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(c) Wader is reviewing the accounting treatment of its buildings. The company uses the ‘revaluation model’ for itsbuildings. The buildings had originally cost $10 million on 1 June 2005 and had a useful economic life of20 years. They are being depreciated
题目
(c) Wader is reviewing the accounting treatment of its buildings. The company uses the ‘revaluation model’ for its
buildings. The buildings had originally cost $10 million on 1 June 2005 and had a useful economic life of
20 years. They are being depreciated on a straight line basis to a nil residual value. The buildings were revalued
downwards on 31 May 2006 to $8 million which was the buildings’ recoverable amount. At 31 May 2007 the
value of the buildings had risen to $11 million which is to be included in the financial statements. The company
is unsure how to treat the above events. (7 marks)
Required:
Discuss the accounting treatments of the above items in the financial statements for the year ended 31 May
2007.
Note: a discount rate of 5% should be used where necessary. Candidates should show suitable calculations where
necessary.
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第1题：
2 Misson, a public limited company, has carried out transactions denominated in foreign currency during the financial
year ended 31 October 2006 and has conducted foreign operations through a foreign entity. Its functional and
presentation currency is the dollar. A summary of the foreign currency activities is set out below:
(a) Misson has a 100% owned foreign subsidiary, Chong, which was formed on 1 November 2004 with a share
capital of 100 million euros which has been taken as the cost of the investment. The total shareholders’ equity
of the subsidiary as at 31 October 2005 and 31 October 2006 was 140 million euros and 160 million euros
respectively. Chong has not paid any dividends to Misson and has no other reserves than retained earnings in its
financial statements. The subsidiary was sold on 31 October 2006 for 195 million euros.
Misson would like to know how to treat the sale of the subsidiary in the parent and group accounts for the year
ended 31 October 2006. (8 marks)
Required:
Discuss the accounting treatment of the above transactions in accordance with the advice required by the
directors.
(Candidates should show detailed workings as well as a discussion of the accounting treatment used.)
正确答案：
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第2题：
3 Seejoy is a famous football club but has significant cash flow problems. The directors and shareholders wish to take
steps to improve the club’s financial position. The following proposals had been drafted in an attempt to improve the
cash flow of the club. However, the directors need advice upon their implications.
(a) Sale and leaseback of football stadium (excluding the land element)
The football stadium is currently accounted for using the cost model in IAS16, ‘Property, Plant, and Equipment’.
The carrying value of the stadium will be $12 million at 31 December 2006. The stadium will have a remaining
life of 20 years at 31 December 2006, and the club uses straight line depreciation. It is proposed to sell the
stadium to a third party institution on 1 January 2007 and lease it back under a 20 year finance lease. The sale
price and fair value are $15 million which is the present value of the minimum lease payments. The agreement
transfers the title of the stadium back to the football club at the end of the lease at nil cost. The rental is
$1·2 million per annum in advance commencing on 1 January 2007. The directors do not wish to treat this
transaction as the raising of a secured loan. The implicit interest rate on the finance in the lease is 5·6%.
(9 marks)
Required:
Discuss how the above proposals would be dealt with in the financial statements of Seejoy for the year ending
31 December 2007, setting out their accounting treatment and appropriateness in helping the football club’s
cash flow problems.
(Candidates do not need knowledge of the football finance sector to answer this question.)
正确答案：
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第3题：
3 (a) Leigh, a public limited company, purchased the whole of the share capital of Hash, a limited company, on 1 June
2006. The whole of the share capital of Hash was formerly owned by the five directors of Hash and under the
terms of the purchase agreement, the five directors were to receive a total of three million ordinary shares of $1
of Leigh on 1 June 2006 (market value $6 million) and a further 5,000 shares per director on 31 May 2007,
if they were still employed by Leigh on that date. All of the directors were still employed by Leigh at 31 May
2007.
Leigh granted and issued fully paid shares to its own employees on 31 May 2007. Normally share options issued
to employees would vest over a three year period, but these shares were given as a bonus because of the
company’s exceptional performance over the period. The shares in Leigh had a market value of $3 million
(one million ordinary shares of $1 at $3 per share) on 31 May 2007 and an average fair value of
$2·5 million (one million ordinary shares of $1 at $2·50 per share) for the year ended 31 May 2007. It is
expected that Leigh’s share price will rise to $6 per share over the next three years. (10 marks)
Required:
Discuss with suitable computations how the above share based transactions should be accounted for in the
financial statements of Leigh for the year ended 31 May 2007.
正确答案：
(a) The shares issued to the management of Hash by Leigh (three million ordinary shares of $1) for the purchase of the company
would not be accounted for under IFRS2 ‘Share-based payment’ but would be dealt with under IFRS3 ‘Business
Combinations’.
The cost of the business combination will be the total of the fair values of the consideration given by the acquirer plus any
attributable cost. In this case the shares of Leigh will be fair valued at $6 million with $3 million being shown as share capital
and $3million as share premium. However, the shares issued as contingent consideration may be accounted for under IFRS2.
The terms of the issuance of shares will need to be examined. Where part of the consideration may be reliant on uncertain
future events, and it is probable that the additional consideration is payable and can be measured reliably, then it is included
in the cost of the business consideration at the acquisition date. However, the question to be answered in the case of the
additional 5,000 shares per director is whether the shares are compensation or part of the purchase price. There is a need
to understand why the acquisition agreement includes a provision for a contingent payment. It is possible that the price paid
initially by Leigh was quite low and, therefore, this then represents a further purchase consideration. However, in this instance
the additional payment is linked to continuing employment and, therefore, it would be argued that because of the link between
the contingent consideration and continuing employment that it represents a compensation arrangement which should be
included within the scope of IFRS2.
Thus as there is a performance condition, (the performance condition will apply as it is not a market condition) the substance
of the agreement is that the shares are compensation, then they will be fair valued at the grant date and not when the shares
vest. Therefore, the share price of $2 per share will be used to give compensation of $50,000 (5 x 5,000 x $2). (Under
IFRS3, fair value is measured at the date the consideration is provided and discounted to presented value. No guidance is
provided on what the appropriate discount rate might be. Thus the fair value used would have been $3 per share at 31 May
2007.) The compensation will be charged to the income statement and included in equity.
The shares issued to the employees of Leigh will be accounted for under IFRS2. The issuance of fully paid shares will be
presumed to relate to past service. The normal vesting period for share options is irrelevant, as is the average fair value of the
shares during the period. The shares would be expensed at a value of $3 million with a corresponding increase in equity.
Goods or services acquired in a share based payment transaction should be recognised when they are received. In the case
of goods then this will be when this occurs. However, it is somewhat more difficult sometimes to determine when services
are received. In a case of goods the vesting date is not really relevant, however, it is highly relevant for employee services. If
shares are issued that vest immediately then there is a presumption that these are a consideration for past employee services. -
第4题：
(b) During the inventory count on 31 December, some goods which had cost $80,000 were found to be damaged.
In February 2005 the damaged goods were sold for $85,000 by an agent who received a 10% commission out
of the sale proceeds. (2 marks)
Required:
Advise the directors on the correct treatment of these matters, stating the relevant accounting standard which
justifies your answer in each case.
NOTE: The mark allocation is shown against each of the three matters.
正确答案：
(b) The inventories should be valued at the lower of cost and net realisable value. Cost is $80,000, net realisable value is
$85,000 less 10%, or $76,500. The net realisable value of $76,500 should therefore be taken (IAS2 Inventories) -
第5题：
(b) Historically, all owned premises have been measured at cost depreciated over 10 to 50 years. The management
board has decided to revalue these premises for the year ended 30 September 2005. At the balance sheet date
two properties had been revalued by a total of $1·7 million. Another 15 properties have since been revalued by
$5·4 million and there remain a further three properties which are expected to be revalued during 2006. A
revaluation surplus of $7·1 million has been credited to equity. (7 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Albreda Co for the year ended
30 September 2005.
NOTE: The mark allocation is shown against each of the three issues.
