ICAEW Financial Accounting Questions March 2015 to March 2016{SPirate}

PROFESSIONAL LEVEL EXAMINATION MONDAY 16 MARCH 2015 (3 hours)

FINANCIAL ACCOUNTING AND REPORTING This paper consists of FOUR questions (100 marks). 1.

Ensure your candidate details are on the front of your answer booklet. You will be given time to sign, date and print your name on the answer booklet, and to enter your candidate number on this question paper. You may not write anything else until the exam starts.

2.

Answer each question in black ballpoint pen only.

3.

Answers to each question must begin on a new page and must be clearly numbered. Use both sides of the paper in your answer booklet.

4.

The examiner will take account of the way in which answers are presented.

5.

When the assessment is declared closed, you must stop writing immediately. If you continue to write (even completing your candidate details on a continuation booklet), it will be classed as misconduct

Unless otherwise stated, make all calculations to the nearest month and the nearest £. All references to IFRS are to International Financial Reporting Standards and International Accounting Standards.

IMPORTANT Question papers contain confidential information and must NOT be removed from the examination hall.

You MUST enter your candidate number in this box.

DO NOT TURN OVER UNTIL YOU ARE INSTRUCTED TO BEGIN WORK

Copyright © ICAEW 2015. All rights reserved.

Page 1 of 11

BLANK PAGE


Page 2 of 11

1.

You are the financial controller at Coghlan Ltd and an ICAEW Chartered Accountant. You are finalising the financial statements for the year ended 30 September 2014. Your colleague, a part-qualified ICAEW Chartered Accountant, has produced the following draft financial statements with some additional information. He was assisted by the managing director’s son, who was on work experience at Coghlan Ltd. You are under pressure from the managing director to finalise the financial statements as quickly as possible as he is about to go on holiday. The managing director has reminded you that your performance appraisal is due and has hinted that if you finalise the financial statements quickly he will make sure this is reflected in your appraisal which is linked to your salary. Draft statement of profit or loss for the year ended 30 September 2014 £ 3,359,200 (2,198,050) 1,161,150 (1,039,700) 121,450 (500,000) (38,000) (416,550) – (416,550)

Revenue (Note 1) Cost of sales Gross profit Administrative expenses (Note 2) Operating profit Other costs (Note 3) Finance costs (Note 4) Loss before tax Income tax (Note 5) Loss for the year Draft statement of financial position as at 30 September 2014 £ ASSETS Non-current assets Property, plant and equipment (Note 6) Current assets Inventories (Note 7) Trade and other receivables Cash and cash equivalents

1,110,325

142,100 125,400 1,200 268,700 1,379,025

Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares) (Note 4) Share premium Retained earnings Current liabilities Trade and other payables Provision (Note 3) Income tax (Note 5) Total equity and liabilities


£

294,500 94,000 425,825 814,325 31,900 500,000 32,800 564,700 1,379,025

Page 3 of 11

Additional information: (1)

Coghlan Ltd has launched a new monthly technical magazine to its customers on a subscription basis, based on a calendar year. £36,000 was received in annual subscriptions in December 2013 for the year commencing 1 January 2014. This was recognised immediately as revenue as the amount could be measured reliably and the economic benefit had flowed to Coghlan Ltd.

(2)

On 1 October 2013 Coghlan Ltd entered into a new six-year lease for a regional office. Lease payments are £1,200 per month payable at the beginning of each month. The building is estimated to have a useful life of 30 years. Coghlan Ltd negotiated a rent holiday for the first six months. As a consequence, the rent for the final six months of the lease will be double. The first payment of £1,200 was made on 1 April 2014. The lease payments were recognised in administrative expenses as they were paid.

(3)

The provision of £500,000 shown in the financial statements above relates to outstanding lawsuits for the supply, prior to the year end, of faulty products by Coghlan Ltd to a number of customers. This amount has been recognised as a provision based on advice from Coghlan Ltd’s lawyers that the claims are very likely to succeed within the next six months, which has led to some adverse publicity. The product was withdrawn in August 2014. Since recognising the above provision, Coghlan Ltd discovered that there are an additional 50 faulty products still in circulation. Coghlan Ltd’s lawyers estimated for each product £350 would need to be paid. During the year Coghlan Ltd started offering a one-year repair warranty with its luxury products. If minor repairs were required for all the relevant goods sold the cost would be £65,000, compared to £157,000 if major repairs were required. Coghlan Ltd estimates that 20% of the goods sold will require minor repairs and 5% will require major repairs. No provision was recognised in respect of the warranties for the year ended 30 September 2014 as no goods had been returned by this date.

(4)

An interim ordinary dividend of 10p per share was paid on 11 May 2014 and recognised as a finance cost. Shortly after this, Coghlan Ltd entered into a share buyback scheme to reacquire 45,000 £1 ordinary shares for £1.90 cash per share. The total cash paid was debited to share capital.

(5)

The income tax figure shown in the statement of financial position is the balance remaining on the nominal ledger after paying the liability for the previous year. As a loss was made for the year ended 30 September 2014 a tax refund of £65,000 has been appropriately estimated but has not yet been recognised.


Page 4 of 11

(6)

Depreciation on property, plant and equipment for the year ended 30 September 2014 has not yet been charged. The following information is available:

Cost (land £250,000) Accumulated depreciation at 1 October 2013 Depreciation rate and method (buildings)

Land and buildings

Fixtures and fittings

£1,125,000 £187,500

£236,000 £63,175

5% pa straight-line

Recoverable amount (land £225,000) at 30 September 2014

£600,000

20% pa reducing balance £170,000

Land and buildings consist of Coghlan Ltd’s head office and main warehouse which are located together on one piece of land. Local market values decreased following an announcement that a wind farm is to be built in the area. All expenses in respect of property, plant and equipment should be recognised in administrative expenses. (7)

Inventories at 30 September 2013 and 2014 were valued at net realisable value, as this was higher than cost. The following inventory valuations are relevant.

Cost Net realisable value

30 September 2014 £ 98,000 142,100

30 September 2013 £ 79,000 114,550

Requirements (a)

Prepare a revised statement of profit or loss for Coghlan Ltd for the year ended 30 September 2014 and a revised statement of financial position as at that date, in a form suitable for publication. Notes to the financial statements are not required. (19 marks)

(b)

IAS 1, Presentation of Financial Statements, requires financial statements to be prepared using the accruals basis of accounting and the IASB’s Conceptual Framework refers to going concern as the underlying assumption in the preparation of financial statements. Explain these two concepts, illustrating their application with reference to Coghlan Ltd. (6 marks)

(c)

Discuss the ethical issues arising from the scenario for you as financial controller and the steps that you should take to address them. (5 marks) Total: 30 marks


Page 5 of 11

2.

The draft financial statements of Porcaro plc, which has a number of wholly-owned subsidiaries, are being prepared by your trainee, Carmine. A number of outstanding issues are set out below which require your attention, as financial controller, as Carmine was unsure of the correct accounting treatment. The draft consolidated profit for the year ended 30 September 2014 is £483,150. (1)

On 1 October 2013 Porcaro plc borrowed £600,000 at 6% pa, repayable in three years’ time, to help fund the construction of an office block. Porcaro plc immediately paid £200,000 to acquire land and gained planning permission on this date but construction did not start until 31 December 2013. The remaining amount was put into a deposit account earning interest at 3% pa and was used to make payments to the construction company of £100,000 on 1 March 2014 and £200,000 on 1 September 2014. The building was not complete at the year end and a further payment of £100,000 was due to the construction company after 30 September 2014. All relevant interest was received and paid on 30 September 2014. Carmine recognised the net interest paid in the statement of profit or loss and capitalised all other costs incurred as an asset in the course of construction.

(2)

On 1 October 2013 Porcaro plc issued 6,000 5% £100 convertible bonds. Each bond is redeemable in four years’ time at par or can be converted into 100 £1 ordinary shares. Interest is payable annually in arrears and the market rate of interest for similar bonds without the conversion option is 7% pa. Carmine has credited the cash proceeds from the bond issue to non-current liabilities. The annual interest of £30,000 was paid at the year end and was recognised as a finance cost.

(3)

On 1 April 2014 Porcaro plc paid £72,000 for a licence for the production of a state of the art microchip. At the end of six years it is thought that the licence will be worthless due to advances in technology. Carmine has recognised the licence in the draft financial statements as an intangible asset of £90,000 as this is the amount that a competitor offered to Porcaro plc for the licence on 30 June 2014 due to its unique nature. Carmine showed the increase in value as a revaluation surplus in equity.

(4)

On 1 May 2014 Porcaro plc and three other unrelated trading companies each purchased one quarter of the 100,000 £1 ordinary shares, at par, of a newly incorporated company, Barbarossa Ltd. Under a contractual agreement each investor is entitled to an equal share of the profits and losses and unanimous consent is required for all key operating decisions. For the period ended 30 September 2014 Barbarossa Ltd reported a profit after tax of £130,000, no dividends have yet been paid. On acquisition, Carmine recognised the cost of the 25,000 shares in Barbarossa Ltd as a current asset. No other accounting entries have been made in respect of Barbarossa Ltd.

On 1 October 2013 Porcaro plc had in issue 270,000 £1 ordinary shares. On 1 February 2014 Porcaro plc made a 1 for 3 rights issue for £1.70 per share. The market price of one Porcaro plc ordinary share immediately before the rights issue was £2.10.


