ACCA考试 题目列表
Hindberg is a car retailer. On 1 April 2014, Hindberg sold a car to Latterly on the following terms:The selling price of the car was $25,300. Latterly paid $12,650 (half of the cost) on 1 April 2014 and would pay the remaining $12,650 on 31 March 2016 (two years after the sale). Hindberg’s cost of capital is 10% per annum.What is the total amount which Hindberg should credit to profit or loss in respect of this transaction in the year ended 31 March 2015?A.$23,105B.$23,000C.$20,909D.$24,150
Faithful representation is a fundamental characteristic of useful information within the IASB’s Conceptual framework for financial reporting.Which of the following accounting treatments correctly applies the principle of faithful representation?A.Reporting a transaction based on its legal status rather than its economic substanceB.Excluding a subsidiary from consolidation because its activities are not compatible with those of the rest of the groupC.Recording the whole of the net proceeds from the issue of a loan note which is potentially convertible to equity shares as debt (liability)D.Allocating part of the sales proceeds of a motor vehicle to interest received even though it was sold with 0% (interest free) finance
Mr Li, a photographer, had his photos published in the July 2014 edition of the tourism journal. The total fee was RMB20,000 and the publisher agreed to pay Mr Li by two instalments, one of RMB18,000 in June 2014 and the balance of RMB2,000 in August 2014. The same photos were republished by the government in a promotion brochure in August 2014 and Mr Li was paid a further fee of RMB3,000 by the government.What is the total amount of individual income tax (IIT) which Mr Li will pay on the above incomes?A.RMB2,492B.RMB2,576C.RMB2,548D.RMB3,680
A corporate taxpayer has under-reported its taxable revenue in 2002 and hence underpaid value added tax (VAT) and enterprise income tax (EIT). In 2014, the taxpayer was charged by the tax authority with committing an act of tax evasion in 2002.Which of the following statements is correct?A.The taxpayer must pay the additional taxes due, plus a late payment surcharge and a penaltyB.There is no need for the taxpayer to pay any additional taxes, late payment surcharge or penalty as the statute of limitation is ten yearsC.The taxpayer must pay the additional taxes, but no late payment surcharge or penalty as the statute of limitation is ten years for late payment surcharge and penaltiesD.The taxpayer must pay the additional taxes and a late payment surcharge but not a penalty as the statute of limitation is five years for penalties
A company predicted that the learning rate for production of a new product would be 80%. The actual learning rate was 75%. The following possible reasons were stated for this:(i) The number of new employees recruited was lower than expected(ii) Unexpected problems were encountered with production(iii) Unexpected changes to Health and Safety laws meant that the company had to increase the number of breaks during production for employeesWhich of the above reasons could have caused the difference between the expected rate of learning and the actual rate of learning?A.All of the aboveB.(ii) and (iii) onlyC.(i) onlyD.None of the above
The following statements have been made about life cycle costing:(i) It focuses on the short-term by identifying costs at the beginning of a product’s life cycle(ii) It identifies all costs which arise in relation to the product each year and then calculates the product’s profitability on an annual basis(iii) It accumulates a product’s costs over its whole life time and works out the overall profitability of a product(iv) It allocates costs to each stage of a product’s life cycle and writes them off at the end of each stageWhich of the above statements is/are correct?A.(i) and (iii)B.(iii) onlyC.(i) and (iv)D.(ii) only
Ms Huang, a shareholder of the Daqing Limited Liability Company (Daqing), found that the general manager, Mr Ding, had accepted bribes from several suppliers, which materially caused losses to Daqing, and adversely affected the interests of all shareholders.Further examination, through a Certified Public Accountant firm, disclosed that there were a lot of affiliated transactions between Daqing and Everbright Co, which was the majority shareholder of Daqing. Mr Ding was recommended by Everbright Co and appointed by Daqing’s board of directors, which was substantially influenced by Everbright Co. With a series of such transactions Daqing transferred huge profits to Everbright Co and adversely affected Daqing.Required:(a) State whether Ms Huang was entitled to take legal action against Mr Ding for his illegal behaviour of accepting bribes which adversely affected all the shareholders. (2 marks)(b) State TWO different legal actions Ms Huang was entitled to take to protect the rights of Daqing and its shareholders due to the affiliated transactions with Everbright Co. (4 marks)