正确答案：
(b) Revaluation of owned premises
(i) Matters
■ The revaluations are clearly material as $1·7 million, $5·4 million and $7·1 million represent 5·5% , 17·6% and
23·1% of total assets, respectively.
■ The change in accounting policy, from a cost model to a revaluation model, should be accounted for in accordance
with IAS 16 ‘Property, Plant and Equipment’ (i.e. as a revaluation).
Tutorial note: IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ does not apply to the initial
application of a policy to revalue assets in accordance with IAS 16.
■ The basis on which the valuations have been carried out, for example, market-based fair value (IAS 16).
■ Independence, qualifications and expertise of valuer(s).
■ IAS 16 does not permit the selective revaluation of assets thus the whole class of premises should have been
revalued.
■ The valuations of properties after the year end are adjusting events (i.e. providing additional evidence of conditions
existing at the year end) per IAS 10 ‘Events After the Balance Sheet Date’.
Tutorial note: It is ‘now’ still less than three months after the year end so these valuations can reasonably be
expected to reflect year-end values.
■ If $5·4 million is a net amount of surpluses and deficits it should be grossed up so that the credit to equity reflects
the sum of the surpluses with any deficits being expensed through profit and loss (IAS 36 ‘Impairment of Assets’).
■ The revaluation exercise is incomplete. If the revaluations on the remaining three properties are expected to be
material and cannot be reasonably estimated for inclusion in the financial statements for the year ended
30 September 2005 perhaps the change in policy should be deferred for a year.
■ Depreciation for the year should have been calculated on cost as usual to establish carrying amount before
revaluation.
■ Any premises held under finance leases should be similarly revalued.
(ii) Audit evidence
■ A schedule of depreciated cost of owned premises extracted from the non-current asset register.
■ Calculation of difference between valuation and depreciated cost by property. Separate summation of surpluses
and deficits.
■ Copy of valuation certificate for each property.
■ Physical inspection of properties with largest surpluses (including the two valued before the year end) to confirm
condition.
■ Extracts from local property guides/magazines indicating a range of values of similarly styled/sized properties.
■ Separate presentation of the revaluation surpluses (gross) in:
– the statement of changes in equity; and
– reconciliation of carrying amount at the beginning and end of the period.
■ IAS 16 disclosures in the notes to the financial statements including:
– the effective date of revaluation;
– whether an independent valuer was involved;
– the methods and significant assumptions applied in estimating fair values; and
– the carrying amount that would have been recognised under the cost model. -
第6题：
(b) A sale of industrial equipment to Deakin Co in May 2005 resulted in a loss on disposal of $0·3 million that has
been separately disclosed on the face of the income statement. The equipment cost $1·2 million when it was
purchased in April 1996 and was being depreciated on a straight-line basis over 20 years. (6 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended
31 March 2006.
NOTE: The mark allocation is shown against each of the three issues.
正确答案：
(b) Sale of industrial equipment
(i) Matters
■ The industrial equipment was in use for nine years (from April 1996) and would have had a carrying value of
$660,000 at 31 March 2005 (11/20 × $1·2m – assuming nil residual value and a full year’s depreciation charge
in the year of acquisition and none in the year of disposal). Disposal proceeds were therefore only $360,000.
■ The $0·3m loss represents 15% of PBT (for the year to 31 March 2006) and is therefore material. The equipment
was material to the balance sheet at 31 March 2005 representing 2·6% of total assets ($0·66/$25·7 × 100).
■ Separate disclosure, of a material loss on disposal, on the face of the income statement is in accordance with
IAS 16 ‘Property, Plant and Equipment’. However, in accordance with IAS 1 ‘Presentation of Financial Statements’,
it should not be captioned in any way that might suggest that it is not part of normal operating activities (i.e. not
‘extraordinary’, ‘exceptional’, etc).
Tutorial note: However, note that if there is a prior period error to be accounted for (see later), there would be
no impact on the current period income statement requiring consideration of any disclosure.
■ The reason for the sale. For example, whether the equipment was:
– surplus to operating requirements (i.e. not being replaced); or
– being replaced with newer equipment (thereby contributing to the $8·1m increase (33·8 – 25·7) in total
assets).
■ The reason for the loss on sale. For example, whether:
– the sale was at an under-value (e.g. to a related party);
– the equipment had a bad maintenance history (or was otherwise impaired);
– the useful life of the equipment is less than 20 years;
– there is any deferred consideration not yet recorded;
– any non-cash disposal proceeds have been overlooked (e.g. if another asset was acquired in a part-exchange).
■ If the useful life was less than 20 years, tangible non-current assets may be materially overstated in respect of other
items of equipment that are still in use and being depreciated on the same basis.
■ If the sale was to a related party then additional disclosure should be required in a note to the financial statements
for the year to 31 March 2006 (IAS 24 ‘Related Party Disclosures’).
Tutorial note: Since there are no specific pointers to a related party transaction (RPT), this point is not expanded
on.
■ Whether the sale was identified in the prior year audit’s post balance sheet event review. If so:
– the disclosure made in the prior year’s financial statements (IAS 10 ‘Events After the Balance Sheet Date’);
– whether an impairment loss was recognised at 31 March 2005.
■ If not, and the equipment was impaired at 31 March 2005, a prior period error should be accounted for (IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’). An impairment loss of $0·3m would have
been material to prior year profit (12·5%).
Tutorial note: Unless this was a RPT or the impairment arose after 31 March 2005 a prior period adjustment
should be made.
■ Failure to account for a prior period error (if any) would result in modification of the audit opinion ‘except for’ noncompliance
with IAS 8 (in the current year) and IAS 36 (in the prior period).
(ii) Audit evidence
■ Carrying amount ($0·66m as above) agreed to the non-current asset register balances at 31 March 2005 and
recalculation of the loss on disposal.
■ Cost and accumulated depreciation removed from the asset register in the year to 31 March 2006.
■ Receipt of proceeds per cash book agreed to bank statement.
■ Sales invoice transferring title to Deakin.
■ A review of maintenance expenses and records (e.g. to confirm reason for loss on sale).
■ Post balance sheet event review on prior year audit working papers file.
■ Management representation confirming that Deakin is not a related party (provided that there is no evidence to
suggest otherwise). -
第7题：
3 You are the manager responsible for the audit of Seymour Co. The company offers information, proprietary foods and
medical innovations designed to improve the quality of life. (Proprietary foods are marketed under and protected by
registered names.) The draft consolidated financial statements for the year ended 30 September 2006 show revenue
of $74·4 million (2005 – $69·2 million), profit before taxation of $13·2 million (2005 – $15·8 million) and total
assets of $53·3 million (2005 – $40·5 million).
The following issues arising during the final audit have been noted on a schedule of points for your attention:
(a) In 2001, Seymour had been awarded a 20-year patent on a new drug, Tournose, that was also approved for
food use. The drug had been developed at a cost of $4 million which is being amortised over the life of the
patent. The patent cost $11,600. In September 2006 a competitor announced the successful completion of
preliminary trials on an alternative drug with the same beneficial properties as Tournose. The alternative drug is
expected to be readily available in two years time. (7 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended
30 September 2006.
NOTE: The mark allocation is shown against each of the three issues.
正确答案：
■ A change in the estimated useful life should be accounted for as a change in accounting estimate in accordance
with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. For example, if the development
costs have little, if any, useful life after the introduction of the alternative drug (‘worst case’ scenario), the carrying
value ($3 million) should be written off over the current and remaining years, i.e. $1 million p.a. The increase in
amortisation/decrease in carrying value ($800,000) is material to PBT (6%) and total assets (1·5%).
■ Similarly a change in the expected pattern of consumption of the future economic benefits should be accounted for
as a change in accounting estimate (IAS 8). For example, it may be that the useful life is still to 2020 but that
the economic benefits may reduce significantly in two years time.