Page 6 of 11

Requirements (a)

Explain the required IFRS financial reporting treatment of the four issues above in the financial statements for the year ended 30 September 2014, preparing all relevant calculations and setting out the required adjustments in the form of journal entries. (27 marks)

(b)

Using your results from Part (a) calculate a revised figure for consolidated profit for the year. (2 marks)

(c)

(i)

Calculate basic earnings per share for the Porcaro plc group.

(ii)

Briefly explain the treatment of the rights issue in the above calculation. (6 marks)

(d)

Describe the difference between IFRS and UK GAAP in relation to issue (1) above. (1 mark) Total: 36 marks


Page 7 of 11

3.

Henrit plc has two subsidiary companies, one of which was acquired during the year ended 30 September 2014. Set out below is an extract from all three companies’ draft statements of financial position. Draft statements of financial position at 30 September 2014 (extracts)

ASSETS Non-current assets Property, plant and equipment Investments Current assets Inventories

Henrit plc (single company) £

Bonham Ltd £

Crago Ltd £

963,200 475,000

469,400 –

623,150 –

46,980

18,900

31,300


At 1 October 2013 Henrit plc held property, plant and equipment with a carrying amount of £729,400, none of which had been acquired under finance leases. During the year ended 30 September 2014 Henrit plc sold equipment with a carrying amount of £124,000, recognising a profit on disposal of £9,500. Depreciation of £113,000 was recognised. Henrit plc acquired new plant during the year; some additions were made under a finance lease with the remainder for cash. The draft financial statements show a total finance lease liability of £97,725 at 30 September 2014 and a lease payment of £15,000 was made during the year.

(2)

The statement of profit or loss shows finance costs of £25,875 which relate to the interest due on a bank loan and interest on the finance lease. Interest at 5% pa is payable on the bank loan. At 1 October 2013 Henrit plc had a bank loan of £290,000, with additional funding of £160,000 obtained on 1 April 2014.

(3)

At 1 October 2013 Henrit plc had an investment in a wholly owned subsidiary, Bonham Ltd. This investment cost £200,000 and gave rise to goodwill at acquisition of £73,400. On 1 April 2014 Henrit plc acquired 60% of the ordinary share capital of Crago Ltd for consideration comprising cash of £230,000 and 45,000 £1 ordinary shares in Henrit plc, with a market value of £3.15 each. The investment in Crago Ltd was recognised in noncurrent assets at £275,000 being the cash consideration and the share issue at £1 nominal value. The fair value of the assets and liabilities acquired were £615,000 at the date of acquisition which was the same as their carrying amount. The non-controlling interest and goodwill on the acquisition of Crago Ltd were calculated using the fair value method. The fair value of the non-controlling interest at 1 April 2014 was £261,000.

(4)

Immediately after its acquisition by Henrit plc, Crago Ltd sold a machine to Henrit plc for £53,000. The machine had originally been acquired by Crago Ltd for £95,000 on 1 October 2011 and had an estimated five year useful life, which has never changed.

(5)

In August 2014 Bonham Ltd sold goods to Crago Ltd for £11,500 at a mark-up of 15%. All of these goods were still in Crago Ltd’s inventories at the year end.


Page 8 of 11

Requirements (a)

Using the draft financial statements for Henrit plc and the additional information set out in (1) and (2) above, prepare extracts from Henrit plc’s single company statement of cash flows for the year ended 30 September 2014 showing figures under the headings: (i) (ii)

(b)

Cash flows from investing activities Cash flows from financing activities

(6 marks)

Using the draft financial statements of all three companies and the additional information set out in (3) to (5) above prepare extracts from the consolidated statement of financial position of Henrit plc as at 30 September 2014 showing: (i) (ii)

Non-current assets Current assets

(5 marks) Total: 11 marks

PLEASE TURN OVER


Page 9 of 11

4.

At 1 October 2013 Mantia plc had investments in two companies: an 80% holding in Appice Ltd and a 65% holding in Starkey Ltd. On 1 April 2014 Mantia plc sold all of its 91,000 £1 ordinary shares in Starkey Ltd, for £427,000. The disposal proceeds were credited to a suspense account. Starkey Ltd’s retained earnings at 1 October 2013 were £243,000. Mantia plc measures all non-controlling interest and goodwill on acquisition using the proportionate method. The draft individual statements of profit or loss of the three companies are shown below: Draft statements of profit or loss for the year ended 30 September 2014

Revenue Cost of sales Gross profit Operating expenses Profit from operations Investment income Profit before tax Income tax expense Profit for the year

Mantia plc £

Appice Ltd £

Starkey Ltd £

2,986,000 (1,343,700) 1,642,300 (419,575) 1,222,725 42,600 1,265,325 (259,000) 1,006,325

768,000 (345,600) 422,400 (84,480) 337,920 – 337,920 (68,000) 269,920

1,672,000 (585,200) 1,086,800 (334,100) 752,700 – 752,700 (152,500) 600,200

The draft individual statements of financial position at 30 September 2014 for Mantia plc and Appice Ltd show:

Equity Ordinary share capital (£1) Retained earnings

Mantia plc £

Appice Ltd £

500,000 596,300

80,000 384,200


Mantia plc acquired its holding in Appice Ltd on 1 October 2012 when Appice Ltd’s retained earnings were £136,000. The fair values of all Appice Ltd’s assets and liabilities at the date of acquisition were the same as their carrying amounts, with the exception of a machine which was estimated to have a fair value of £70,000 in excess of its carrying amount. The machine was assessed as having a remaining useful life of ten years at 1 October 2012. Depreciation of plant and machinery is recognised in operating expenses.

(2)

Mantia plc acquired its holding in Starkey Ltd several years ago for £230,000 when Starkey Ltd’s retained earnings were £162,000. The fair values of all Starkey Ltd’s assets and liabilities at the date of acquisition were the same as their carrying amounts. Starkey Ltd’s revenue and costs accrued evenly over the current year.

(3)

During the year Appice Ltd sold goods to Mantia plc for £32,000 earning a gross margin of 15%. At the year-end Mantia plc still held a quarter of these goods.


Page 10 of 11

(4)

Mantia plc and Appice Ltd paid a dividend of £1.20 and 40p per share respectively during the year ended 30 September 2014.

(5)

Mantia plc has undertaken its annual impairment review of goodwill and identified that an impairment of £25,000 has arisen in relation to Appice Ltd and should be recognised. No impairment of goodwill arose in the year in respect of the acquisition of Starkey Ltd, however, cumulative impairments of £18,000 had been recognised at 1 October 2013.

Requirements (a)

Prepare, for Mantia plc for the year ended 30 September 2014: (i)

a consolidated statement of profit or loss;

(ii)

the retained earnings column from the consolidated statement of changes in equity.

You should assume that the disposal of Starkey Ltd constitutes a discontinued activity in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. (20 marks) (b)

Describe the differences between IFRS and UK GAAP in relation to the acquisition and disposal of Starkey Ltd. (3 marks) Total: 23 marks


Page 11 of 11

PROFESSIONAL LEVEL EXAMINATION MONDAY 8 JUNE 2015 (3 hours)



2.

Answer each question in black ball point pen only.

3.


4.


5.

When the assessment is declared closed, you must stop writing immediately. If you continue to write (even completing your candidate details on a continuation booklet), it will be classed as misconduct.






Page 1 of 9

1.

The following trial balance has been extracted from the nominal ledger of Antigua plc at 31 December 2014. Note(s) £ £ Sales Purchases Land and buildings (1) Valuation (land £140,000) Accumulated depreciation at 31 December 2013 Plant and equipment (1), (2) Cost Accumulated depreciation at 31 December 2013 Retained earnings at 31 December 2013 Revaluation surplus at 31 December 2013 Ordinary share capital (£1 shares) Bank account Operating expenses (3) Trade and other receivables Trade and other payables Income tax (4) Inventories at 31 December 2013

8,417,010 4,741,400 1,490,000 90,000 578,000 231,200 15,010 757,000 50,000 101,300 2,017,500 578,700 325,100 127,000 678,000 10,098,610

10,098,610

The following additional information is available: (1)

Antigua plc originally measured its land and buildings under the cost model. All buildings were acquired on 1 January 2006 and had a zero residual value and a total estimated useful life of 50 years at that date. On 1 January 2011 Antigua plc adopted the revaluation model for its land and buildings and revalued all its land and buildings at that date, with no change to total estimated useful lives. No further revaluations have been necessary since this date. On 31 December 2014 a building which was surplus to requirements met the “held for sale” criteria of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. The building is included in property, plant and equipment at its carrying amount on 31 December 2013. Details in respect of this building are as follows: £ Cost on 1 January 2006 76,000 Valuation on 1 January 2011 108,000 Estimated fair value on 31 December 2014 58,000 Estimated costs to sell 5,000 Depreciation for the year ended 31 December 2014 has not yet been charged on any of Antigua plc’s property, plant and equipment. Depreciation on buildings should be presented in operating expenses and depreciation on plant and equipment should be presented in cost of sales. Plant and equipment is depreciated on a reducing balance basis using a rate of 20% pa. Antigua plc does not make annual transfers between the revaluation surplus and retained earnings.


Page 2 of 9

(2)

On 1 July 2014 Antigua plc paid £103,500 for a piece of high-tech equipment, which is included in the total for plant and equipment in the trial balance above. A government grant of 50% of the cost of the equipment was received to help finance the purchase of this equipment as part of the government’s drive to encourage investment in new technology. There were no future performance-related conditions attached to the grant. The grant was debited to cash and credited to purchases, although Antigua plc’s published accounting policy for government grants is to use the netting-off method.

