IFRS 17 Module 7 - Revision Pack V3 30-06-2012

DiplomainIFRS(June2012)
RevisionPack
Page
Q1GlenapplePlc ............................................................................... 3
Q2McDowellLtd ............................................................................... 8
GlenOaksChemist ..................................................................... 9
Q3GatesPlc ..................................................................................... 10
TimberLodgeLtd ......................................................................... 10
(Question1to3takenfromCharteredAccountantsIrelandSampleexampaper1issuedSeptember2011)
Q4RainbowLtd .................................................................................. 14
Q5GPLtd........................................................................................... 16
FlintstoneLtd ................................................................................ 17
Q6Equityandliabilities...................................................................... 18
YoungLifeLtd................................................................................ 18
(Question4to6takenfromCharteredAccountantsIrelandSampleexampaper2issuedFeb2012)
Q7TrafalgarPlc .................................................................................. 19
Q8Patchet........................................................................................... 21
(Question7to8takenfromICEAWwebsiteDiplomainIFRSFebruary2012exam)
Q9Delta............................................................................................. 23
Q10Rose ............................................................................................. 25
Q11Alpha(1) ...................................................................................... 27
Q12Alpha(2) ..................................................................................... 29
Q13Jocatt ........................................................................................... 32
(Question9to13takenfromACCADiplomainIFRSpastexampapers)
Samplequestions/exampapers,otherthanthosepublishedbyCharteredAccountantsIrelandandexpressly
referredtoassamplepapersprovidedfortheDiplomainIFRSs,shouldonlybeusedforrevisionpurposes,to
testyourcomprehensionofaspecificelementofthecourse,i.e.aspecificStandard.Participantsshouldonly
usetheseinconjunctionwiththeCharteredAccountantsIrelandsamples.Thesesamplepapersshouldbeused
asthecorecomplementarymaterialtoaidyourstudyandrevisioninadvanceofthefinalexaminationandas
toolstofamiliariseyourselfwiththelayoutofthefinalexaminationandtoperfectaspectsofexamtiming.
Chartered Accountants Ireland

Diploma in IFRS
Exam 1 - Pilot
Day / Date / Time:
XXXXXXX, Y:00 p.m. G.M.T GAV IS THIS NEEDED FOR

PILOT?
There are 3 questions, all of which are compulsory.
An exam total of 100 marks are allocated across the 3 questions.
The examination duration is 2 hours and 30 minutes; of which the first 30 minutes is
designated reading time. Candidates are not permitted to write in their answer booklets
until the designated reading time is completed.
Wherever possible and appropriate, arguments should be supported by reference to

appropriate accounting standards.
There is a 5 minute allowance at the conclusion of the examination to enable candidates

to tidy his / her answer book including ensuring that the examination number and
number of questions answered have been correctly completed.
Only answers written into the official Chartered Accountants Ireland Examination
booklet will be accepted.
Please submit and reference all workings.
Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Question 1
Glen-apple plc
Consolidated Statement of Comprehensive Income for the year ended 30 June 2011
Revenue
12,000
Cost of sales
(3,200)
Operating expenses
(2,800)
Income from associate
2,050
Finance costs
(1,700)
Profit before tax
6,350
Tax
(1,905)
Profit after tax
4,445
Other comprehensive income

Gains on property revaluation
2,050
Total Comprehensive Income
6,495
Glen-apple plc
Consolidated Statement of Financial Position as at 30 June 2011 and 2010
2011
2010
Investment in associate
13,500
12,000
Property
15,000
12,810
Plant and machinery
14,720
3,000
Total non-current assets
43,220
27,810
Inventory
12,400
15,500
Trade receivables
21,600
20,800
Total current assets
34,000
36,300
Total assets
77,220
64,110
Assets
Non-current assets
Current assets
Page2of9

Liabilities
Non-current liabilities
Provision for site restoration
20,700
13,700
Finance lease liabilities
10,200
9,900
Total non-current liabilities
30,900
23,600
Trade payables
1,200
1,910
Bank overdraft
1,350
2,170
Provision for legal claims
3,450
2,560
Overtime payable
1,600
1,280
Finance lease liabilities
2,600
2,000
Total current liabilities
10,200
9,920
Total liabilities
41,100
33,520
Net assets
36,120
30,590
Equity
5,100
2,550
Revaluation reserve
4,000
2,000
Retained earnings
27,020
26,040
Net equity
36,120
30,590
Current liabilities
Equity
Notes
(1) Property has a remaining useful life at 1 July 2010 of 40 years. Glen-apple plc accounting
policy elects the optional annual transfer of the revaluation reserve. Total depreciation for
the year was 900.
(2) On the last day of the financial year, the company signed two leases outlined below. No
other leases were entered into in the current financial year.
Lease A
Lease A is to rent a black and white photocopier, and the present value of the rental
payments are 16,000. The rent is charged based on a monthly fixed fee of three cents
per copy. The copier was delivered on the last day of the year and no payments have
been made to date.
Lease B
Lease B is to rent a colour photocopier, and the present value of the rental payments are
6,000. The rent is charged based on a monthly fixed fee of 180. The lessor granted a
Page3of9