This information was taken from an internal newsletter of The Knowledge Partnership LLP (TKP), a company which offers project and software consultancy work for clients based in Zeeland. The newsletter was dated 2 November 2014 and describes two projects currently being undertaken by the partnership.Project OneIn this project, one of our clients was just about to place a contract for a time recording system to help them monitor and estimate construction contracts when we were called in by the Finance Director. He was concerned about the company supplying the software package. ‘They only have an annual revenue of $5m’, he said, ‘and that worries me.’ TKP analysed software companies operating in Zeeland. It found that 200 software companies were registered in Zeeland with annual revenues of between $3m and $10m. Of these, 20 went out of business last year. This compared to a 1% failure rate for software companies with revenues of more than $100m per year. We presented this information to the client and suggested that this could cause a short-term support problem. The client immediately re-opened the procurement process. Eventually they bought a solution from a much larger well-known software supplier. It is a popular software solution, used in many larger companies.The client has now asked us to help with the implementation of the package. A budget for the project has been agreed and has been documented in an agreed, signed-off, business case. The client has a policy of never re-visiting its business cases once they have been accepted; they see this as essential for effective cost control. We are currently working with the primary users of the software – account managers (using time and cost data to monitor contracts) and the project support office (using time and cost data to improve contract estimating) – to ensure that they can use the software effectively when it is implemented. We have also given ‘drop in’ briefing sessions for the client’s employees who are entering the time and cost data analysed by the software. They already record this information on a legacy system and so all they will see is a bright new user interface, but we need to keep them informed about our implementation. We are also looking at data migration from the current legacy system. We think some of the current data might be of poor quality, so we have established a strategy for data cleansing (through offshore data input) if this problem materialises. We currently estimate that the project will go live in May 2015.Project TwoIn this project, the client is the developer of the iProjector, a tiny phone-size projector which is portable, easy to use and offers high definition projection. The client was concerned that their product is completely dependent on a specialist image-enhancing chip designed and produced by a small start-up technology company. They asked TKP to investigate this company. We confirmed their fears. The company has been trading for less than three years and it has a very inexperienced management team. We suggested that the client should establish an escrow agreement for design details of the chip and suggested a suitable third party to hold this agreement. We also suggested that significant stocks of the chip should be maintained. The client also asked TKP to look at establishing patents for the iProjector throughout the world. Again, using our customer contacts, we put them in touch with a company which specialises in this. We are currently engaged with the client in examining the risk that a major telephone producer will launch a competitive product with functionality and features similar to the iProjector.The iProjector is due to be launched on 1 May 2015 and we have been engaged to give advice on the launch of the product. The launch has been heavily publicised, a prestigious venue booked and over 400 attendees are expected. TKP have arranged for many newspaper journalists to attend. The product is not quite finished, so although orders will be taken at the launch, the product is not expected to ship until June 2015.Further information:TKP only undertakes projects in the business culture which it understands and where it feels comfortable. Consequently, it does not undertake assignments outside Zeeland.TKP has $10,000,000 of consultant’s liability insurance underwritten by Zeeland Insurance Group (ZIG).Required:(a) Analyse how TKP itself and the two projects described in the scenario demonstrate the principles of effective risk management. (15 marks)(b) Describe the principle of the triple constraint (scope, time and cost) on projects and discuss its implications in the two projects described in the scenario. (10 marks)
(a) Kayte operates in the shipping industry and owns vessels for transportation. In June 2014, Kayte acquired Ceemone whose assets were entirely investments in small companies. The small companies each owned and operated one or two shipping vessels. There were no employees in Ceemone or the small companies. At the acquisition date, there were only limited activities related to managing the small companies as most activities were outsourced. All the personnel in Ceemone were employed by a separate management company. The companies owning the vessels had an agreement with the management company concerning assistance with chartering, purchase and sale of vessels and any technical management. The management company used a shipbroker to assist with some of these tasks.Kayte accounted for the investment in Ceemone as an asset acquisition. The consideration paid and related transaction costs were recognised as the acquisition price of the vessels. Kayte argued that the vessels were only passive investments and that Ceemone did not own a business consisting of processes, since all activities regarding commercial and technical management were outsourced to the management company. As a result, the acquisition was accounted for as if the vessels were acquired on a stand-alone