(3)

On 1 January 2014 Antigua plc entered into a six year finance lease for a machine with a fair value of £50,250, a zero residual value and a useful life of seven years. Lease payments of £9,250 are due annually on 1 January. The first payment of £9,250 was duly made on 1 January 2014 and included in operating expenses. No other accounting entries have been made in respect of this lease. Antigua plc allocates finance charges on a sum-of-the-digits basis.

(4)

The income tax in the trial balance represents a refund in respect of prior years, which was made on 15 June 2014, following an appeal to HMRC. The income tax liability for the year ended 31 December 2014 has been estimated at £497,500.

(5)

Inventories at 31 December 2014 were valued at their cost of £752,000. This included £118,000 for one product line which had a total list price of £142,000 on 31 December 2014. However, on 15 January 2015 the directors discovered that, since December 2014, a number of competitors had been selling an equivalent product for 30% less than Antigua plc’s list price.

Requirements (a)

Prepare a statement of profit or loss for Antigua plc for the year ended 31 December 2014 and a statement of financial position as at that date, in a form suitable for publication. (25 marks) NOTES: Notes to the financial statements are not required. Expenses should be analysed by function.

(b)

Describe the differences between IFRS and UK GAAP in respect of the financial reporting treatment of the government grant. (3 marks)

(c)

The IASB Conceptual Framework refers to five elements of the financial statements. Give one example of each of these elements from the financial statements of Antigua plc, explaining how each meets the definition of the relevant element. (5 marks) Total: 33 marks


Page 3 of 9

2.

The finance director of the Cuba Ltd group, Philippe, who is due to retire very shortly, has prepared draft consolidated financial statements for the year ended 31 December 2014. Shortly after Philippe completed the draft consolidated financial statements, he was taken ill and has been on sick leave since then. The managing director of Cuba Ltd asked José, the financial controller, to make any adjustments necessary to complete the consolidated financial statements. Both José and Philippe are ICAEW Chartered Accountants. On examining the draft financial statements prepared by Philippe, José has identified the following issues: (1)

On 1 January 2014 Cuba Ltd acquired a zero coupon bond with a nominal value of £100,000 for £94,500. The bond is quoted in an active market. Broker’s fees of £2,500 were incurred in relation to the purchase and recognised in profit or loss. The bond is redeemable on 31 December 2015 at a premium of 10% of its nominal value and will be held to maturity. The effective interest rate on the bond is 6.49%. On purchase of the bond Philippe debited investments within non-current assets with £110,000, being the redemption value, credited cash with £94,500 and credited income with £15,500, and has made no subsequent accounting entries in respect of this bond.

(2)

On 1 July 2014 Cuba Ltd disposed of its entire holding in Honduras Ltd for £256,600. Cuba Ltd had acquired 80% of the ordinary share capital of Honduras Ltd a number of years ago for £147,800, when the fair value of Honduras Ltd’s net assets was £157,500. At acquisition, the non-controlling interest was measured at its fair value of £40,100. No impairment losses in respect of goodwill acquired in the business combination with Honduras Ltd have arisen. At 31 December 2013, Honduras Ltd had net assets with a fair value of £301,000. In the year ended 31 December 2014 Honduras Ltd made a loss of £16,600, with revenue and costs accruing evenly over the year. In the draft consolidated financial statements for the year ended 31 December 2014 Philippe has included a single figure for Honduras Ltd: a profit on disposal of £108,800, being the difference between the sale proceeds of £256,600 and the cost of the original investment of £147,800. The investment in Honduras Ltd represented a separate major line of business of the Cuba Ltd group.

(3)

In previous years Cuba Ltd had traded only with UK suppliers. However, in November 2014, Cuba Ltd began importing goods from Germany. The goods were received on 23 November 2014, and the purchase invoice, for €158,000, was correctly processed by Philippe. No adjustments have subsequently been made to this figure. At the year end the invoice was unpaid and the goods were still in inventory. Philippe has valued this inventory using the spot rate at 31 December 2014 and included it in closing inventory used to prepare the draft consolidated financial statements. The spot exchange rates were as follows: 23 November 2014 – €1:£0.85 31 December 2014 – €1:£0.90


Page 4 of 9

(4)

During the year Cuba Ltd made a significant proportion of its purchases (£550,000) from Grenada Ltd, a company owned by Philippe’s wife. At 31 December 2014 £75,000 was due to Grenada Ltd in respect of these purchases. No disclosure of this transaction has been made in Cuba Ltd’s draft consolidated financial statements. When José queried this with the managing director of Cuba Ltd, the managing director told him that he had been assured by Philippe that no disclosure was necessary as the purchases had all been made at an arm’s length price.

Philippe is due to return to work next week and has told José, in a brief telephone call, that he is expecting to present the draft consolidated financial statements to the board exactly as he prepared them as he has already accrued for his bonus based on the consolidated profit for the year per those draft financial statements. Requirements (a)

Explain the required IFRS financial reporting treatment of the four issues above in the consolidated financial statements of Cuba Ltd for the year ended 31 December 2014. You should prepare all relevant calculations and quantify the effects on the draft financial statements where possible. (21 marks)

(b)

Discuss the ethical issues arising for Philippe and José from the scenario and the steps that José should take to address them. (5 marks)

(c)

Describe the differences between IFRS and UK GAAP in respect of the financial reporting treatment of Issue (2) above. (2 marks) Total: 28 marks


Page 5 of 9

3.

Columbia plc operates in the manufacturing sector. The company’s statement of financial position as at 31 December 2013 included the following balances:

Property, plant and equipment

£ 1,456,700

Ordinary share capital (£1 shares) Share premium account Retained earnings

300,000 35,000 145,800 480,800

The following information is relevant to its financial statements for the year ended 31 December 2014: (1)

Columbia plc constructed a new manufacturing facility, capitalising the following costs, all of which were incurred between 1 January 2014 and 30 November 2014: £ 100,000 358,300 10,000 32,500 11,000 45,600 21,000

Site preparation Materials and labour Professional fees General overheads Construction overheads Costs of relocating staff to the new facility Initial safety inspection

The facility was ready for use on 30 November 2014. However, due to delays in moving equipment into the facility, it was not in fact used until January 2015. As a result no depreciation on the facility has been calculated or recognised. The overall life of the facility is estimated to be 20 years. The next safety inspection is due in three years’ time and thereafter every three years. (2)

The following transactions took place and were recognised in respect of other property, plant and equipment:   

(3)

Depreciation of £235,600 was charged. An asset with a carrying amount of £125,700 was disposed of at a loss of £14,300. Columbia plc acquired plant and equipment for cash of £432,500.

The following share issues were made during the year ended 31 December 2014. All shares have a nominal value of £1 per share. Date

Type of shares

Number of shares

1 February 2014 Ordinary 75,000 1 July 2014 4% Irredeemable preference 50,000 1 November 2014 Ordinary 1 for 4 bonus issue


Issue price £1.50 per share Par -

Page 6 of 9

The dividend on the irredeemable preference shares is mandatory and if it is unpaid at the end of the period it becomes cumulative in the following period. The dividend due on these shares was paid on 1 January 2015 but no entry was made in the financial statements for the year ended 31 December 2014. An interim ordinary dividend of 15p per share was paid on 30 June 2014. (4)

Columbia plc’s draft statement of profit or loss for the year ended 31 December 2014 shows a profit for the year of £52,600. Columbia plc wishes to retain the maximum balance on retained earnings whilst still following IFRS.

Requirements (a)

Explain the required IFRS financial reporting treatment of the manufacturing facility described in (1) above, with supporting calculations. (5 marks)

(b)

(i)

Calculate a revised profit for Columbia plc for the year ended 31 December 2014.

(ii)

Prepare extracts from Columbia plc’s statement of financial position as at 31 December 2014, and the investing and financing sections of its statement of cash flows for the year then ended. (14 marks) Total: 19 marks


Page 7 of 9

4.

Dominica plc has investments in two companies, a subsidiary, Tobago Ltd, and an associate, Anguilla Ltd. The unqualified assistant accountant has prepared a draft consolidated statement of financial position at 31 December 2014 by simply adding together each line of the individual statements of financial position of Dominica plc and Tobago Ltd. However, he was unsure how to deal with Anguilla Ltd so has not included any of that company’s figures in the consolidation. The draft consolidated statement of financial position as at 31 December 2014 is shown below, together with the individual statement of financial position of Anguilla Ltd at the same date: Dominica plc group (draft consolidated) £ ASSETS Non-current assets Property, plant and equipment Investments Current assets Inventories Trade and other receivables Cash and cash equivalents

Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares) Share premium account Revaluation surplus Retained earnings

Current liabilities Trade and other payables Taxation

Total equity and liabilities

Anguilla Ltd £

3,780,400 756,000 4,536,400

351,200 – 351,200

400,800 182,400 53,400 636,600

42,000 35,600 6,800 84,400

5,173,000

435,600

1,400,000 890,000 1,061,600 1,367,900 4,719,500

200,000 – – 168,100 368,100

320,000 133,500 453,500

61,900 5,600 67,500

5,173,000

435,600


Dominica plc acquired 85% of Tobago Ltd on 1 January 2014 for £600,000 when Tobago Ltd’s equity was as follows:

Ordinary share capital (£1 shares) Share premium account Revaluation surplus Retained earnings Equity