■ After adjusting the carrying amount to take account of the change in accounting estimate(s) management should
have tested it for impairment and any impairment loss recognised in profit or loss.
(ii) Audit evidence
■ $3 million carrying amount of development costs brought forward agreed to prior year working papers and financial
statements.
■ A copy of the press release announcing the competitor’s alternative drug.
■ Management’s projections of future cashflows from Tournose-related sales as evidence of the useful life of the
development costs and pattern of consumption.
■ Reperformance of management’s impairment test on the development costs: Recalculation of management’s
calculation of the carrying amount after revising estimates of useful life and/or consumption of benefits compared
with management’s calculation of value in use.
■ Sensitivity analysis on management’s key assumptions (e.g. estimates of useful life, discount rate).
■ Written management representation on the key assumptions concerning the future that have a significant risk of
causing material adjustment to the carrying amount of the development costs. (These assumptions should be
disclosed in accordance with IAS 1 Presentation of Financial Statements.) -
第8题：
(d) Wader has decided to close one of its overseas branches. A board meeting was held on 30 April 2007 when a
detailed formal plan was presented to the board. The plan was formalised and accepted at that meeting. Letters
were sent out to customers, suppliers and workers on 15 May 2007 and meetings were held prior to the year
end to determine the issues involved in the closure. The plan is to be implemented in June 2007. The company
wish to provide $8 million for the restructuring but are unsure as to whether this is permissible. Additionally there
was an issue raised at one of the meetings. The operations of the branch are to be moved to another country
from June 2007 but the operating lease on the present buildings of the branch is non-cancellable and runs for
another two years, until 31 May 2009. The annual rent of the buildings is $150,000 payable in arrears on
31 May and the lessor has offered to take a single payment of $270,000 on 31 May 2008 to settle the
outstanding amount owing and terminate the lease on that date. Wader has additionally obtained permission to
sublet the building at a rental of $100,000 per year, payable in advance on 1 June. The company needs advice
on how to treat the above under IAS37 ‘Provisions, Contingent Liabilities and Contingent Assets’. (7 marks)
Required:
Discuss the accounting treatments of the above items in the financial statements for the year ended 31 May
2007.
Note: a discount rate of 5% should be used where necessary. Candidates should show suitable calculations where
necessary.
正确答案：(d) A provision under IAS37 ‘Provisions, Contingent Liabilities and Contingent assets’ can only be made in relation to the entity’s
restructuring plans where there is both a detailed formal plan in place and the plans have been announced to those affected.
The plan should identify areas of the business affected, the impact on employees and the likely cost of the restructuring and
the timescale for implementation. There should be a short timescale between communicating the plan and starting to
implement it. A provision should not be recognised until a plan is formalised.
A decision to restructure before the balance sheet date is not sufficient in itself for a provision to be recognised. A formal plan
should be announced prior to the balance sheet date. A constructive obligation should have arisen. It arises where there has
been a detailed formal plan and this has raised a valid expectation in the minds of those affected. The provision should only
include direct expenditure arising from the restructuring. Such amounts do not include costs associated with ongoing business
operations. Costs of retraining staff or relocating continuing staff or marketing or investment in new systems and distribution
networks, are excluded. It seems as though in this case a constructive obligation has arisen as there have been detailed formal
plans approved and communicated thus raising valid expectations. The provision can be allowed subject to the exclusion of
the costs outlined above.
Although executory contracts are outside IAS37, it is permissible to recognise a provision that is onerous. Onerous contracts
can result from restructuring plans or on a stand alone basis. A provision should be made for the best estimate of the excess
unavoidable costs under the onerous contract. This estimate should assess any likely level of future income from new sources.
Thus in this case, the rental income from sub-letting the building should be taken into account. The provision should be
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第9题：
On 1 April 2009 Pandar purchased 80% of the equity shares in Salva. The acquisition was through a share exchange of three shares in Pandar for every five shares in Salva. The market prices of Pandar’s and Salva’s shares at 1 April
2009 were $6 per share and $3.20 respectively.
On the same date Pandar acquired 40% of the equity shares in Ambra paying $2 per share.
The summarised income statements for the three companies for the year ended 30 September 2009 are:
The following information is relevant:
(i) The fair values of the net assets of Salva at the date of acquisition were equal to their carrying amounts with the exception of an item of plant which had a carrying amount of $12 million and a fair value of $17 million. This plant had a remaining life of five years (straight-line depreciation) at the date of acquisition of Salva. All depreciation is charged to cost of sales.
In addition Salva owns the registration of a popular internet domain name. The registration, which had a
negligible cost, has a five year remaining life (at the date of acquisition); however, it is renewable indefinitely at a nominal cost. At the date of acquisition the domain name was valued by a specialist company at $20 million.
The fair values of the plant and the domain name have not been reflected in Salva’s financial statements.
No fair value adjustments were required on the acquisition of the investment in Ambra.
(ii) Immediately after its acquisition of Salva, Pandar invested $50 million in an 8% loan note from Salva. All interest accruing to 30 September 2009 had been accounted for by both companies. Salva also has other loans in issue at 30 September 2009.
(iii) Pandar has credited the whole of the dividend it received from Salva to investment income.
(iv) After the acquisition, Pandar sold goods to Salva for $15 million on which Pandar made a gross profit of 20%. Salva had one third of these goods still in its inventory at 30 September 2009. There are no intra-group current account balances at 30 September 2009.
(v) The non-controlling interest in Salva is to be valued at its (full) fair value at the date of acquisition. For this
purpose Salva’s share price at that date can be taken to be indicative of the fair value of the shareholding of the non-controlling interest.
(vi) The goodwill of Salva has not suffered any impairment; however, due to its losses, the value of Pandar’s
investment in Ambra has been impaired by $3 million at 30 September 2009.
(vii) All items in the above income statements are deemed to accrue evenly over the year unless otherwise indicated.
Required:
(a) (i) Calculate the goodwill arising on the acquisition of Salva at 1 April 2009; (6 marks)
(ii) Calculate the carrying amount of the investment in Ambra to be included within the consolidated
statement of financial position as at 30 September 2009. (3 marks)
(b) Prepare the consolidated income statement for the Pandar Group for the year ended 30 September 2009.(16 marks)
正确答案：
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第10题：
(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 the
platinum is a requirement to landscape the mining site at the end of its estimated life of ten years. The
present value of this cost at the date of the purchase was calculated at $3 million (in addition to the
purchase 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 revaluation
reserve 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 followed
by 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. The
remaining movement on the property, plant and equipment, after charging depreciation of $3 million, was
the cost of replacing plant.
(ii) From 1 October 2008 to 31 March 2009 a further $500,000 was spent completing the development
project at which date marketing and production started. The sales of the new product proved disappointing
and on 30 September 2009 the development costs were written down to $1 million via an impairment
charge.