basis.Additionally, Kayte had borrowed heavily to purchase some vessels and was struggling to meet its debt obligations. Kayte had sold some of these vessels but in some cases, the bank did not wish Kayte to sell the vessel. In these cases, the vessel was transferred to a new entity, in which the bank retained a variable interest based upon the level of the indebtedness. Kayte’s directors felt that the entity was a subsidiary of the bank and are uncertain as to whether they have complied with the requirements of IFRS 3 Business Combinations and IFRS 10 Consolidated Financial Statements as regards the above transactions. (12 marks)(b) Kayte’s vessels constitute a material part of its total assets. The economic life of the vessels is estimated to be 30 years, but the useful life of some of the vessels is only 10 years because Kayte’s policy is to sell these vessels when they are 10 years old. Kayte estimated the residual value of these vessels at sale to be half of acquisition cost and this value was assumed to be constant during their useful life. Kayte argued that the estimates of residual value used were conservative in view of an immature market with a high degree of uncertainty and presented documentation which indicated some vessels were being sold for a price considerably above carrying value. Broker valuations of the residual value were considerably higher than those used by Kayte. Kayte argued against broker valuations on the grounds that it would result in greater volatility in reporting.Kayte keeps some of the vessels for the whole 30 years and these vessels are required to undergo an engine overhaul in dry dock every 10 years to restore their service potential, hence the reason why some of the vessels are sold. The residual value of the vessels kept for 30 years is based upon the steel value of the vessel at the end of its economic life. At the time of purchase, the service potential which will be required to be restored by the engine overhaul is measured based on the cost as if it had been performed at the time of the purchase of the vessel. In the current period, one of the vessels had to have its engine totally replaced after only eight years. Normally, engines last for the 30-year economic life if overhauled every 10 years. Additionally, one type of vessel was having its funnels replaced after 15 years but the funnels had not been depreciated separately. (11 marks)Required:Discuss the accounting treatment of the above transactions in the financial statements of Kayte.Note: The mark allocation is shown against each of the elements above.Professional marks will be awarded in question 3 for clarity and quality of presentation. (2 marks)
Section B – TWO questions ONLY to be attempted(a) Cate is an entity in the software industry. Cate had incurred substantial losses in the fi nancial years 31 May 2004 to 31 May 2009. In the fi nancial year to 31 May 2010 Cate made a small profi t before tax. This included signifi cant non-operating gains. In 2009, Cate recognised a material deferred tax asset in respect of carried forward losses, which will expire during 2012. Cate again recognised the deferred tax asset in 2010 on the basis of anticipated performance in the years from 2010 to 2012, based on budgets prepared in 2010. The budgets included high growth rates in profi tability. Cate argued that the budgets were realistic as there were positive indications from customers about future orders. Cate also had plans to expand sales to new markets and to sell new products whose development would be completed soon. Cate was taking measures to increase sales, implementing new programs to improve both productivity and profi tability. Deferred tax assets less deferred tax liabilities represent 25% of shareholders’ equity at 31 May 2010. There are no tax planning opportunities available to Cate that would create taxable profi t in the near future. (5 marks)(b) At 31 May 2010 Cate held an investment in and had a signifi cant infl uence over Bates, a public limited company. Cate had carried out an impairment test in respect of its investment in accordance with the procedures prescribed in IAS 36, Impairment of assets. Cate argued that fair value was the only measure applicable in this case as value-in-use was not determinable as cash fl ow estimates had not been produced. Cate stated that there were no plans to dispose of the shareholding and hence there was no binding sale agreement. Cate also stated that the quoted share price was not an appropriate measure when considering the fair value of Cate’s signifi cant infl uence on Bates. Therefore, Cate estimated the fair value of its interest in Bates through application of two measurement techniques; one based on earnings multiples and the other based on an option–pricing model. Neither of these methods supported the existence of an impairment loss as of 31 May 2010. (5 marks)(c) At 1 April 2009 Cate had a direct holding of shares giving 70% of the voting rights in Date. In May 2010, Date issued new shares, which were wholly subscribed for by a new investor. After the increase in capital, Cate retained an interest of 35% of the voting rights in its former subsidiary Date. At the same time, the shareholders of Date signed an agreement providing new governance rules for Date. Based on this new agreement, Cate was no longer to be represented on Date’s board or participate in its management. As a consequence Cate considered that its decision not to subscribe to