£ 160,000 80,000 140,000 63,200 443,200

Page 8 of 9

On 31 December 2014 Tobago Ltd’s retained earnings were £181,500 and its revaluation surplus was £240,000. All other components of equity were unchanged. The consideration of £600,000 was made up of £400,000 cash payable immediately and a further £200,000 payable on 31 December 2015 if the post-acquisition profits of Tobago Ltd exceeded a certain amount by that date. At 1 January 2014 the probability of Tobago Ltd hitting the earnings target was such that the fair value of the possible cash payment was £100,000. At 31 December 2014 the probability had risen such that the fair value of the possible cash payment was judged to be £150,000. When preparing the draft consolidated statement of financial position the assistant accountant included the full £600,000 in investments and the full £200,000 in trade and other payables. The fair values of the assets and liabilities of Tobago Ltd at the date of acquisition were equal to their carrying amounts, with the exception of inventory. On 1 January 2014 the fair value of Tobago Ltd’s inventories was £124,000 but their carrying amount was £107,000. At 31 December 2014 half of these inventories were still held by Tobago Ltd. Dominica plc has decided to measure goodwill and the non-controlling interest using the proportionate method. (2)

Dominica plc acquired 35% of Anguilla Ltd on 1 January 2005 for £156,000 when the retained earnings of Anguilla Ltd were £104,500. At this date a property owned by Anguilla Ltd had a fair value £100,000 in excess of its carrying amount and a remaining useful life of 20 years. The remaining assets and liabilities at the date of acquisition were equal to their carrying amounts.

(3)

On 1 January 2014 Dominica plc sold a machine to Tobago Ltd for £180,000. The machine had a carrying amount in Dominica plc’s books of £156,000. The estimated remaining useful life of the machine was reassessed on the date of sale at six years.

(4)

During the year Dominica plc sold goods to Anguilla Ltd for £20,000, making a gross profit margin of 30%. At 31 December 2014 Anguilla Ltd held one-third of these goods in its inventories.

(5)

Inventories in the statements of financial position of all three companies at 31 December 2014 were based on physical inventory counts carried out on 31 December 2014. However, on 10 January 2015 Tobago Ltd received a report from one of its customers, Trinidad Ltd, showing that on 31 December 2014 Trinidad Ltd held £23,600 (cost to Trinidad Ltd) of Tobago Ltd’s inventories on a sale or return basis. Tobago Ltd makes a gross profit margin of 25% on all sales but has not yet raised any invoices for this transaction.

Requirement Prepare the consolidated statement of financial position of Dominica plc as at 31 December 2014. Total: 20 marks


Page 9 of 9

PROFESSIONAL LEVEL EXAMINATION MONDAY 7 SEPTEMBER 2015 (3 hours)



2.


3.


4.


5.







Page 1 of 11

BLANK PAGE


Page 2 of 11

1.

The financial controller at Gamow Ltd has prepared draft financial statements for the year ended 31 March 2015. However, there are some issues which need to be finalised before the financial statements can be presented to the board. You are the financial controller’s assistant, and you have been provided with the following information and asked to complete the financial statements. Draft statement of profit or loss for the year ended 31 March 2015 £ 1,896,200 (567,430) 1,328,770 (283,600) (189,720) 855,450 (1,560) 853,890 (74,000) 779,890

Revenue (Notes 1 to 3) Cost of sales Gross profit Administrative expenses Other operating costs Operating profit Finance costs Profit before tax Income tax Profit for the year Draft statement of financial position as at 31 March 2015 £ ASSETS Non-current assets Property, plant and equipment Intangible assets (Note 2) Current assets Inventories Trade and other receivables Cash and cash equivalents

1,260,780 275,000 1,535,780 47,300 121,240 3,800 172,340 1,708,120

Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares) Retained earnings

580,000 541,720 1,121,720

Non-current liabilities 6% convertible bonds (Note 4) Current liabilities Trade and other payables Provisions (Note 5) Income tax Total equity and liabilities


£

300,000

92,400 120,000 74,000 286,400 1,708,120

Page 3 of 11


On 1 July 2014 Gamow Ltd introduced a discount loyalty card scheme for select customers, issuing 200 cards for £1,250 each in return for a 25% discount on all purchases over the next two years. The financial controller included the total cash received of £250,000 as part of revenue for the year ended 31 March 2015. An analysis of purchases over the last five years for these customers shows that purchases are evenly spread throughout each year.

(2)

During the year ended 31 March 2015 Gamow Ltd incurred £275,000 of research and development expenditure on a new product, the Mendel. All of this expenditure was capitalised as an intangible asset. The following costs have been incurred: Background investigation work (1 April – 31 May 2014) Initial development work (1 June – 15 July 2014) Second phase development work (16 July – 30 November 2014) Product launch costs (December 2014) Staff training (February 2015)

£ 25,000 42,800 160,000 31,600 15,600 275,000

The Mendel was assessed as being commercially viable on 16 July 2014 and product development was completed by the end of November 2014. The product was launched in December 2014, although the first products were not delivered until April 2015. 2,000 advance orders were taken during the product launch events, with customers paying deposits of £50 per Mendel. The only accounting entries made in respect of the advance orders were to recognise the cash deposits and credit revenue. (3)

On 1 January 2015 Gamow Ltd made a one-off sale to a customer in mainland Europe. The sale was for €22,000 and a 120 day credit period was given to the customer. The sale was recognised in revenue and receivables using the 1 January 2015 spot exchange rate. No other accounting entries have been made. The cash from the customer was received on 1 May 2015. The spot exchange rates are as follows: 1 January 2015 31 March 2015 1 May 2015

(4)

€1:£0.83 €1:£0.79 €1:£0.80

On 1 April 2014 Gamow Ltd issued 30,000 6% £10 convertible bonds at par. On 31 March 2017 each bond can be redeemed for cash at par or converted into three ordinary shares. The interest due on the bonds was paid on 1 April 2015. The equivalent effective interest rate on similar bonds without the conversion rights is 9% pa. The only accounting entries made at 31 March 2015 were to recognise the £300,000 cash received as a non-current liability.


Page 4 of 11

(5)

During the period a legal claim was made against Gamow Ltd in relation to a delivery of goods made on 1 April 2014 which were of a poor quality. This was an isolated incident with a fault with one of the production machines and the goods should not have been delivered to the customer. Gamow Ltd’s legal department believe that the claim is likely to succeed and an out of court settlement is estimated at £120,000. A provision was recognised at 31 March 2015 for £120,000 and the costs were debited to other operating costs. Due to a number of complications with the claim it is estimated that it is not likely to be settled until April 2016. The appropriate discount rate is 7%.

(6)

Depreciation on property, plant and equipment for the year ended 31 March 2015 has not yet been charged. All depreciation is charged on a straight-line basis. Buildings were assessed as having a 40 year useful life, and plant and machinery a 15 year useful life. The cost of property, plant and equipment at 1 April 2014 included:

Land Buildings Plant and machinery

£ 350,000 1,080,000 384,900

No new items of property, plant and equipment were acquired in the year, although a machine was sold on 1 April 2014 for £9,300. This machine had originally been purchased on 1 April 2008 for £19,500. The only accounting entries made in respect of this disposal were to credit the cash proceeds to non-current assets. All expenses in respect of property, plant and equipment should be recognised in administrative expenses. Requirements (a)

Prepare the following for Gamow Ltd, in a form suitable for publication: (i)

a revised statement of profit or loss for the year ended 31 March 2015;

(ii)

a revised statement of financial position as at 31 March 2015; and

(iii)

a provisions note to the financial statements, including both the movements table and accompanying narrative. (27 marks)

(b)

Describe any differences between IFRS and UK GAAP in respect of the presentation of financial statements. (4 marks)

(c)

(i)

Explain the concept of ‘substance over form’ using Gamow Ltd to illustrate your explanation.

(ii)

Explain the concepts of ‘present fairly’ and ‘true and fair view’.

(6 marks) Total: 37 marks


Page 5 of 11

2.

Meitner plc is a UK company operating in the global healthcare market. The draft financial statements for the year ended 31 March 2015 have been prepared by the financial controller and include:

Profit before tax Equity

£ 1,460,000 2,600,180

The following information is required to finalise the financial statements: (1)

On 1 April 2014 Meitner plc received a government grant of £375,000 and credited it to other income. The grant is to help fund local employment within Meitner plc’s research facilities. A condition of the grant is that the "local workforce" must make up at least one third of the total number of Meitner plc’s employees for the three years from the date of receipt of the grant. “Local workforce” is defined in the grant’s terms and conditions as “living within a 10 mile radius of the research facility”. At 31 March 2015 the local workforce made up 35% of Meitner plc’s total number of employees. This percentage is expected to rise over the next two years and Meitner plc is confident that it will not have to repay the grant.

(2)

Meitner plc is planning to centralise its operations in a few years’ time which will release some additional finance. However, funding is needed now to finance the initial research stage of a new drug so Meitner plc sold its head office building for £8 million on 1 July 2014 and then immediately leased it back. The lease is for five years, with payments set at a market rate and has been correctly accounted for. The carrying amount of the property at 1 July 2014 was £6.5 million, with a 30 year remaining useful life, and the property’s fair value was estimated at £7.3 million at that date. Meitner plc derecognised the property on 1 July 2014 and recognised a profit on disposal of £1.5 million as part of other income.