(iii) During the year ended 30 September 2009, $4 million of the 10% convertible loan notes matured. The
loan note holders had the option of redemption at par in cash or to exchange them for equity shares on the
basis 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 the
year 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 ended
30 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 the
deterioration 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 the
apparent 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)
正确答案：
(i)Thecashelementsoftheincreaseinproperty,plantandequipmentare$5millionforthemine(thecapitalisedenvironmentalprovisionisnotacashflow)and$2·4millionforthereplacementplantmakingatotalof$7·4million.(ii)Ofthe$4millionconvertibleloannotes(5,000–1,000)thatwereredeemedduringtheyear,75%($3million)ofthesewereexchangedforequitysharesonthebasisof20newsharesforeach$100inloannotes.Thiswouldcreate600,000(3,000/100x20)newsharesof$1eachandsharepremiumof$2·4million(3,000–600).As1million(5,000–4,000)newshareswereissuedintotal,400,000musthavebeenforcash.Theremainingincrease(aftertheeffectoftheconversion)inthesharepremiumof$1·6million(6,000–2,000b/f–2,400conversion)mustrelatetothecashissueofshares,thuscashproceedsfromtheissueofsharesis$2million(400nominalvalue+1,600premium).(iii)Theinitialleaseobligationis$10million(thefairvalueoftheplant).At30September2009totalleaseobligationsare$6·8million(5,040+1,760),thusrepaymentsintheyearwere$3·2million(10,000–6,800).(b)TakingthedefinitionofROCEfromthequestion:Fromtheaboveitcanbeclearlyseenthatthe2009operatingmarginhasimprovedbynearly1%point,despitethe$2millionimpairmentchargeonthewritedownofthedevelopmentproject.ThismeansthedeteriorationintheROCEisduetopoorerassetturnover.Thisimpliestherehasbeenadecreaseintheefficiencyintheuseofthecompany’sassetsthisyearcomparedtolastyear.Lookingatthemovementinthenon-currentassetsduringtheyearrevealssomemitigatingpoints:Thelandrevaluationhasincreasedthecarryingamountofproperty,plantandequipmentwithoutanyphysicalincreaseincapacity.Thisunfavourablydistortsthecurrentyear’sassetturnoverandROCEfigures.TheacquisitionoftheplatinummineappearstobeanewareaofoperationforCrosswirewhichmayhaveadifferent(perhapslower)ROCEtootherpreviousactivitiesoritmaybethatitwilltakesometimefortheminetocometofullproductioncapacity.Thesubstantialacquisitionoftheleasedplantwashalf-waythroughtheyearandcanonlyhavecontributedtotheyear’sresultsforsixmonthsatbest.Infutureperiodsafullyear’scontributioncanbeexpectedfromthisnewinvestmentinplantandthisshouldimprovebothassetturnoverandROCE.Insummary,thefallintheROCEmaybeduelargelytotheabovefactors(effectivelythereplacementandexpansionprogramme),ratherthantopooroperatingperformance,andinfutureperiodsthismaybereversed.ItshouldalsobenotedthathadtheROCEbeencalculatedontheaveragecapitalemployedduringtheyear(ratherthantheyearendcapitalemployed),whichisarguablymorecorrect,thenthedeteriorationintheROCEwouldnothavebeenaspronounced. -
第11题：
For the year just ended, N company had an earnings of$ 2 per share and paid a dividend of $ 1. 2 on its stock. The growth rate in net income and dividend are both expected to be a constant 7 percent per year, indefinitely. N company has a Beta of 0. 8, the risk - free interest rate is 6 percent, and the market risk premium is 8 percent.
P Company is very similar to N company in growth rate, risk and dividend. payout ratio. It had 20 million shares outstanding and an earnings of $ 36 million for the year just ended. The earnings will increase to $ 38. 5 million the next year.
Requirement :
A. Calculate the expected rate of return on N company 's equity.
B. Calculate N Company 's current price-earning ratio and prospective price - earning ratio.
C. Using N company 's current price-earning ratio, value P company 's stock price.
D. Using N company 's prospective price - earning ratio, value P company 's stock price.
答案：解析：A. The expected rate of return on N company's equity =6% +0. 8*8% =12.4%
B. Current price -earning ratio = (1. 2/2) * (1 +7% )/ (12.4% -7% ) =11. 89
Prospective price - earning ratio = (1. 2/2) / (12. 4% - 70% ) =11. 11
C. P company's stock = 11. 89* 36/20 = 21. 4
D. P company's stock = 11. 11* 38. 5/20 = 21. 39
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第12题：
问答题Passage 1 The cost of staging the year 2000 Olympics in Sydney is estimated to be a staggering $ 9 million, but (1) the city is preparing to the financial benefits that come from holding such an international event by equaling the commercial success of Los Angeles, the only city yet to have made a demonstrable profit from the Games in 1984. At precisely 4:20 a.m. on Friday the 24th of September 1993, it was announced that Sydney had beaten five other competing cities around the world, and Australians everywhere, not only Sydneysiders, were justifiably proud of the result. (2) But, if Sydney had lost the bid, would the taxpayers of New South Wales and of Australia have approved of governments spending millions of dollars in a failed and costly exercise? There may have been some consolation in the fact that the bid came in $ l million below the revised budget and $ 5 million below the original budget of $ 29 million formulated in mid-1991. However, the final cost was the considerable sum of $ 24 million, the bulk of which was paid for by corporate and community contributions, merchandising, licensing, and the proceeds of lotteries, with the NSW Government, which had originally been willing to spend up to $ 10 million, contributing some $ 2 million. (3) The Federal Government’s grant of $ 5 million meant, in effect, that the Sydney bid was financed by every Australian taxpayer. Prior to the announcement of the winning city, there was considerable debate about the wisdom of taking financial risks of this kind at a time of economic recession. (4) Others argued that 70% of the facilities were already in place, and all were on government-owned land, removing some potential areas of conflict which troubled previous Olympic bidders. The former NSW Premier, Mr. Nick Greiner, went on record as saying that the advantage of having the Games… “is not that you are going to have $ 7.4 billion in extra gross domestic product over the next 14 years.” (5) I think the real point is the psychological change, the gaining of confidence, apart from the other more obvious reasons, such as the building of sporting facilities, tourism, and things of that nature.正确答案： 1. 悉尼正在准备通过举办这样的国际盛会而收获同洛杉矶一样的经济利益,1984年的洛杉矶奥运会使洛杉矶成为举办奥运会以来获利最多的一个城市。
(reap“收获,获得”,demonstrable“可论证的,显而易见的”,后半句采用意译的方法,“the only city yet to have made a demonstrable profit from the Games in 1984”翻译为“1984年的洛杉矶奥运会使洛杉矶成为举办奥运会以来获利最多的一个城市”。)
2. 但是,如果悉尼申奥失败的话,新南威尔士州和澳大利亚的纳税人会同意政府花上百万美元在这一次失败而昂贵的演练上吗?
(lost the bid“投标失败”,这里指申奥失败,taxpayer“纳税人”,approve of“赞同,同意”,exercise在这里意义为“演练”更合适。)
3. 联邦政府批准的500万美元,实际上意味着悉尼申奥得到每位澳大利亚纳税人的经济支持。
(in effect“实际上”,grant of“扶助”,在这里意译为“批准”,be financed by“由…”资助。)
4. 其他人认为70%的奥运设施已经到位了,而且都处于政府所有的土地上,这就消除了困扰以前申奥城市的潜在地区冲突。
(government-owned“政府所有的”,areas of conflict“地区冲突”,remove“消除”,在该句末尾的bidder指代的是申奥的城市,所以不宜翻译为“投标者”。)
5. 我认为,举办奥运会除了能够带来一些显而易见的好处,比如,体育场馆的修建,旅游业的发展和此类事情之外,其真正的意义在于心理的变化,人们获得了自信。
(apart from“除了……”,obvious reasons在此处意译为“显而易见的好处”。)解析： 暂无解析 -
第13题：
(b) Misson has purchased goods from a foreign supplier for 8 million euros on 31 July 2006. At 31 October 2006,
the trade payable was still outstanding and the goods were still held by Misson. Similarly Misson has sold goods
to a foreign customer for 4 million euros on 31 July 2006 and it received payment for the goods in euros on
31 October 2006. Additionally Misson had purchased an investment property on 1 November 2005 for
28 million euros. At 31 October 2006, the investment property had a fair value of 24 million euros. The company
uses the fair value model in accounting for investment properties.
Misson would like advice on how to treat these transactions in the financial statements for the year ended 31
October 2006. (7 marks)
Required:
Discuss the accounting treatment of the above transactions in accordance with the advice required by the
directors.
(Candidates should show detailed workings as well as a discussion of the accounting treatment used.)