the issue of new shares was equivalent to a decision to disinvest in Date. Cate argued that the decision not to invest clearly showed its new intention not to recover the investment in Date principally through continuing use of the asset and was considering selling the investment. Due to the fact that Date is a separate line of business (with separate cash fl ows, management and customers), Cate considered that the results of Date for the period to 31 May 2010 should be presented based on principles provided by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. (8 marks)(d) In its 2010 fi nancial statements, Cate disclosed the existence of a voluntary fund established in order to provide a post-retirement benefi t plan (Plan) to employees. Cate considers its contributions to the Plan to be voluntary, and has not recorded any related liability in its consolidated fi nancial statements. Cate has a history of paying benefi ts to its former employees, even increasing them to keep pace with infl ation since the commencement of the Plan. The main characteristics of the Plan are as follows:(i) the Plan is totally funded by Cate;(ii) the contributions for the Plan are made periodically;(iii) the post retirement benefi t is calculated based on a percentage of the fi nal salaries of Plan participants dependent on the years of service;(iv) the annual contributions to the Plan are determined as a function of the fair value of the assets less the liability arising from past services.Cate argues that it should not have to recognise the Plan because, according to the underlying contract, it can terminate its contributions to the Plan, if and when it wishes. The termination clauses of the contract establish that Cate must immediately purchase lifetime annuities from an insurance company for all the retired employees who are already receiving benefi t when the termination of the contribution is communicated. (5 marks)Required:Discuss whether the accounting treatments proposed by the company are acceptable under International Financial Reporting Standards.Professional marks will be awarded in this question for clarity and quality of discussion. (2 marks)The mark allocation is shown against each of the four parts above.
Section A – This ONE question is compulsory and MUST be attemptedHesket Nuclear (HN) is a nuclear power station in Ayland, a large European country. The HN plant is operated by Hesket Power Company (HPC), which in turn is wholly owned by the government of Ayland. Initially opened in the late 1950s, the power station grew in subsequent decades by the addition of several other facilities on the same site. HN now has the ability to generate 5% of Ayland’s entire electricity demand and is one of the largest nuclear stations in Europe. At each stage of its development from the 1950s to the present day, development on the site was welcomed by the relevant local government authorities, by the businesses that have supported it, by the trade union that represents the majority of employees (called Forward Together or FT for short) and also by the national Ayland government. A nuclear reprocessing facility was added in the 1980s. This is a valuable source of overseas income as nuclear power producers in many other parts of the world send material by sea to HN to be reprocessed. This includes nuclear producers in several developing countries that rely on the cheaper reprocessed fuel (compared to ‘virgin’ fuel) that HN produces.HPC is loss-making and receives a substantial subsidy each year from the government of Ayland. HPC has proven itself uneconomic but is deemed politically and environmentally necessary as far as the government is concerned. The government of Ayland has reluctantly accepted that large subsidies to HPC will be necessary for many years but considers nuclear power to be a vital component of its energy portfolio (along with other energy sources such as oil, gas, coal, renewables and hydroelectric) and also as a key part of its ‘clean’ energy strategy. Unlike energy from fossil fuels (such as coal, gas and oil), nuclear power generates a negligible amount of polluting greenhouse gas. HN also provides much needed employment in an otherwise deprived part of the country. The HN power station underpins and dominates the economy of its local area and local government authorities say that the HN plant is vital to the regional economy.Since it opened, however, the HN power station has been controversial. Whilst being welcomed by those who benefi t from it in terms of jobs, trade, reprocessing capacity and energy, a coalition has gradually built up against it comprising those sceptical about the safety and environmental impact of nuclear power. Some neighbouring countries believe themselves to be vulnerable to radioactive contamination from the HN plant. In particular, two countries, both of whom say their concerns about HN arise because of their geographical positions, are vocal opponents. They say that their geographical proximity forced them to be concerned as they are affected by the location of the HN plant which was not of their choosing.The government of Beeland, whose capital city is 70 km across the sea from HN (which is situated on the coast), has consistently opposed HN and has frequently asked the government of Ayland to close HN down. The Beeland government claims that not only does ‘low-level’ emission from the site already contaminate the waters separating the two countries but