(3)

On 1 December 2014 Meitner plc made the decision to close two smaller manufacturing operations in Ostwald and Dirac and to move to a single central location. The following information is relevant for the properties at the two operations at 1 December 2014: Cost Date of acquisition Carrying amount Fair value (independent professional valuations) Selling costs (as a percentage of fair value)

Ostwald £1,372,500 1 April 2006 £976,000 £1,300,000 1.5%

Dirac £1,890,000 1 December 2005 £1,323,000 £1,169,700 1%

On 1 December 2014 both properties were offered for sale at their fair value and advertised in the relevant trade press. The company’s commercial property agent has advised that properties in Ostwald are generally selling within four to eight months. Properties within Dirac have dropped in value recently due to speculation that a major road restructure could affect the area. Meitner plc has decided not to sell the property yet and instead wait for the outcome of the road planning decision which is expected to take at least a year.


Page 6 of 11

Although there had been some interest in Ostwald, both properties remained unsold at 31 March 2015. Meitner plc continued to depreciate both properties during the year on a straight-line basis over their 30 year useful life. Meitner plc measures all property, plant and equipment on a cost basis. (4)

On 1 February 2015 Meitner plc repurchased 150,000 of its £1 ordinary shares for £1.40 each. The only accounting entries made were to credit cash and debit investments.

Requirements (a)

Explain the required IFRS financial reporting treatment of the four issues above in the financial statements for the year ended 31 March 2015, preparing all relevant calculations. (23 marks)

(b)

Calculate revised figures for Meitner plc for both profit before tax and equity for inclusion in the financial statements for the year ended 31 March 2015. (3 marks) Total: 26 marks


Page 7 of 11

3.

For several years Fermi plc has owned a number of subsidiary companies and a 35% investment in an associate, Boas Ltd. On 1 September 2014 Fermi plc acquired 70% of the ordinary share capital of Selye Ltd. The consideration consisted of 70,000 £1 ordinary shares with a fair value of £1.90 per share, and £135,000 in cash. The junior accountant at Fermi plc, Elion, is preparing the draft consolidated financial statements and has asked for your help, as his senior and an ICAEW Chartered Accountant.

(a)

The following information is needed to complete missing figures from the consolidated statement of cash flows. Consolidated statement of financial position as at 31 March 2015 (extracts)

Non-current assets Investment in associate Current assets Trade and other receivables Equity Share capital (£1 ordinary) Share premium account Non-controlling interest Current liabilities Trade and other payables

2015 £

2014 £

239,420

176,300

112,400

83,100

575,000 425,750 471,400

460,000 320,000 246,700

96,700

53,840

Consolidated statement of profit or loss for the year ended 31 March 2015 (extracts) Share of profits of associate Non-controlling interest

£ 83,200 139,600

Additional information: (i)

Cash flows from operating activities had been calculated as £386,480 although the movement in trade receivables and payables was excluded from this calculation.

(ii)

On 1 September 2014 Selye Ltd’s net assets totaled £420,550 and included: Trade and other receivables Cash and cash equivalents Trade and other payables

(iii)

£ 61,400 3,150 36,700

The consolidated statement of changes in equity shows that Fermi plc made a share issue for cash on 1 January 2015.

Requirement Prepare, for inclusion in Fermi plc’s consolidated statement of cash flows for the year ended 31 March 2015, a revised figure for cash flows from operating activities and extracts from the investing activities and financing activities sections in so far as the information above allows. (7 marks)


Page 8 of 11

(b)

Elion is having difficulties trying to calculate Fermi plc’s consolidated gross profit for the year ended 31 March 2015. A number of transactions between group companies arose during the year, as detailed below. In addition, Selye Ltd’s results have not been included in the draft consolidated results for the Fermi plc group as Elion was unsure what should be included as the acquisition occurred part way through the year. The following information is available to complete the consolidated gross profit figure. (i)

Draft extracts from the Fermi plc group and the individual financial statements of Selye Ltd are:

Revenue Cost of sales Gross profit

Fermi plc group £ 2,345,800 (1,290,200) 1,055,600

Selye Ltd £ 963,000 (537,000) 426,000

Selye Ltd’s revenue and costs accrued evenly over the year ended 31 March 2015. (ii)

In January 2015 Fermi plc sold goods to one of its other subsidiary companies for £27,600 and to Boas Ltd, its associate, for £24,000. All goods were sold at a mark-up on cost of 20%. At 31 March 2015 both companies still held half of these goods in their inventories.

Requirement Prepare a revised extract for gross profit, showing the breakdown of revenue and cost of sales, as part of Fermi plc’s consolidated statement of profit or loss for the year ended 31 March 2015. (5 marks) (c)

The finance director has asked Elion to prepare a paper for consideration by the board on different forms of financing including possible takeover and merger opportunities. Elion is concerned that he lacks the right level of expertise, as he is still a trainee ICAEW Chartered Accountant. Requirement Set out which of the key fundamental principles from the ICAEW Code of Ethics might be relevant to the above scenario and explain any action that Elion should take. (4 marks) Total: 16 marks


Page 9 of 11

4.

At 31 March 2015 Huygens plc has one subsidiary company, Planck Ltd. It also has a 25% investment in Quimby Ltd, along with three other equal investors. The draft, summarised statements of financial position of the three companies at 31 March 2015 are shown below:

ASSETS Non-current assets Property, plant and equipment Investments Current assets Inventories Trade and other receivables Cash and cash equivalents

Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares) Share premium account Retained earnings Current liabilities Trade and other payables Income tax


Huygens plc £

Planck Ltd £

Quimby Ltd £

911,700 116,250 1,027,950

89,400 – 89,400

85,000 – 85,000

43,700 71,000 5,600 120,300

32,000 17,900 3,100 53,000

24,400 10,300 2,940 37,640

1,148,250

142,400

122,640

300,000 105,000 579,650 984,650

50,000 – 57,200 107,200

100,000 – 15,240 115,240

98,600 65,000 163,600

21,400 13,800 35,200

4,600 2,800 7,400

1,148,250

142,400

122,640


On 1 October 2014, Huygens plc acquired 80% of the ordinary shares of Planck Ltd when the retained earnings of Planck Ltd were £39,000. The consideration consisted of cash of £85,000 paid on 1 October 2014 and a further cash payment of £42,000, deferred until 1 October 2015. No accounting entries have been made in respect of the deferred cash payment. An appropriate discount rate is 5% pa. Huygens plc recognises goodwill and non-controlling interests using the fair value method. The fair values of Planck Ltd’s other assets, liabilities and contingent liabilities at 1 October 2014 were equal to their carrying amounts with the exception of a specialised piece of plant which had a fair value £15,000 in excess of its carrying amount. This plant had a ten year remaining useful life on 1 October 2014. The fair value of the non-controlling interest in Planck Ltd on 1 October 2014 was estimated at £26,000.


Page 10 of 11

(2)

In December 2014 Planck Ltd sold goods to Huygens plc for £12,800, earning a gross margin of 15% on the sale. Huygens plc still held £9,600 of these goods in its inventories at 31 March 2015. Planck Ltd still had the full invoice value of £12,800 in its trade receivables at 31 March 2015, however Huygens plc only showed half of the invoice value in its trade payables as it made a payment of £6,400 on 31 March 2015.

(3)

Quimby Ltd is a joint venture, set up by Huygens plc and its fellow venturers on 1 April 2014. Each venturer paid £25,000 for a 25% share of Quimby Ltd. On 1 November 2014 Quimby Ltd paid a total dividend of £15,000. Huygens plc credited the dividend received to investments within non-current assets.

Requirements (a)

Prepare the consolidated statement of financial position of Huygens plc as at 31 March 2015. (18 marks)

(b)

Calculate Huygens plc’s distributable profits at 31 March 2015, explaining your calculation. (3 marks) Total: 21 marks


Page 11 of 11

PROFESSIONAL LEVEL EXAMINATION MONDAY 7 DECEMBER 2015 (3 hours)



2.


3.


4.


5.







Page 1 of 9

1.

The following trial balance was extracted from the nominal ledger of Darwin plc, an engineering company, at 30 June 2015. Note Sales Purchases Administrative expenses Distribution costs Construction costs Finance costs Bank loan Land and buildings Cost (land £50,000) Accumulated depreciation at 30 June 2014 Plant and equipment Cost Accumulated depreciation at 30 June 2014 Retained earnings at 30 June 2014 Ordinary share capital (£1 shares) Bank account Trade and other receivables Trade and other payables Inventories at 30 June 2014 Income tax

(1) (1) (1) (2)

£

£ 6,558,550

5,106,100 1,008,300 262,800 163,500 15,250 100,000 400,000 160,000

(3) 382,000 159,100 148,100 500,000 40,500

(4)

403,375 342,750 (5) (6)

266,175 1,500 8,009,000

8,009,000

The following additional information is available: (1)

Construction costs relate to the building of a specialised machine, the Baler, which is a qualifying asset. Construction commenced on 1 October 2014 and was still in progress on 30 June 2015. To help fund this, borrowings of £100,000 were arranged. £30,000 was drawn down on 1 October 2014 at an interest rate of 5% pa and the remaining £70,000 on 1 April 2015 at an interest rate of 4% pa. All interest was paid on 30 June 2015 and charged to finance costs. The loan is repayable on 31 December 2015.