正确答案：
(b) Inventory, Goods sold and Investment property
The inventory and trade payable initially would be recorded at 8 million euros ÷ 1·6, i.e. $5 million. At the year end, the
amount payable is still outstanding and is retranslated at 1 dollar = 1·3 euros, i.e. $6·2 million. An exchange loss of
$(6·2 – 5) million, i.e. $1·2 million would be reported in profit or loss. The inventory would be recorded at $5 million at the
year end unless it is impaired in value.
The sale of goods would be recorded at 4 million euros ÷ 1·6, i.e. $2·5 million as a sale and as a trade receivable. Payment
is received on 31 October 2006 in euros and the actual value of euros received will be 4 million euros ÷ 1·3,
i.e. $3·1 million.
Thus a gain on exchange of $0·6 million will be reported in profit or loss.
The investment property should be recognised on 1 November 2005 at 28 million euros ÷ 1·4, i.e. $20 million. At
31 October 2006, the property should be recognised at 24 million euros ÷ 1·3, i.e. $18·5 million. The decrease in fair value
should be recognised in profit and loss as a loss on investment property. The property is a non-monetary asset and any foreign
currency element is not recognised separately. When a gain or loss on a non-monetary item is recognised in profit or loss,
any exchange component of that gain or loss is also recognised in profit or loss. If any gain or loss is recognised in equity ona non-monetary asset, any exchange gain is also recognised in equity. -
第14题：
(ii) The property of the former administrative centre of Tyre is owned by the company. Tyre had decided in the year
that the property was surplus to requirements and demolished the building on 10 June 2006. After demolition,
the company will have to carry out remedial environmental work, which is a legal requirement resulting from the
demolition. It was intended that the land would be sold after the remedial work had been carried out. However,
land prices are currently increasing in value and, therefore, the company has decided that it will not sell the land
immediately. Tyres uses the ‘cost model’ in IAS16 ‘Property, plant and equipment’ and has owned the property
for many years. (7 marks)
Required:
Advise the directors of Tyre on how to treat the above items in the financial statements for the year ended
31 May 2006.
(The mark allocation is shown against each of the above items)
正确答案：
(ii) Former administrative building
The land and buildings of the former administrative centre are accounted for as separate elements. The demolition of the
building is an indicator of the impairment of the property under IAS36. The building will not generate any future cash flows
and its recoverable amount is zero. Therefore, the carrying value of the building will be written down to zero and the loss
charged to profit or loss in the year to 31 May 2006 when the decision to demolish the building was made. The land value
will be in excess of its carrying amount as the company uses the cost model and land prices are rising. Thus no impairment
charge is recognised in respect of the land.
The demolition costs will be expensed when incurred and a provision for environmental costs recognised when an obligation
arises, i.e. in the financial year to 31 May 2007. It may be that some of these costs could be recognised as site preparation
costs and be capitalised under IAS16.
The land will not meet the criteria set out in IFRS5 ‘Non-current Assets Held for Sale and Discontinued Operations’ as a noncurrent
asset which is held for sale. IFRS5 says that a non-current asset should be classified as ‘held for sale’ if its carrying
amount will be recovered principally through a sale transaction rather than through continuing use. However, the non-current
asset must be available for immediate sale and must be actively marketed at its current fair value (amongst other criteria) and
these criteria have not been met in this case.
When the building has been demolished and the site prepared, the land could be considered to be an investment property
and accounted for under IAS40 ‘Investment Property’ where the fair value model allows gains (or losses) to be recognised inprofit or loss for the period. -
第15题：
(b) Router has a number of film studios and office buildings. The office buildings are in prestigious areas whereas
the film studios are located in ‘out of town’ locations. The management of Router wish to apply the ‘revaluation
model’ to the office buildings and the ‘cost model’ to the film studios in the year ended 31 May 2007. At present
both types of buildings are valued using the ‘revaluation model’. One of the film studios has been converted to a
theme park. In this case only, the land and buildings on the park are leased on a single lease from a third party.
The lease term was 30 years in 1990. The lease of the land and buildings was classified as a finance lease even
though the financial statements purport to comply with IAS 17 ‘Leases’.
The terms of the lease were changed on 31 May 2007. Router is now going to terminate the lease early in 2015
in exchange for a payment of $10 million on 31 May 2007 and a reduction in the monthly lease payments.
Router intends to move from the site in 2015. The revised lease terms have not resulted in a change of
classification of the lease in the financial statements of Router. (10 marks)
Required:
Discuss how the above items should be dealt with in the group financial statements of Router for the year ended
31 May 2007.
正确答案：
(b) IAS16 ‘Property, Plant and Equipment’ permits assets to be revalued on a class by class basis. The different characteristics
of the buildings allow them to be classified separately. Different measurement models can, therefore, be used for the office
buildings and the film studios. However, IAS8 ‘Accounting policies, changes in accounting estimates and errors’ says that
once an entity has decided on its accounting policies, it should apply them consistently from period to period and across all
relevant transactions. An entity can change its accounting policies but only in specific circumstances. These circumstances
are:
(a) where there is a new accounting standard or interpretation or changes to an accounting standard
(b) where the change results in the financial statements providing reliable and more relevant information about the effects
of transactions, other events or conditions on the entity’s financial position, financial performance, or cash flows
Voluntary changes in accounting policies are quite uncommon but may occur when an accounting policy is no longer
appropriate. Router will have to ensure that the change in accounting policy meets the criteria in IAS8. Additionally,
depreciated historical cost will have to be calculated for the film studios at the commencement of the period and the opening
balance on the revaluation reserve and any other affected component of equity adjusted. The comparative amounts for each
prior period should be presented as if the new accounting policy had always been applied. There are limits on retrospective
application on the grounds of impracticability.
It is surprising that the lease of the land is considered to be a finance lease under IAS17 ‘Leases’. Land is considered to have
an indefinite life and should, therefore normally be classified as an operating lease unless ownership passes to the lessee
during the lease term. The lease of the land should be separated out from the lease and treated individually. The value of the
land so determined would be taken off the balance sheet in terms of the liability and asset and the lease payments treated
as rentals in the income statement. A prior period adjustment should also be made. The buildings would continue to be
treated as property, plant and equipment (PPE) and the carrying amount not adjusted. However, the remaining useful life of
the building should be revised to reflect the shorter lease term. This will result in the carrying amount being depreciated over
the shorter period. This change to the depreciation policy is applied prospectively not retrospectively.
The lease liability must be assessed for derecognition under IAS39 ‘Financial Instruments: Recognition and Measurement’,
because of the revision of the lease terms, in order to determine whether the new terms are substantially different from the
old. The purpose of this is to determine whether the change in terms is a modification or an extinguishment. The change
seems to constitute a ‘modification’ because there is little change to the terms. The lease liability is, therefore, amended by
deducting the one off payment ($10 million) from the carrying amount (after adjustment for the lease of land) together with
any transaction costs. The lease liability is then remeasured to the present value of the revised future cash flows, discounted
using the original effective interest rate. Any adjustment made in remeasuring the lease liability will be taken to the income
statement.
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第16题：
The following information is relevant for questions 9 and 10
A company’s draft financial statements for 2005 showed a profit of $630,000. However, the trial balance did not agree,
and a suspense account appeared in the company’s draft balance sheet.
Subsequent checking revealed the following errors:
(1) The cost of an item of plant $48,000 had been entered in the cash book and in the plant account as $4,800.
Depreciation at the rate of 10% per year ($480) had been charged.
(2) Bank charges of $440 appeared in the bank statement in December 2005 but had not been entered in the
company’s records.
(3) One of the directors of the company paid $800 due to a supplier in the company’s payables ledger by a personal
cheque. The bookkeeper recorded a debit in the supplier’s ledger account but did not complete the double entry
for the transaction. (The company does not maintain a payables ledger control account).
(4) The payments side of the cash book had been understated by $10,000.