it also claims that any future major nuclear ‘incident’ would have serious implications for the citizens of Beeland. There is some scientifi c support for this view although opinion is divided over whether Beeland is being irrational in its general opposition to HN.The government of Ceeland is also a vocal opponent of HN. Ceeland is located to the north of Beeland and approximately 500 km away from Ayland. Some nuclear scientists have said that with such a large stretch of water between the HN plant and Ceeland, even a much-feared incident would be unlikely to seriously impact on Ceeland. Some commentators have gone further and said that Ceeland’s concerns are unfounded and ‘borne of ignorance’. FT, the trade union for HN employees, issued a statement saying that Ceeland had no reason to fear HN and that its fears were ‘entirely groundless’.HN’s other vocal and persistent opponent is No Nuclear Now (NNN), a well-organised and well-funded campaigning group. Describing itself on its website as ‘passionate about the environment’, it describes HN’s social and environmental footprint as ‘very negative’. NNN has often pointed to an environmentally important colony of rare seals living near the HN plant. It says that the seals are dependent on a local natural ecosystem around the plant and are unable to move, arguing that the animals are at signifi cant risk from low-level contamination and would have ‘no chance’ of survival if a more serious radioactive leak ever occurred. NNN points to such a leak that occurred in the 1970s, saying that such a leak proves that HN has a poor safety record and that a leak could easily recur.Each time an objection to the HN power station is raised, FT, the trade union, robustly defends the HN site in the media, and argues for further investment, based on the need to protect the jobs at the site. Furthermore, the radiation leak in the 1970s led to FT uniting with the HPC board to argue against those stakeholders that wanted to use the leak as a reason to close the HN site. The combination of union and HPC management was able to counter the arguments of those asking for closure.HN places a great deal of emphasis on its risk management and often publicises the fact that it conducts continual risk assessments and is in full compliance with all relevant regulatory frameworks. Similarly, FT recently pointed out that HN has had an ‘impeccable’ safety record since the incident in the 1970s and says on its website that it is ‘proud’ that its members are involved in ensuring that the company is continually in full compliance with all of the regulatory requirements placed upon it.The board of HPC, led by chairman Paul Gog, is under continual pressure from the government of Ayland to minimise the amount of government subsidy. Each year, the government places challenging targets on the HPC board requiring stringent cost controls at the HN power station. In seeking to reduce maintenance costs on the expiry of a prior maintenance contract last year, the board awarded the new contract to an overseas company that brought its own workers in from abroad rather than employing local people. The previous contract company was outraged to have lost the contract and the move also triggered an angry response from the local workforce and from FT, the representative trade union.FT said that it was deplorable that HPC had awarded the contract to an overseas company when a domestic company in Ayland could have been awarded the work. The union convenor, Kate Allujah, said that especially in the nuclear industry where safety was so important, domestic workers were ‘more reliable’ than foreign workers who were brought in purely on the basis of cost and in whose countries safety standards in similar industries might not be so stringent. HPC said that it had done nothing illegal as the foreign workers were allowed to work in Ayland under international legal treaties. Furthermore, it argued that pressure by FT to raise wages over recent years had created, with the government’s subsidy targets, the cost pressure to re-tender the maintenance contract.On HN’s 50th anniversary last year, NNN published what it called a ‘risk assessment’ for the HN power station. It said it had calculated the probabilities (P) and impacts (I) of three prominent risks.Risk of major radioactive leak over the next 10 years: P = 10%, I = 20Risk of nuclear explosion over the next 50 years: P = 20%, I = 100Risk of major terrorist attack over next 10 years: P = 10%, I = 80Impacts were on an arbitrary scale of 1–100 where 100 was defi ned by NNN as ‘total nuclear annihilation of the area and thousands of deaths’.The governments of Beeland and Ceeland seized upon the report, saying that it proved that HN is a genuine threat to their security and should be immediately closed and decommissioned. HN’s risk manager, Keith Wan, vigorously disagreed with this assessment saying that the probabilities and the impacts were ‘ridiculous’, massively overstated and intended to unnecessarily alarm people. HN’s public relations offi ce was also angry about it and said it would issue a rebuttal statement.Required:(a) Distinguish between voluntary and involuntary stakeholders, identifying both types of stakeholders in Hesket Nuclear. Assess the claims of THREE of the involuntary ‘affected’ stakeholders identifi ed. (12 marks)(b) The trade union, Forward Together, has had a long relationship with HN and represents not only the main workforce but