(2)

Darwin plc has previously measured property, plant and equipment under the cost model. However, with effect from 1 July 2014, the directors decided to adopt the revaluation model for land and buildings. A valuation of all land and buildings on 1 July 2014 gave a total of £600,000 (including land of £200,000). This valuation has not been reflected in the trial balance above. Darwin plc wishes to make an annual transfer between the revaluation surplus and retained earnings. The remaining useful life of buildings was reassessed on 1 July 2014 at 40 years. There were no additions to, or disposals of, land and buildings in the year ended 30 June 2015. Depreciation on buildings should be presented in administrative expenses.


Page 2 of 9

(3)

A review of machinery on 31 December 2014 identified that one machine, the Molder, was not operating efficiently. The Molder was purchased on 1 July 2012 for £38,400. The review on 31 December 2014 showed that if the Molder were to be retained it would generate future cash flows with a present value of £10,000. If the Molder were to be sold it would realise £11,000, with selling costs of £1,500. An equivalent new Molder could be purchased for £56,000. No adjustments in respect of this review were recognised. Plant and equipment is depreciated on a reducing balance basis, at a rate of 25% pa. Depreciation on plant and equipment should be presented in cost of sales.

(4)

150,000 4% £1 redeemable preference shares were issued at par on 1 July 2014. The cash received in respect of these shares was credited to retained earnings. The shares are redeemable on 30 June 2018 at a premium. The effective interest rate is 4.75% pa. The preference dividend was paid on 30 June 2015 and debited to retained earnings.

(5)

Inventories at 30 June 2015 were correctly valued at £175,400. During the inventory valuation it was discovered that inventories at 30 June 2014 had, in error, been overvalued by £100,000. This error was not adjusted for in the trial balance above.

(6)

The income tax figure in the trial balance represents the excess of the liability provided for at 30 June 2014 over the amount paid in February 2015. The liability for the current year was appropriately estimated at £18,600.

Requirements (a)

Prepare a statement of profit or loss for Darwin plc for the year ended 30 June 2015, and a statement of financial position as at that date, in a form suitable for publication. (23 marks) Notes to the financial statements are not required. Expenses should be analysed by function.

(b)

Explain the IFRS financial reporting treatment of the error in respect of opening inventories (Note (5) above) in the published financial statements of Darwin plc for the year ended 30 June 2015. (3 marks)

(c)

The IASB Conceptual Framework refers to four different measurement bases. Explain these four bases with reference to the figures in Note (3) above. (5 marks) Total: 31 marks


Page 3 of 9

2.

Alan is the finance director of Girton plc and an ICAEW Chartered Accountant. He has prepared draft individual and consolidated financial statements for the year ended 30 June 2015 for Girton plc. The consolidated financial statements include the following figures:

Profit for the year attributable to the shareholders of Girton plc Earnings per share Equity Ordinary share capital (£1 shares) Share premium Retained earnings

£ 574,500 127.7p £ 450,000 90,000 890,200

You are the financial controller at Girton plc and an ICAEW Chartered Accountant. The managing director is concerned about Alan's treatment of certain matters within the draft financial statements, particularly given that the directors’ bonus is linked to earnings per share. The managing director has asked you to review the following issues and correct the financial statements. (1)

On 1 January 2015 Girton plc acquired 150,000 of Downing Ltd’s 200,000 £1 ordinary shares. The consideration was comprised of 100,000 £1 ordinary shares in Girton plc issued on 1 January 2015, cash of £375,000 paid on 1 January 2015 and additional cash due on 1 January 2016 of £147,000. Alan has calculated goodwill on the business combination with Downing Ltd as £49,575 and has recognised this amount as an intangible asset in the consolidated financial statements. However, Alan only included the cash consideration of £375,000 in his calculation and has not accounted for the remaining consideration. When you queried this Alan said that this was because cash was the only part of the consideration which involved a transfer of funds in the current year. The market price of Girton plc’s shares on 1 January 2015 was £1.20 per share. You reviewed the board minutes and established that goodwill and the non-controlling interest were to be calculated using the fair value method. Alan has used the proportionate method. The fair value of the non-controlling interest on 1 January 2015 was £115,000. Downing Ltd’s financial statements for the year ended 30 June 2015 show profit for the year of £245,600 and retained earnings of £356,700. These financial statements include a note concerning a contingent liability in respect of ongoing legal proceedings against Downing Ltd. The proceedings had commenced on 15 December 2014. The contingent liability had a fair value of £75,000 on 1 January 2015. Alan made no adjustment for this liability when he calculated goodwill arguing that it did not form part of Downing Ltd’s net assets on 1 January 2015. The consolidated statement of profit or loss for the year ended 30 June 2015 correctly reflects the results of Downing Ltd.


Page 4 of 9

(2)

On 1 February 2015 Girton plc made a one for five bonus issue of ordinary shares. Alan has not accounted for the bonus issue, although the issue was based on the correct number of ordinary shares. On 30 June 2015 Girton plc acquired 100,000 of its own £1 ordinary shares for £2 cash per share. Alan debited the consideration to ordinary share capital.

(3)

During the year Girton plc sold goods totalling £216,700 on credit to Selwyn Ltd, a company wholly-owned by Alan’s son. At 30 June 2015 there was a trade receivable of £54,400 in respect of these sales. No disclosures were made in the individual or consolidated financial statements of Girton plc for this transaction. When you queried this Alan said that this was because the sales were made at an arm’s length price. The managing director was unaware of these sales until the credit controller asked him to review the year-end allowance for doubtful debts, which includes £20,000 in respect of this debt, as Selwyn Ltd is known to be in financial difficulties.

(4)

On 1 April 2015 Girton plc sold a package of products for £191,250 cash. The package was made up of equipment and 12 months of helpdesk support. The equipment normally retails at £175,000 and the support at £50,000. Alan recognised revenue of £191,250 in the financial statements for the year ended 30 June 2015, on the grounds that the equipment sale had been made in that year and the provision of helpdesk support was part of that sale.

The published financial statements for the year ended 30 June 2014 show that Girton plc had an earnings per share of 118.6p. Requirements (a)

Explain the required IFRS financial reporting treatment of issues (1) to (4) above in the financial statements for the year ended 30 June 2015, preparing all relevant calculations. Unless stated otherwise, an applicable discount rate is 5% pa. (22 marks)

(b)

Using your results from Part (a) calculate the following for Girton plc’s consolidated financial statements for the year ended 30 June 2015:

(c)

(i)

Revised profit for the year attributable to the shareholders of Girton plc

(ii)

Revised number of ordinary shares

(iii)

Basic earnings per share and comparative figure.

(4 marks)

Discuss the ethical issues arising from the scenario for yourself and Alan and the steps that you should take to address them. (5 marks) Total: 31 marks


Page 5 of 9

3.

The financial controller of Peterhouse Ltd has prepared draft financial statements for the year ended 30 June 2015, including the following: Draft statement of cash flows for the year ended 30 June 2015 £ Cash flows from operating activities Cash generated from operations Interest paid Income tax paid Net cash from operating activities Cash flows from investing activities Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary share capital Ordinary dividend paid Increase in bank overdraft Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 July 2014 Cash and cash equivalents at 30 June 2015

£

978,700 (2,100) (195,500) 781,100 (1,041,200) (1,041,200) 150,000 (23,900) 85,000 211,100 (49,000) 49,150 150

The financial controller has failed to deal correctly with the following matters: (1)

The draft statement of financial position as at 30 June 2015 includes inventories of £135,800. However, the financial controller had valued 2,000 units of one product, the Perro, in work in progress and 1,000 units in finished goods at their costs per unit of £15 and £18 respectively. Finished units usually sell for £25 per unit. However, difficult trading conditions meant that Peterhouse Ltd had to discount the finished units by 30% and incurred selling costs of £1 per unit. Work in progress was all at the same stage of production and a further £3 per unit was still to be incurred to finish off these items.

(2)

On 1 July 2014 Peterhouse Ltd entered into a three-year finance lease for a machine with a list price of £31,000. Lease payments comprise an initial payment of £8,000 on 1 July 2014, followed by three annual instalments of £8,000 each, in arrears, the first of which was paid on 30 June 2015. Both payments made in the year ended 30 June 2015 were debited to cost of sales. The machine has a useful life of four years. The interest rate implicit in the agreement is 5% pa.

(3)

At 30 June 2015, there was interest due but not paid of £1,500. This accrual was included in trade and other payables. The figure for interest paid in the draft statement of cash flows is that from the statement of profit or loss.

(4)

On 1 July 2014 a machine with a carrying amount of £15,600 was sold for cash of £17,200. The sale was correctly recognised in the statement of profit or loss and statement of financial position but no adjustment was made for it in the draft statement of cash flows. The figure for purchase of property, plant and equipment in the draft statement of cash flows is the movement between the opening and closing figures from the statements of financial position adjusted by the depreciation charge for the year.


Page 6 of 9

(5)

150,000 £1 ordinary shares were issued during the year at a price of £1.50 per share. The financial controller credited ordinary share capital with the par value and credited retained earnings with the premium.

(6)

The figure for the ordinary dividend paid in the draft statement of cash flows is the movement between the opening and closing retained earnings figures from the statements of financial position adjusted by the profit for the year. This figure does not agree to the actual dividend paid per the statement of changes in equity.

(7)

A bank overdraft was arranged during the year. The increase in bank overdraft shown in the draft statement of cash flows is the overdraft as at 30 June 2015.