9 Which of the above items would require an entry to the suspense account in correcting them?
A All four items
B 3 and 4 only
C 2 and 3 only
D 1, 2 and 4 only
正确答案：B
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第17题：
3 You are the manager responsible for the audit of Volcan, a long-established limited liability company. Volcan operates
a national supermarket chain of 23 stores, five of which are in the capital city, Urvina. All the stores are managed in
the same way with purchases being made through Volcan’s central buying department and product pricing, marketing,
advertising and human resources policies being decided centrally. The draft financial statements for the year ended
31 March 2005 show revenue of $303 million (2004 – $282 million), profit before taxation of $9·5 million (2004
– $7·3 million) and total assets of $178 million (2004 – $173 million).
The following issues arising during the final audit have been noted on a schedule of points for your attention:
(a) On 1 May 2005, Volcan announced its intention to downsize one of the stores in Urvina from a supermarket to
a ‘City Metro’ in response to a significant decline in the demand for supermarket-style. shopping in the capital.
The store will be closed throughout June, re-opening on 1 July 2005. Goodwill of $5·5 million was recognised
three years ago when this store, together with two others, was bought from a national competitor. It is Volcan’s
policy to write off goodwill over five years. (7 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Volcan for the year ended
31 March 2005.
NOTE: The mark allocation is shown against each of the three issues.
正确答案：
3 VOLCAN
(a) Store impairment
(i) Matters
■ Materiality
? The cost of goodwill represents 3·1% of total assets and is therefore material.
? However, after three years the carrying amount of goodwill ($2·2m) represents only 1·2% of total assets –
and is therefore immaterial in the context of the balance sheet.
? The annual amortisation charge ($1·1m) represents 11·6% profit before tax (PBT) and is therefore also
material (to the income statement).
? The impact of writing off the whole of the carrying amount would be material to PBT (23%).
Tutorial note: The temporary closure of the supermarket does not constitute a discontinued operation under IFRS 5
‘Non-Current Assets Held for Sale and Discontinued Operations’.
■ Under IFRS 3 ‘Business Combinations’ Volcan should no longer be writing goodwill off over five years but
subjecting it to an annual impairment test.
■ The announcement is after the balance sheet date and is therefore a non-adjusting event (IAS 10 ‘Events After the
Balance Sheet Date’) insofar as no provision for restructuring (for example) can be made.
■ However, the event provides evidence of a possible impairment of the cash-generating unit which is this store and,
in particular, the value of goodwill assigned to it.
■ If the carrying amount of goodwill ($2·2m) can be allocated on a reasonable and consistent basis to this and the
other two stores (purchased at the same time) Volcan’s management should have applied an impairment test to
the goodwill of the downsized store (this is likely to show impairment).
■ If more than 22% of goodwill is attributable to the City Metro store – then its write-off would be material to PBT
(22% × $2·2m ÷ $9·5m = 5%).
■ If the carrying amount of goodwill cannot be so allocated; the impairment test should be applied to the
cash-generating unit that is the three stores (this may not necessarily show impairment).
■ Management should have considered whether the other four stores in Urvina (and elsewhere) are similarly
impaired.
■ Going concern is unlikely to be an issue unless all the supermarkets are located in cities facing a downward trend
in demand.
Tutorial note: Marks will be awarded for stating the rules for recognition of an impairment loss for a cash-generating
unit. However, as it is expected that the majority of candidates will not deal with this matter, the rules of IAS 36 are
not reproduced here.
(ii) Audit evidence
■ Board minutes approving the store’s ‘facelift’ and documenting the need to address the fall in demand for it as a
supermarket.
■ Recomputation of the carrying amount of goodwill (2/5 × $5·5m = $2·2m).
■ A schedule identifying all the assets that relate to the store under review and the carrying amounts thereof agreed
to the underlying accounting records (e.g. non-current asset register).
■ Recalculation of value in use and/or fair value less costs to sell of the cash-generating unit (i.e. the store that is to
become the City Metro, or the three stores bought together) as at 31 March 2005.
Tutorial note: If just one of these amounts exceeds carrying amount there will be no impairment loss. Also, as
there is a plan NOT to sell the store it is most likely that value in use should be used.
■ Agreement of cash flow projections (e.g. to approved budgets/forecast revenues and costs for a maximum of five
years, unless a longer period can be justified).
■ Written management representation relating to the assumptions used in the preparation of financial budgets.
■ Agreement that the pre-tax discount rate used reflects current market assessments of the time value of money (and
the risks specific to the store) and is reasonable. For example, by comparison with Volcan’s weighted average cost
of capital.
■ Inspection of the store (if this month it should be closed for refurbishment).
■ Revenue budgets and cash flow projections for:
– the two stores purchased at the same time;
– the other stores in Urvina; and
– the stores elsewhere.
Also actual after-date sales by store compared with budget. -
第18题：
(b) You are the audit manager of Johnston Co, a private company. The draft consolidated financial statements for
the year ended 31 March 2006 show profit before taxation of $10·5 million (2005 – $9·4 million) and total
assets of $55·2 million (2005 – $50·7 million).
Your firm was appointed auditor of Tiltman Co when Johnston Co acquired all the shares of Tiltman Co in March
2006. Tiltman’s draft financial statements for the year ended 31 March 2006 show profit before taxation of
$0·7 million (2005 – $1·7 million) and total assets of $16·1 million (2005 – $16·6 million). The auditor’s
report on the financial statements for the year ended 31 March 2005 was unmodified.
You are currently reviewing two matters that have been left for your attention on the audit working paper files for
the year ended 31 March 2006:
(i) In December 2004 Tiltman installed a new computer system that properly quantified an overvaluation of
inventory amounting to $2·7 million. This is being written off over three years.
(ii) In May 2006, Tiltman’s head office was relocated to Johnston’s premises as part of a restructuring.
Provisions for the resulting redundancies and non-cancellable lease payments amounting to $2·3 million
have been made in the financial statements of Tiltman for the year ended 31 March 2006.
Required:
Identify and comment on the implications of these two matters for your auditor’s reports on the financial
statements of Johnston Co and Tiltman Co for the year ended 31 March 2006. (10 marks)
正确答案：
(b) Tiltman Co
Tiltman’s total assets at 31 March 2006 represent 29% (16·1/55·2 × 100) of Johnston’s total assets. The subsidiary is
therefore material to Johnston’s consolidated financial statements.
Tutorial note: Tiltman’s profit for the year is not relevant as the acquisition took place just before the year end and will
therefore have no impact on the consolidated income statement. Calculations of the effect on consolidated profit before
taxation are therefore inappropriate and will not be awarded marks.
(i) Inventory overvaluation
This should have been written off to the income statement in the year to 31 March 2005 and not spread over three
years (contrary to IAS 2 ‘Inventories’).
At 31 March 2006 inventory is overvalued by $0·9m. This represents all Tiltmans’s profit for the year and 5·6% of
total assets and is material. At 31 March 2005 inventory was materially overvalued by $1·8m ($1·7m reported profit
should have been a $0·1m loss).
Tutorial note: 1/3 of the overvaluation was written off in the prior period (i.e. year to 31 March 2005) instead of $2·7m.
That the prior period’s auditor’s report was unmodified means that the previous auditor concurred with an incorrect
accounting treatment (or otherwise gave an inappropriate audit opinion).
As the matter is material a prior period adjustment is required (IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’). $1·8m should be written off against opening reserves (i.e. restated as at 1 April 2005).
(ii) Restructuring provision
$2·3m expense has been charged to Tiltman’s profit and loss in arriving at a draft profit of $0·7m. This is very material.
(The provision represents 14·3% of Tiltman’s total assets and is material to the balance sheet date also.)
The provision for redundancies and onerous contracts should not have been made for the year ended 31 March 2006
unless there was a constructive obligation at the balance sheet date (IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Assets’). So, unless the main features of the restructuring plan had been announced to those affected (i.e.
redundancy notifications issued to employees), the provision should be reversed. However, it should then be disclosed
as a non-adjusting post balance sheet event (IAS 10 ‘Events After the Balance Sheet Date’).