also the employees of the maintenance company replaced by the foreign workers.Required:Explain the roles of employee representatives such as trade unions in corporate governance and critically evaluate, from the perspective of HPC’s board, the contribution of Forward Together in the governance of HPC. (10 marks)(c) Explain what an agency relationship is and examine the board of HPC’s current agency relationship and objectives. Briefl y explain how these would differ if HPC was a company with private shareholders. (10 marks)(d) As a part of HPC’s public relations effort, it has been proposed that a response statement should be prepared for the company’s website to help address two major challenges to their reputation.Required:Draft this statement to include the following:(i) Referring to the NNN report, explain why accurate risk assessment is necessary at Hesket Nuclear. (8 marks)(ii) Explain what a social and environmental ‘footprint’ is and construct the argument that HN’s overall social and environmental footprint is positive. (6 marks)Professional marks will additionally be awarded in part (d) for drafting a statement that is clear, has a logical fl ow, is persuasive and is appropriately structured. (4 marks)
Big Cheese Chairs (BCC) manufactures and sells executive leather chairs. They are considering a new design of massaging chair to launch into the competitive market in which they operate.They have carried out an investigation in the market and using a target costing system have targeted a competitive selling price of $120 for the chair. BCC wants a margin on selling price of 20% (ignoring any overheads).The frame. and massage mechanism will be bought in for $51 per chair and BCC will upholster it in leather and assemble it ready for despatch.Leather costs $10 per metre and two metres are needed for a complete chair although 20% of all leather is wasted in the upholstery process.The upholstery and assembly process will be subject to a learning effect as the workers get used to the new design.BCC estimates that the first chair will take two hours to prepare but this will be subject to a learning rate (LR) of 95%.The learning improvement will stop once 128 chairs have been made and the time for the 128th chair will be the time for all subsequent chairs. The cost of labour is $15 per hour.The learning formula is shown on the formula sheet and at the 95% learning rate the value of b is -0·074000581.Required:(a) Calculate the average cost for the first 128 chairs made and identify any cost gap that may be present atthat stage. (8 marks)(b) Assuming that a cost gap for the chair exists suggest four ways in which it could be closed. (6 marks)The production manager denies any claims that a cost gap exists and has stated that the cost of the 128th chair will be low enough to yield the required margin.(c) Calculate the cost of the 128th chair made and state whether the target cost is being achieved on the 128th chair. (6 marks)
(a) The following figures have been calculated from the financial statements (including comparatives) of Barstead forthe year ended 30 September 2009:increase in profit after taxation 80%increase in (basic) earnings per share 5%increase in diluted earnings per share 2%Required:Explain why the three measures of earnings (profit) growth for the same company over the same period cangive apparently differing impressions. (4 marks)(b) The profit after tax for Barstead for the year ended 30 September 2009 was $15 million. At 1 October 2008 the company had in issue 36 million equity shares and a $10 million 8% convertible loan note. The loan note will mature in 2010 and will be redeemed at par or converted to equity shares on the basis of 25 shares for each $100 of loan note at the loan-note holders’ option. On 1 January 2009 Barstead made a fully subscribed rights issue of one new share for every four shares held at a price of $2·80 each. The market price of the equity shares of Barstead immediately before the issue was $3·80. The earnings per share (EPS) reported for the year ended 30 September 2008 was 35 cents.Barstead’s income tax rate is 25%.Required:Calculate the (basic) EPS figure for Barstead (including comparatives) and the diluted EPS (comparatives not required) that would be disclosed for the year ended 30 September 2009. (6 marks)
(a) An assistant of yours has been criticised over a piece of assessed work that he produced for his study course for giving the definition of a non-current asset as ‘a physical asset of substantial cost, owned by the company, which will last longer than one year’.Required:Provide an explanation to your assistant of the weaknesses in his definition of non-current assets whencompared to the International Accounting Standards Board’s (IASB) view of assets. (4 marks)(b) The same assistant has encountered the following matters during the preparation of the draft financial statements of Darby for the year ending 30 September 2009. He has given an explanation of his treatment of them.