Requirements (a)

Using the information in Note (1) above, calculate the carrying amount of inventories at 30 June 2015. (3 marks)

(b)

Using the information in Note (2) above, prepare extracts from the statement of profit or loss of Peterhouse Ltd for the year ended 30 June 2015 and statement of financial position as at that date reflecting the finance lease. (6 marks)

(c)

Using all of the information above, prepare a revised statement of cash flows for Peterhouse Ltd for the year ended 30 June 2015. A note showing the reconciliation of profit before tax to cash generated from operations is not required. (8 marks) Total: 17 marks

PLEASE TURN OVER


Page 7 of 9

4.

At 1 July 2014 Pembroke Ltd held 80% and 40% respectively of the ordinary share capital of Newnham Ltd and Wolfson Ltd. On 1 November 2014 Pembroke Ltd acquired 70% of the ordinary share capital of Trinity Ltd. Pembroke Ltd measures non-controlling interest and goodwill using the proportionate method. Extracts from the draft individual financial statements of the four companies for the year ended 30 June 2015 are shown below: Draft statements of profit or loss Pembroke Ltd £

Newnham Ltd Trinity Ltd Wolfson Ltd £ £ £

Revenue Cost of sales

945,200 (583,700)

754,800 (573,600)

705,000 (418,500)

161,700 (66,300)

Gross profit Operating expenses

361,500 (128,900)

181,200 (116,400)

286,500 (122,550)

95,400 (109,900)

Profit/(loss) before tax Income tax expense

232,600 (60,000)

64,800 (13,000)

163,950 (31,950)

(14,500) –

Profit/(loss) for the year

172,600

51,800

132,000

(14,500)

Draft statements of financial position (extracts) Pembroke Ltd £ Equity Ordinary share capital (£1 shares) Retained earnings

600,000 1,025,400 1,625,400

Newnham Ltd Trinity Ltd Wolfson Ltd £ £ £

500,000 363,600 863,600

400,000 271,000 671,000

200,000 (120,600) 79,400


Details of the three investments were as follows.

Cost of investment Retained earnings at date of investment

Newnham Ltd Trinity Ltd Wolfson Ltd £ £ £ 844,000 360,000 118,200 301,000 175,000 181,900

The fair values of the assets and liabilities of all three companies at the date of the investments were the same as their carrying amounts with the exception of a property owned by Newnham Ltd which was estimated to have a fair value of £120,000 above its carrying amount. This property was assessed as having a remaining useful life of 25 years on 1 July 2012, the date of Newnham Ltd’s acquisition by Pembroke Ltd. Depreciation on properties is presented in operating expenses.


Page 8 of 9

(2)

During the current year, Pembroke Ltd charged management fees of £24,000 to Trinity Ltd. These fees were included in revenue and operating expenses respectively.

(3)

On 1 January 2015 Trinity Ltd sold a machine to Pembroke Ltd for £51,000. At this date, the machine had a carrying amount in Trinity Ltd’s books of £39,000. The estimated remaining useful life of the machine was reassessed on the date of sale at five years. Depreciation on this machine is presented in cost of sales.

(4)

Pembroke Ltd undertakes annual impairment reviews in respect of all its investments. At 30 June 2014 cumulative impairment losses of £50,000 had been recognised in respect of goodwill arising on the acquisition of Newnham Ltd.

(5)

Revenues and costs accrued evenly over the year, with the exception of consultancy fees of £12,000 paid by Trinity Ltd to an unrelated company for the period to 30 October 2014. These fees were recognised in operating expenses.

Requirements (a)

(b)

Prepare for Pembroke Ltd for the year ended 30 June 2015: (i)

a consolidated statement of profit or loss

(ii)

the non-controlling interest column from the consolidated statement of changes in equity. (17 marks)

Describe any differences between IFRS and UK GAAP in respect of the preparation of consolidated financial statements. Answers may be presented in a bullet point format. (4 marks) Total: 21 marks


Page 9 of 9

PROFESSIONAL LEVEL EXAMINATION MONDAY 7 MARCH 2016 (3 hours)



2.


3.


4.


5.







Page 1 of 9

1.

The financial controller of Laderas plc is on long-term sick leave. Parry Dagwood, who has spent two years taking a career break, was appointed as temporary financial controller at the beginning of the financial year. This is Parry’s first job on returning to work and he is responsible for preparing the financial statements for the year ended 30 September 2015. The finance director told Parry the board is hoping for high profits and a strong financial position as the company may seek additional funding. Parry is hoping to be offered a permanent position. You are the assistant accountant at Laderas plc working for Parry. There are a number of outstanding issues which you were asked to help finalise before the financial statements can be presented to the board. Both you and Parry are ICAEW Chartered Accountants. On 30 September 2015 Laderas plc’s nominal ledger showed the following balances. Sales Purchases Administrative expenses Other operating costs Intangibles – brands Plant and machinery Cost Accumulated depreciation at 30 September 2014 Land and buildings Cost (land £300,000) Accumulated depreciation at 30 September 2014 Retained earnings at 30 September 2014 Ordinary share capital (£1 shares) Share premium account Revaluation surplus Cash at bank Inventories at 30 September 2014 Trade and other receivables Trade and other payables Lease liability

Note(s) (1)

(2) (3)

£ 1,323,700 721,400 237,400 113,000 133,000 290,600 78,000

(3)

(4) (4) (2)

(5)

992,600 176,000 70,690 520,000 307,500 55,000 15,600 52,690 47,800 61,200 12,000

Outstanding issues: (1)

On 1 December 2014 Laderas plc received a government grant of £75,000 to assist with the purchase of a specialised machine which has an estimated useful life of five years. As there were no conditions attached to the grant it was credited in full to sales, although Laderas plc’s policy is to use the ‘netting-off’ method. The machine cost £125,000 and was ready for use on 1 January 2015. The total cost of the machine has been included in the plant and machinery balance above.

(2)

On 1 March 2015 Laderas plc recognised two new unique brands as intangible assets. The first brand was acquired for £78,000 on 1 March 2015 and on the same date an internally generated brand was also recognised. An external expert valued the internally generated brand at £55,000 on 1 March 2015 and this was recognised in the revaluation surplus. The total of £133,000 was debited to intangible assets. Both brands are estimated to have a four-year useful life, although no amortisation was recognised in the current year. All expenses relating to intangible assets should be recognised in other operating costs.


Page 2 of 9

(3)

Depreciation on property, plant and equipment for the year ended 30 September 2015 has yet to be charged. All depreciation is charged on a straight-line basis. Buildings were estimated as having a 40 year useful life, and plant and machinery an 8 year useful life, unless stated otherwise. A new building was acquired on 1 April 2015 for £350,000 and was recognised in property, plant and equipment. All expenses related to property, plant and equipment should be recognised in cost of sales.

(4)

On 1 July 2015 Laderas plc made a 1 for 4 rights issue at £1.20 per share. The market price of one Laderas plc ordinary share immediately before the rights issue was £1.85. The entire proceeds were credited to the share premium account.

(5)

On 1 October 2014 Laderas plc entered into a three-year lease for a piece of equipment. Laderas plc negotiated the lease so that there was nothing to pay in the first year followed by two payments of £6,000 each on 1 October 2016 and 1 October 2017. The equipment has a useful life of eight years but will be returned to the lessor at the end of the three-year lease term. The full amount payable under the lease of £12,000 was debited to cost of sales and credited to lease liability.

(6)

An inventory count was carried out at the main warehouse on 30 September 2015 and inventory held there was correctly valued at £42,600. However it was subsequently discovered that 1,200 units of one product, Eros, had not been included in this amount. This was an isolated incident. The unit selling price of the Eros is £8.25 and the total associated costs are: Materials and direct labour Variable overheads Fixed overheads

£ 14,800 4,200 2,000

Due to an industrial dispute production of the Eros in the year ended 30 September 2015 was slightly lower than planned, at 3,800 rather than 4,000 units. (7)

The income tax liability for the current year has been estimated at £21,600.

Requirements 1.1 Prepare the statement of profit or loss for Laderas plc for the year ended 30 September 2015 and a statement of financial position as at that date, in a form suitable for publication. (19 marks) 1.2 Calculate basic earnings per share for the year ended 30 September 2015.

(4 marks)

1.3 Prepare extracts from the statement of financial position as at 30 September 2015 for the transactions described in Issue (1) applying UK GAAP. (3 marks) 1.4 Identify and explain the inherent limitations of financial statements that may reduce their usefulness to users. (4 marks) 1.5 Discuss the ethical issues arising from the scenario and list the steps that the assistant accountant should take to address them. (5 marks) Total: 35 marks


Page 3 of 9

2.

The following issues need to be resolved to finalise the financial statements of Chayofa Ltd for the year ended 30 September 2015: (1)

On 1 October 2014 Chayofa Ltd began constructing a specialised piece of plant. The plant underwent a final safety inspection on 30 June 2015 and was ready for use the following day. The plant has a useful life of 15 years, although replacement blades, which cost £14,000, will be needed every five years. No depreciation was recognised for the year ended 30 September 2015 as the plant was not working at its full capacity because staff were still being trained. The following amounts were incurred between 1 October 2014 and 30 June 2015 and capitalised as part of property, plant and equipment: £ Materials cost (including the blades) 124,000 Labour costs 41,500 Sale of by-products produced as part of testing process (450) Staff training 1,800 Consultancy fees re installation and assembly 1,150 Professional fees 1,300 Safety inspection 1,500 Allocated overheads (50% general administration: 14,200 50% directly attributable) 185,000 The labour costs consist of £31,500 in respect of the plant’s installation and assembly and a £10,000 allocated share of the sales director’s salary. The sales director was responsible for discussing the new plant’s capabilities with existing customers.

