in clean up costs, $0·6 million in modernisation of the units toprevent future leakage and a $30,000 fine to a regulatory agency. Apart from the fine, which has been expensed,these costs have been capitalised as improvements. (7 marks)Required:For each of the above issues:(i) comment on the matters that you should consider; and(ii) state the audit evidence that you should expect to find,in undertaking your review of the audit working papers and financial statements of Lamont Co for the year ended31 March 2007.NOTE: The mark allocation is shown against each of the three issues.
3 (a) Financial statements often contain material balances recognised at fair value. For auditors, this leads to additionalaudit risk.Required:Discuss this statement. (7 marks)
(b) You are the manager responsible for the audit of Poppy Co, a manufacturing company with a year ended31 October 2008. In the last year, several investment properties have been purchased to utilise surplus fundsand to provide rental income. The properties have been revalued at the year end in accordance with IAS 40Investment Property, they are recognised on the statement of financial position at a fair value of $8 million, andthe total assets of Poppy Co are $160 million at 31 October 2008. An external valuer has been used to providethe fair value for each property.Required:(i) Recommend the enquiries to be made in respect of the external valuer, before placing any reliance on theirwork, and explain the reason for the enquiries; (7 marks)
There has been significant divergence in practice over recognition of revenue mainly because International Financial Reporting Standards (IFRS) have contained limited guidance in certain areas. The International Accounting Standards Board (IASB) as a result of the joint project with the US Financial Accounting Standards Board (FASB) has issued IFRS 15 Revenue from Contracts with Customers. IFRS 15 sets out a five-step model, which applies to revenue earned from a contract with a customer with limited exceptions, regardless of the type of revenue transaction or the industry. Step one in the five-step model requires the identification of the contract with the customer and is critical for the purpose of applying the standard. The remaining four steps in the standard’s revenue recognition model are irrelevant if the contract does not fall within the scope of IFRS 15.Required:(a) (i) Discuss the criteria which must be met for a contract with a customer to fall within the scope of IFRS 15. (5 marks)(ii) Discuss the four remaining steps which lead to revenue recognition after a contract has been identified as falling within the scope of IFRS 15. (8 marks)(b) (i) Tang enters into a contract with a customer to sell an existing printing machine such that control of the printing machine vests with the customer in two years’ time. The contract has two payment options. The customer can pay $240,000 when the contract is signed or $300,000 in two years’ time when the customer gains control of the printing machine. The interest rate implicit in the contract is 11·8% in order to adjust for the risk involved in the delay in payment. However, Tang’s incremental borrowing rate is 5%. The customer paid $240,000 on 1 December 2014 when the contract was signed. (4 marks)(ii) Tang enters into a contract on 1 December 2014 to construct a printing machine on a customer’s premises for a promised consideration of $1,500,000 with a bonus of $100,000 if the machine is completed within 24 months. At the inception of the contract, Tang correctly accounts for the promised bundle of goods and services as a single performance obligation in accordance with IFRS 15. At the inception of the contract, Tang expects the costs to be $800,000 and concludes that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will occur. Completion of the printing machine is highly susceptible to factors outside of Tang’s influence, mainly issues with the supply of components.At 30 November 2015, Tang has satisfied 65% of its performance obligation on the basis of costs incurred to date and concludes that the variable consideration is still constrained in accordance with IFRS 15. However, on 4 December 2015, the contract is modified with the result that the fixed consideration and expected costs increase by $110,000 and $60,000 respectively. The time allowable for achieving the bonus is extended by six months with the result that Tang concludes that it is highly probable that the bonus will be achieved and that the contract still remains a single performance obligation. Tang has an accounting year end of 30 November. (6 marks)Required:Discuss how the above two contracts should be accounted for under IFRS 15. (In the case of (b)(i), the discussion should include the accounting treatment up to 30 November 2016 and in the case of (b)(ii), the accounting treatment up to 4 December 2015.)Note: The mark allocation is shown against each of the items above.Professional marks will be awarded in question 4 for clarity and quality of presentation. (2 marks)
You are an audit manager at Rockwell Co, a firm of Chartered Certified Accountants. You are responsible for the audit of the Hopper Group, a listed audit client which supplies ingredients to the food and beverage industry worldwide.The audit work for the year ended 30 June 2015 is nearly complete, and you are reviewing the draft audit report which has been prepared by the audit senior. During the year the Hopper Group purchased a new subsidiary company, Seurat Sweeteners Co, which has expertise in the research and design of sugar alternatives. The draft financial statements of the Hopper Group for the year ended 30 June 2015 recognise profit before tax of $495 million (2014 – $462 million) and total assets of $4,617 million (2014: $4,751 million). An extract from the draft audit report is shown below:Basis of modified opinion (extract)In their calculation of goodwill on the acquisition of the new subsidiary, the directors have failed to recognise consideration which is contingent upon meeting certain development targets. The directors believe that it is unlikely that these targets will be met by the subsidiary company and, therefore, have not recorded the contingent consideration in the cost of the acquisition. They have disclosed this contingent liability fully in the notes to the financial statements. We do not feel that the directors’ treatment of the contingent consideration is correct and, therefore, do not believe that the criteria of the relevant standard have been met. If this is the case, it would be appropriate to adjust the goodwill balance in the statement of financial position.We believe that any required adjustment may materially affect the goodwill balance in the statement of financial position. Therefore, in our opinion, the financial statements do not give a true and fair view of the financial position of the Hopper Group and of the Hopper Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.Emphasis of Matter ParagraphWe draw attention to the note to the financial statements which describes the uncertainty relating to the contingent consideration described above. The note provides further information necessary to understand the potential implications of the contingency.Required:(a) Critically appraise the draft audit report of the Hopper Group for the year ended 30 June 2015, prepared by the audit senior.Note: You are NOT required to re-draft the extracts from the audit report. (10 marks)(b) The audit of the new subsidiary, Seurat Sweeteners Co, was performed by a different firm of auditors, Fish Associates. During your review of the communication from Fish Associates, you note that they were unable to obtain sufficient appropriate evidence with regard to the breakdown of research expenses. The total of research costs expensed by Seurat Sweeteners Co during the year was $1·2 million. Fish Associates has issued a qualified audit opinion on the financial statements of Seurat Sweeteners Co due to this inability to obtain sufficient appropriate evidence.Required:Comment on the actions which Rockwell Co should take as the auditor of the Hopper Group, and the implications for the auditor’s report on the Hopper Group financial statements. (6 marks)(c) Discuss the quality control procedures which should be carried out by Rockwell Co prior to the audit report on the Hopper Group being issued. (4 marks)