(i) Darby spent $200,000 sending its staff on training courses during the year. This has already led to animprovement in the company’s efficiency and resulted in cost savings. The organiser of the course has stated that the benefits from the training should last for a minimum of four years. The assistant has therefore treated the cost of the training as an intangible asset and charged six months’ amortisation based on the average date during the year on which the training courses were completed. (3 marks)(ii) During the year the company started research work with a view to the eventual development of a newprocessor chip. By 30 September 2009 it had spent $1·6 million on this project. Darby has a past historyof being particularly successful in bringing similar projects to a profitable conclusion. As a consequence theassistant has treated the expenditure to date on this project as an asset in the statement of financial position.Darby was also commissioned by a customer to research and, if feasible, produce a computer system toinstall in motor vehicles that can automatically stop the vehicle if it is about to be involved in a collision. At30 September 2009, Darby had spent $2·4 million on this project, but at this date it was uncertain as towhether the project would be successful. As a consequence the assistant has treated the $2·4 million as anexpense in the income statement. (4 marks)(iii) Darby signed a contract (for an initial three years) in August 2009 with a company called Media Today toinstall a satellite dish and cabling system to a newly built group of residential apartments. Media Today willprovide telephone and television services to the residents of the apartments via the satellite system and payDarby $50,000 per annum commencing in December 2009. Work on the installation commenced on1 September 2009 and the expenditure to 30 September 2009 was $58,000. The installation is expectedto be completed by 31 October 2009. Previous experience with similar contracts indicates that Darby willmake a total profit of $40,000 over the three years on this initial contract. The assistant correctly recordedthe costs to 30 September 2009 of $58,000 as a non-current asset, but then wrote this amount down to$40,000 (the expected total profit) because he believed the asset to be impaired.The contract is not a finance lease. Ignore discounting. (4 marks)Required:For each of the above items (i) to (iii) comment on the assistant’s treatment of them in the financialstatements for the year ended 30 September 2009 and advise him how they should be treated underInternational Financial Reporting Standards.Note: the mark allocation is shown against each of the three items above.
(a) The following information relates to Crosswire a publicly listed company.Summarised statements of financial position as at:The following information is available:(i) During the year to 30 September 2009, Crosswire embarked on a replacement and expansion programme for its non-current assets. The details of this programme are:On 1 October 2008 Crosswire acquired a platinum mine at a cost of $5 million. A condition of mining theplatinum is a requirement to landscape the mining site at the end of its estimated life of ten years. Thepresent value of this cost at the date of the purchase was calculated at $3 million (in addition to thepurchase price of the mine of $5 million).Also on 1 October 2008 Crosswire revalued its freehold land for the first time. The credit in the revaluationreserve is the net amount of the revaluation after a transfer to deferred tax on the gain. The tax rate applicable to Crosswire for deferred tax is 20% per annum.On 1 April 2009 Crosswire took out a finance lease for some new plant. The fair value of the plant was$10 million. The lease agreement provided for an initial payment on 1 April 2009 of $2·4 million followedby eight six-monthly payments of $1·2 million commencing 30 September 2009.Plant disposed of during the year had a carrying amount of $500,000 and was sold for $1·2 million. Theremaining movement on the property, plant and equipment, after charging depreciation of $3 million, wasthe cost of replacing plant.(ii) From 1 October 2008 to 31 March 2009 a further $500,000 was spent completing the developmentproject at which date marketing and production started. The sales of the new product proved disappointingand on 30 September 2009 the development costs were written down to $1 million via an impairmentcharge.(iii) During the year ended 30 September 2009, $4 million of the 10% convertible loan notes matured. Theloan note holders had the option of redemption at par in cash or to exchange them for equity shares on thebasis of 20 new shares for each $100 of loan notes. 75% of the loan-note holders chose the equity option.Ignore any effect of this on the other equity reserve.All the above items have been treated correctly according to International Financial Reporting Standards.(iv) The finance costs are made up of:Required:(i) Prepare a statement of the movements in the carrying amount of Crosswire’s non-current assets for theyear ended 30 September 2009; (9 marks)(ii) Calculate the amounts that would appear under the headings of ‘cash flows from investing activities’and ‘cash flows from financing activities’ in the statement of cash flows for Crosswire for the year ended30 September 2009.Note: Crosswire includes finance costs paid as a financing activity. (8 marks)(b) A substantial shareholder has written to the directors of Crosswire expressing particular concern over thedeterioration of the company’s return on capital employed (ROCE)Required:Calculate Crosswire’s ROCE for the two years ended 30 September 2008 and 2009 and comment on theapparent cause of its deterioration.Note: ROCE should be taken as profit before interest on long-term borrowings and tax as a percentage of equity plus loan notes and finance lease obligations (at the year end). (8 marks)