(2)

Prior to the year end Chayofa Ltd decided to acquire three new pieces of equipment. The total cost of £101,000 for all the equipment was accrued for at 30 September 2015 and capitalised as part of property, plant and equipment. The following information is relevant: Equipment A

Equipment B

Equipment C

Decision made to acquire asset Payment date Delivery date

28 Aug 2015 28 Oct 2015 28 Sept 2015

30 Sept 2015 1 Dec 2015 1 Nov 2015

18 Sept 2015 30 Nov 2015 25 Sept 2015

Cost (note)

£34,000

£27,000

£40,000

Note: The cost of Equipment C was an estimated figure at 30 September 2015. The actual cost was finalised on 31 October 2015 at £38,000. The orders can be cancelled at no cost.


Page 4 of 9

(3)

On 1 October 2014 Chayofa Ltd acquired a recycling centre with an estimated useful life of 15 years. A condition of the purchase is that Chayofa Ltd will need to restore any environmental damage caused by its activities. On 1 October 2014 the estimated cost in 15 years’ time of restoring the land to its original state was £450,000. However, it is possible that new technology over the 15 years will reduce these costs by 10%. The relevant annual discount rate was assessed as 6%. The cost of the recycling centre has been capitalised and depreciation was calculated based on this cost. The only other accounting entries made at 30 September 2015 were to recognise a provision and an expense of £450,000.

(4)

On 31 August 2015 a machine was identified as requiring maintenance work. The machine originally cost £60,000 on 1 October 2009 and had an estimated useful life of eight years at that date. Depreciation was charged on a straight-line basis. The machine was revalued on 30 September 2012 to £42,000, with no change in its total useful life. Annual transfers between retained earnings and the revaluation surplus are not made. An impairment review was carried out on 30 September 2015 and the machine was assessed as working at an acceptable level with a revised remaining useful life of five years. On that date the machine’s fair value was assessed as being £10,500 with selling costs of £500 and its value in use as £11,000.

Requirement Explain the required IFRS financial reporting treatment of Issues (1) to (4) above in the financial statements for the year ended 30 September 2015, preparing all relevant calculations and setting out the required adjustments in the form of journal entries. Total: 28 marks


Page 5 of 9

3.

Hiedras plc has a number of subsidiary companies and an investment in an associate, Amparo Ltd. The draft consolidated financial statements for the year ended 30 September 2015 are being prepared and there are a number of outstanding issues.

3.1 Hiedras plc acquired 75% of the ordinary share capital in Isora Ltd several years ago for total consideration of £495,000. The fair values of Isora Ltd’s assets, liabilities and contingent liabilities at acquisition were equal to their carrying amounts. On 1 July 2015 Hiedras plc sold all of its shares in Isora Ltd for £765,000. Hiedras plc measured the goodwill and noncontrolling interest using the proportionate method. Isora Ltd’s financial statements showed equity of: At acquisition

Ordinary share capital (£1 shares) Retained earnings Revaluation surplus

£ 200,000 234,800 175,000 609,800

At 30 September 2014 £ 200,000 461,700 237,000 898,700

Isora Ltd made a profit for the year ended 30 September 2015 of £108,000, which accrued evenly over the year. There was no impairment loss in respect of the goodwill acquired in the business combination with Hiedras plc for the nine month period to the date of disposal although cumulative impairment losses of £35,000 had been recognised up to 30 September 2014. Requirements (a)

Calculate the profit or loss from discontinued operations for inclusion in the consolidated statement of profit or loss for Hiedras plc in relation to the disposal of Isora Ltd for the year ended 30 September 2015. (4 marks)

(b)

Describe any differences between IFRS and UK GAAP in respect of the presentation of discontinued operations. (2 marks)

3.2 On 1 April 2015 Hiedras plc acquired its 30% investment in Amparo Ltd for consideration of £263,000. Amparo Ltd made a profit for the year ended 30 September 2015 of £51,300, accruing evenly over the year, and has paid no dividends since the acquisition. The fair values of the assets and liabilities of Amparo Ltd at the date of acquisition were equal to their carrying amounts with the exception of some land and a building with a remaining useful life of 15 years as at 1 April 2015. The following values are relevant at 1 April 2015: Carrying amount Fair value £ £ Land 150,000 375,000 Building 285,000 450,000 435,000 825,000 Requirement Prepare extracts from Hiedras plc’s consolidated statement of financial position and consolidated statement of profit or loss in respect of its investment in Amparo Ltd for the year ended 30 September 2015. (4 marks)


Page 6 of 9

3.3 On 1 October 2014 Hiedras plc sold a piece of land to an unconnected company, Eras Ltd, for £500,000, to raise some short-term finance. Hiedras plc will continue to have access to the land and has the right to buy it back on 30 September 2016 for £575,000, giving Eras Ltd a return of 15% over the two year period. On 1 October 2014 the land had a fair value of £1,250,000 and a carrying amount of £350,000. Hiedras plc derecognised the land and recognised a profit on disposal of £150,000. An annual rate for 15% over two years is 7.25%. Requirement Briefly explain with supporting calculations, the financial reporting treatment for the land in the financial statements of Hiedras plc for the year ended 30 September 2015. (5 marks)

3.4 The financing activities section of the consolidated statement of cash flows was not completed. The following extract is from the draft consolidated statement of financial position at 30 September 2015: 2015 £ Equity Ordinary share capital (£1 shares) Share premium account Retained earnings

570,000 275,000 594,200 1,439,200

2014 £ 320,000 120,000 375,600 815,600

In November 2014 Hiedras plc made a bonus issue out of retained earnings. This was followed in February 2015 by an issue of 155,000 ordinary shares for cash at £2.00 per share. Profit attributable to the owners of Hiedras plc for the year ended 30 September 2015 was £441,100 and the only dividend paid in the year was an interim dividend paid by Hiedras plc. Requirement Prepare an extract from Hiedras plc’s consolidated statement of cash flows, showing ‘Cash flows from financing activities’ for the year ended 30 September 2015. Use the information in part 3.4 only. (3 marks) Total: 18 marks


Page 7 of 9

4.

At 30 September 2015 Gordo plc has two subsidiary companies: Orotava Ltd, which was acquired during the year, and Tixera Ltd. The draft consolidated statement of financial position for the Gordo group and the individual statement of financial position of Orotava Ltd, at 30 September 2015 are shown below. Investments include the cost of the two subsidiaries and a number of shareholdings of below 5% each. Figures for the Gordo group were prepared by adding across the two statements of financial position of Gordo plc and Tixera Ltd. Gordo group (draft consolidated) £ ASSETS Non-current assets Property, plant and equipment Investments Current assets Inventories Trade and other receivables Cash and cash equivalents

Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (£1 shares) Share premium account Retained earnings Current liabilities Trade and other payables Income tax


Orotava Ltd

£

936,400 667,800 1,604,200

389,500 – 389,500

46,170 53,900 4,700 104,770

21,500 36,950 1,400 59,850

1,708,970

449,350

600,000 250,000 679,270 1,529,270

150,000 75,000 147,150 372,150

67,400 112,300 179,700

37,800 39,400 77,200

1,708,970

449,350


Equity from the individual statements of financial position of Gordo plc and Tixera Ltd at 30 September 2015 are shown below:

Ordinary share capital (£1 shares) Share premium account Retained earnings


Gordo plc £ 400,000 200,000 580,870 1,180,870

Tixera Ltd £ 200,000 50,000 98,400 348,400

Page 8 of 9

(2)

The fair values of Tixera Ltd’s assets, liabilities and contingent liabilities at the date of acquisition by Gordo plc were equal to their carrying amounts. Tixera Ltd’s retained earnings at the date of acquisition were £61,200 and the consideration for the acquisition of 75% of the ordinary shares of Tixera Ltd was £220,000. A reassessment of Tixera Ltd’s assets, liabilities, contingent liabilities and consideration transferred took place following the acquisition and no adjustments were necessary. Gordo plc chose to recognise the goodwill and non-controlling interest using the proportionate method.

(3)

On 1 January 2015, Gordo plc acquired 85% of the ordinary shares of Orotava Ltd when the retained earnings of Orotava Ltd were £89,650. The consideration consisted of cash of £340,000 and 85,000 £1 ordinary shares in Gordo plc. The market value of Gordo plc’s shares on 1 January 2015 was £1.20 per share. The fair values of Orotava Ltd’s assets, liabilities and contingent liabilities at 1 January 2015 were equal to their carrying amounts with the exception of a building which had a fair value £150,000 in excess of its carrying amount. This building had a 25 year remaining useful life on 1 January 2015. Gordo plc chose to recognise the goodwill and non-controlling interest using the fair value method. The fair value of the non-controlling interest in Orotava Ltd on 1 January 2015 was estimated at £52,000.

(4)

In July 2015 Tixera Ltd sold goods to Orotava Ltd for £14,000, at cost plus a mark-up of 25%. At 30 September 2015 Orotava Ltd still held half of these goods in its inventories. Payment for the full invoice value of £14,000 was outstanding at the year end.

(5)

On 1 October 2014 Tixera Ltd sold a machine to Gordo plc for £45,000. Tixera Ltd had originally bought the machine for £60,000 on 1 October 2011. The machine had a total useful life of eight years which has never changed.

Requirement Prepare the revised consolidated statement of financial position of Gordo plc as at 30 September 2015. Total: 19 marks


Page 9 of 9

ICAEW Financial Accounting Questions March 2015 to March 2016{SPirate}

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