Given the short time (less than one month) between acquisition and the balance sheet it is very possible that a
constructive obligation does not arise at the balance sheet date. The relocation in May was only part of a restructuring
(and could be the first evidence that Johnston’s management has started to implement a restructuring plan).
There is a risk that goodwill on consolidation of Tiltman may be overstated in Johnston’s consolidated financial
statements. To avoid the $2·3 expense having a significant effect on post-acquisition profit (which may be negligible
due to the short time between acquisition and year end), Johnston may have recognised it as a liability in the
determination of goodwill on acquisition.
However, the execution of Tiltman’s restructuring plan, though made for the year ended 31 March 2006, was conditional
upon its acquisition by Johnston. It does not therefore represent, immediately before the business combination, a
present obligation of Johnston. Nor is it a contingent liability of Johnston immediately before the combination. Therefore
Johnston cannot recognise a liability for Tiltman’s restructuring plans as part of allocating the cost of the combination
(IFRS 3 ‘Business Combinations’).
Tiltman’s auditor’s report
The following adjustments are required to the financial statements:
■ restructuring provision, $2·3m, eliminated;
■ adequate disclosure of relocation as a non-adjusting post balance sheet event;
■ current period inventory written down by $0·9m;
■ prior period inventory (and reserves) written down by $1·8m.
Profit for the year to 31 March 2006 should be $3·9m ($0·7 + $0·9 + $2·3).
If all these adjustments are made the auditor’s report should be unmodified. Otherwise, the auditor’s report should be
qualified ‘except for’ on grounds of disagreement. If none of the adjustments are made, the qualification should still be
‘except for’ as the matters are not pervasive.
Johnston’s auditor’s report
If Tiltman’s auditor’s report is unmodified (because the required adjustments are made) the auditor’s report of Johnston
should be similarly unmodified. As Tiltman is wholly-owned by Johnston there should be no problem getting the
adjustments made.
If no adjustments were made in Tiltman’s financial statements, adjustments could be made on consolidation, if
necessary, to avoid modification of the auditor’s report on Johnston’s financial statements.
The effect of these adjustments on Tiltman’s net assets is an increase of $1·4m. Goodwill arising on consolidation (if
any) would be reduced by $1·4m. The reduction in consolidated total assets required ($0·9m + $1·4m) is therefore
the same as the reduction in consolidated total liabilities (i.e. $2·3m). $2·3m is material (4·2% consolidated total
assets). If Tiltman’s financial statements are not adjusted and no adjustments are made on consolidation, the
consolidated financial position (balance sheet) should be qualified ‘except for’. The results of operations (i.e. profit for
the period) should be unqualified (if permitted in the jurisdiction in which Johnston reports).
Adjustment in respect of the inventory valuation may not be required as Johnston should have consolidated inventory
at fair value on acquisition. In this case, consolidated total liabilities should be reduced by $2·3m and goodwill arising
on consolidation (if any) reduced by $2·3m.
Tutorial note: The effect of any possible goodwill impairment has been ignored as the subsidiary has only just been
acquired and the balance sheet date is very close to the date of acquisition. -
第19题：
(b) You are the audit manager of Petrie Co, a private company, that retails kitchen utensils. The draft financial
statements for the year ended 31 March 2007 show revenue $42·2 million (2006 – $41·8 million), profit before
taxation of $1·8 million (2006 – $2·2 million) and total assets of $30·7 million (2006 – $23·4 million).
You are currently reviewing two matters that have been left for your attention on Petrie’s audit working paper file
for the year ended 31 March 2007:
(i) Petrie’s management board decided to revalue properties for the year ended 31 March 2007 that had
previously all been measured at depreciated cost. At the balance sheet date three properties had been
revalued by a total of $1·7 million. Another nine properties have since been revalued by $5·4 million. The
remaining three properties are expected to be revalued later in 2007. (5 marks)
Required:
Identify and comment on the implications of these two matters for your auditor’s report on the financial
statements of Petrie Co for the year ended 31 March 2007.
NOTE: The mark allocation is shown against each of the matters above.
正确答案：
(b) Implications for auditor’s report
(i) Selective revaluation of premises
The revaluations are clearly material to the balance sheet as $1·7 million and $5·4 million represent 5·5% and 17·6%
of total assets, respectively (and 23·1% in total). As the effects of the revaluation on line items in the financial statements
are clearly identified (e.g. revalued amount, depreciation, surplus in statement of changes in equity) the matter is not
pervasive.
The valuations of the nine properties after the year end provide additional evidence of conditions existing at the year end
and are therefore adjusting events per IAS 10 Events After the Balance Sheet Date.
Tutorial note: It is ‘now’ still less than three months after the year end so these valuations can reasonably be expected
to reflect year end values.
However, IAS 16 Property, Plant and Equipment does not permit the selective revaluation of assets thus the whole class
of premises would need to have been revalued for the year to 31 March 2007 to change the measurement basis for this
reporting period.
The revaluation exercise is incomplete. Unless the remaining three properties are revalued before the auditor’s report on
the financial statements for the year ended 31 March 2007 is signed off:
(1) the $7·1 revaluation made so far must be reversed to show all premises at depreciated cost as in previous years;
OR
(2) the auditor’s report would be qualified ‘except for’ disagreement regarding non-compliance with IAS 16.
When it is appropriate to adopt the revaluation model (e.g. next year) the change in accounting policy (from a cost model
to a revaluation model) should be accounted for in accordance with IAS 16 (i.e. as a revaluation).
Tutorial note: IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors does not apply to the initial
application of a policy to revalue assets in accordance with IAS 16.
Assuming the revaluation is written back, before giving an unmodified opinion, the auditor should consider why the three
properties were not revalued. In particular if there are any indicators of impairment (e.g. physical dilapidation) there
should be sufficient evidence on the working paper file to show that the carrying amount of these properties is not
materially greater than their recoverable amount (i.e. the higher of value in use and fair value less costs to sell).
If there is insufficient evidence to confirm that the three properties are not impaired (e.g. if the auditor was prevented
from inspecting the properties) the auditor’s report would be qualified ‘except for’ on grounds of limitation on scope.
If there is evidence of material impairment but management fail to write down the carrying amount to recoverable
amount the auditor’s report would be qualified ‘except for’ disagreement regarding non-compliance with IAS 36
Impairment of Assets.
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第20题：
This city is famous ____ its beautiful buildings.A.on
B.at
C.for
D.with
答案：C
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第21题：
The following trial balance relates to Sandown at 30 September 2009:
The following notes are relevant:
(i) Sandown’s revenue includes $16 million for goods sold to Pending on 1 October 2008. The terms of the sale are that Sandown will incur ongoing service and support costs of $1·2 million per annum for three years after the sale. Sandown normally makes a gross profit of 40% on such servicing and support work. Ignore the time value of money.
(ii) Administrative expenses include an equity dividend of 4·8 cents per share paid during the year.
(iii) The 5% convertible loan note was issued for proceeds of $20 million on 1 October 2007. It has an effective interest rate of 8% due to the value of its conversion option.
(iv) During the year Sandown sold an available-for-sale investment for $11 million. At the date of sale it had a
carrying amount of $8·8 million and had originally cost $7 million. Sandown has recorded the disposal of the
investment. The remaining available-for-sale investments (the $26·5 million in the trial balance) have a fair value of $29 million at 30 September 2009. The other reserve in the trial balance represents the net increase in the value of the available-for-sale investments as at 1 October 2008. Ignore deferred tax on these transactions.
(v) The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2008. The directors have estimated the provision for income tax for the year ended 30 September 2009 at $16·2 million. At 30 September 2009 the carrying amounts of Sandown’s net assets were $13 million in excess of their tax base. The income tax rate of Sandown is 30%.
(vi) Non-current assets:
The freehold property has a land element of $13 million. The building element is being depreciated on a
straight-line basis.
Plant and equipment is depreciated at 40% per annum using the reducing balance method.
Sandown’s brand in the trial balance relates to a product line that received bad publicity during the year which led to falling sales revenues. An impairment review was conducted on 1 April 2009 which concluded that, based on estimated future sales, the brand had a value in use of $12 million and a remaining life of only three years.
However, on the same date as the impairment review, Sandown received an offer to purchase the brand for
$15 million. Prior to the impairment review, it was being depreciated using the straight-line method over a
10-year life.
No depreciation/amortisation has yet been charged on any non-current asset for the year ended 30 September
2009. Depreciation, amortisation and impairment charges are all charged to cost of sales.
Required:
(a) Prepare the statement of comprehensive income for Sandown for the year ended 30 September 2009.
(13 marks)
(b) Prepare the statement of financial position of Sandown as at 30 September 2009. (12 marks)
Notes to the financial statements are not required.
A statement of changes in equity is not required.
正确答案：
(i)IAS18Revenuerequiresthatwheresalesrevenueincludesanamountforaftersalesservicingandsupportcoststhenaproportionoftherevenueshouldbedeferred.Theamountdeferredshouldcoverthecostandareasonableprofit(inthiscaseagrossprofitof40%)ontheservices.Astheservicingandsupportisforthreeyearsandthedateofthesalewas1October2008,revenuerelatingtotwoyears’servicingandsupportprovisionmustbedeferred:($1·2millionx2/0·6)=$4million.Thisisshownas$2millioninbothcurrentandnon-currentliabilities. -
第22题：
(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)
正确答案：(a) The accounting for the transaction as an asset acquisition does not comply with the requirements of IFRS 3 Business Combinations and should have been accounted as a business combination. This would mean that transaction costs would be expensed, the vessels recognised at fair value, any deferred tax recognised at nominal value and the difference between these amounts and the consideration paid to be recognised as goodwill.
In accordance with IFRS 3, an entity should determine whether a transaction is a business combination by applying the definition of a business in IFRS 3. A business is an integrated set of activities and assets which is capable of being conducted and managed for the purpose of providing a return in the form. of dividends, lower costs or other economic benefits directly to investors or other owners, members or participants. A business consists of inputs and processes applied to those inputs which have the ability to create outputs. Although businesses usually have outputs, outputs are not required to qualify as a business.
When analysing the transaction, the following elements are relevant:
(i) Inputs: Shares in vessel owning companies, charter arrangements, outsourcing arrangements with a management company, and relationships with a shipping broker.
(ii) Processes: Activities regarding chartering and operating the vessels, financing the business, purchase and sales of vessels.
(iii) Outputs: Ceemone would generate revenue from charter agreements and has the ability to gain economic benefit from the vessels.
IFRS 3 states that whether a seller operated a set of assets and activities as a business or intends to operate it as a business is not relevant in evaluating whether it is a business. It is not relevant therefore that some activities were outsourced as Ceemone could chose to conduct and manage the integrated set of assets and activities as a business. As a result, the acquisition included all the elements which constitute a business, in accordance with IFRS 3.
IFRS 10 Consolidated Financial Statements sets out the situation where an investor controls an investee. This is the case, if and only if, the investor has all of the following elements:
(i) power over the investee, that is, the investor has existing rights which give it the ability to direct the relevant activities (the activities which significantly affect the investee’s returns);
(ii) exposure, or rights, to variable returns from its involvement with the investee;
(iii) the ability to use its power over the investee to affect the amount of the investor’s returns.
Where a party has all three elements, then it is a parent; where at least one element is missing, then it is not. In every case, IFRS 10 looks to the substance of the arrangement and not just to its legal form. Each situation needs to be assessed individually. The question arises in this case as to whether the entities created are subsidiaries of the bank. The bank is likely to have power over the investee, may be exposed to variable returns and certainly may have the power to affect the amount of the returns. Thus the bank is likely to have a measure of control but the extent will depend on the constitution of the entity.
(b) Kayte’s calculation of the residual value of the vessels with a 10-year useful life is unacceptable under IAS 16 Property, Plant and Equipment because estimating residual value based on acquisition cost does not comply with the requirements of IAS 16. Kayte should prepare a new model to determine residual value which would take account of broker valuations at the end of each reporting period and which would produce zero depreciation charge when estimated residual value was higher than the carrying amount.
IAS 16 paragraph 6 defines residual value as the estimated amount which an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already at the age and in the condition expected at the end of its useful life.
IAS 16 requires the residual value to be reviewed at least at the end of each financial year end with the depreciable amount of an asset allocated on a systematic basis over its useful life. IAS 16 specifies that the depreciable amount of an asset is determined after deducting its residual value.
Kayte’s original model implied that the residual value was constant for the vessel’s entire useful life. The residual value has to be adjusted especially when an expected sale approaches, and the residual value has to come closer to disposal proceeds minus disposal costs at the end of the useful life. IAS 16 says that in cases when the residual value is greater than the asset’s carrying amount, the depreciation charge is zero unless and until its residual value subsequently decreases to an amount below the asset’s carrying amount. The residual value should be the value at the reporting date as if the vessel were already of the age and in the condition expected at the end of its useful life. An increase in the expected residual value of an asset because of past events will affect the depreciable amount, while expectation of future changes in residual value other than the effects of expected wear and tear will not. There is no guidance in IAS 16 on how to estimate residual value when the useful life is considered to be shorter than the economic life. Undesirable volatility is not a convincing argument to support the accounting treatment, and broker valuations could be a useful starting point to estimate residual value.
As regards the vessels which are kept for the whole of their economic life, a residual value based upon the scrap value of steel is acceptable. Therefore the vessels should be depreciated based upon the cost less the scrap value of steel over the 30-year period. The engine need not be componentised as it will have the same 30-year life if maintained every 10 years. It is likely that the cost of major planned maintenance will increase over the life of a vessel due to inflation and the age of the vessel. This additional cost will be capitalised when incurred and therefore the depreciation charge on these components may be greater in the later stages of a vessel’s life.
When major planned maintenance work is to be undertaken, the cost should be capitalised. The engine overhaul will be capitalised as a new asset which will then be depreciated over the 10-year period to the next overhaul. The depreciation of the original capitalised amount will typically be calculated such that it had a net book value of nil when the overhaul is undertaken.
This is not the case with one vessel, because work was required earlier than expected. In this case, any remaining net book value of the old engine and overhaul cost should be expensed immediately.
The initial carve out of components should include all major maintenance events which are likely to occur over the economic life of the vessel. Sometimes, it may subsequently be found that the initial allocation was insufficiently detailed, in that not all components were identified. This is the case with the funnels. In this situation it is necessary to determine what the net book value of the component would currently be had it been initially identified. This will sometimes require the initial cost to be determined by reference to the replacement cost and the associated accumulated depreciation charge determined using the rate used for the vessel. This is likely to leave a significant net book value in the component being replaced, which will need to be written off at the time the replacement is capitalised.
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第23题：
单选题It can be inferred from the passage that the isotope record taken from ocean sediments would be less useful to researchers if which of the following were true?AIt indicated that lighter isotopes of oxygen predominated at certain times.
BIt had far more gaps in its sequence than the record taken from rocks on land.
CIt indicated that climate shifts did not occur every 100,000 years.
DIt indicated that the ratios of oxygen 16 and oxygen 18 in ocean water were not consistent with those found in fresh water.
EIt stretched back for only a million years.
正确答案： B解析：
推断题。第三段第四句提到：Because of these advantages, sedimentary evidence can be dated with sufficient accuracy by radiometric methods to establish a precise chronology of the ice ages，所以可知如果海底同位素记录失去了其全球性以及延续性，那么其正确性将会大受影响，故B项是正确的。