concession and structured the payments so that they start in the 15th month after the asset
has been delivered. Exactly 75% of the rental fee is to cover the usage of the equipment.
The supplier is obligated under this contract to maintain the asset, and if the entity were
to enter into a contract of this type independently, this would be expected to be
approximately 25% of the contract value. The copier was delivered on the last day of the
year and no payments have been made to date. The purchase price of a new copier would
have been 4,700.
(3) On 15 April 2011 the bonus issue of equity shares of one share for every five shares held
was and this was issued from retained earnings. There was also an issue of shares for
cash during the year on 1 May 2011.
(4) The secretary that typed up this report misplaced the amount that was paid for dividends
and as she was in a hurry to leave for vacation, asked you to work it out from the
information provided.
(5) During the year, Glen-apple plc purchased 100% of Pear Co for 2,000. The financial
statements are consolidated and include the year end balances as per IFRS. At the date of
acquisition, the fair value of the assets and liabilities of Pear Co were as follows:
Cash
1,000
Receivables
2,000
Machinery
1,000
Payables
2,000
(6) During the year, it was uncovered that the warehouse supervisor stole 2,000 in the prior
year. The current year and prior years inventory was falsified with empty boxes during
the stock count. The supervisor has left the country shortly after she was caught, and it is
unlikely that the amount is now recoverable. This theft has not been adjusted for in the
financial information presented.
(7) Machinery to the value of 4,000 was purchased with proceeds from a government grant.
The Machinery was not recorded in the statement of position as it had a cost of nil to the
company.
(8) The movement in site restoration relates only to plant acquired in the current year.
Required:
Prepare the consolidated statement of cash flow for Glen-apple plc using the indirect method
for the year ended 30 June 2011 and the consolidated statement of changes in equity for
Glen-apple plc.
Page4of9

(Notes to the statements are not required.)
[50 Marks]
Page5of9

Question 2 (comprises both a Part A and Part B)
Part A: McDowell Ltd.
McDowell Ltd. acquired an 80% equity interest in Penny Mart Ltd. on 1 January 2010. At
the date of acquisition, the following financial information is relevant:
the consideration was 45 million cash.
the fair value of the identifiable assets and liabilities were 35 million (excluding
deferred tax).
the only difference between the carrying value and the fair value of identifiable assets
and liabilities is related to inventory where the fair value was larger than the carrying
value by 3 million. The inventory was sold to a third party in the normal course of
operations six months after the acquisition date by McDowell.
On 15 July 2011, the recoverable amount of Penny Mart was determined to be 30 million.
At that date the carrying value of Penny Mart was 35 million.
In the tax jurisdiction of Penny Mart, the corporate tax rate is 33% and in the tax jurisdiction
of McDowell, the corporate tax rate is 40%.
The policy of McDowell is to value the NCI at the fair value of the identifiable assets.
Required:
a) Calculate the goodwill recorded in the group accounts for McDowell as at 1 January
2010.
[6 marks]
b) Explain the impact of the inventory fair value difference for the 2010 financial year.
[4 Marks]
c) Calculate the impairment loss on goodwill in 2011, and allocate the impairment loss
between the parent and the non controlling interest.
[5 Marks]
Total Marks: 15
Page6of9

Part B: Glen Oaks Chemist Ltd.
Glen Oaks Chemist Ltd. is a pharmacy located in a small industrial town primarily serving
the pharmaceutical requirements of the employees of two main companies in the town. One
of these companies, operating in the shipbuilding industry, has recently significantly reduced
its workforce, this being an impairment indicator under IAS 36. The impairment event
occurred on 30 June 2011. The business in its entirety is considered one cash generating unit.
After an impairment review, the value in use of Glen Oaks was estimated at 10,000, and the
net selling prices (after selling costs) are listed below:
Carrying value
Net selling
As at 30 June 2011
Price
Inventory
5,000
3,000
Delivery vehicle
7,000
5,000
Computers
3,000
1,300
10,000
25,000
9,300
Leasehold improvements
Notes:
(1)
The selling price of the inventory is how much Mr. Murphy (he owns a pharmacy in a
neighbouring town) would purchase the inventory. If Glen Oaks operations continue,
these products would be sold to retail customers at 6,000, and the selling costs are
approximately 2,000.
(2)
If the assets are sold, the leasehold improvements would have a value of nil.
Required:
Calculate the amount that the assets of Glen Oaks Chemist Ltd. should be recorded at in the
statement of financial position at 30 June 2011.
[15 Marks]
Total Marks Part A and B: 30
Page7of9

Question 3 Gates plc
Gates plc hired a new accountant on 15 October 2010.
After the new accountant conducted a review in November 2010, it was noted from a review
of email correspondence that the previous accountant (a relatively new and experienced) was
considering whether to make a provision for environmental damage caused during the
construction of an ocean based oil rig.
No provision was made in the statement of financial position as at 30 June 2010 for
environmental damage.
Required:
Discuss the facts and circumstances that would indicate whether the adjustment for the
environmental damage is a change in accounting estimate or an accounting error.
Your answer should outline the determining factors that should be reviewed to determine the
correct classification of whether it is a change in estimate or an accounting error.
[10 Marks]
Part B: Timber Lodge Ltd.
Timber Lodge Ltd. is a luxury five star resort. The resort was recently inspected by the
National Park Services, and Timber Lodge was notified that 325 trees were infected with
Virus J.
Virus J kills a tree within a matter of months by destroying the root system; as the trees are
then not stable, they may fall at any time and thereby endanger life. Therefore, national park
regulations require that trees infected with Virus J be cut down within 180 days of
notification by the national park.
If the trees are not cut down by Timber Lodge, the national park will cut down the trees at a
cost of 1,000 per tree. If Timber Lodge cuts down the trees themselves, through securing the
assistance of university students during their summer holiday period, they estimate a cost of
500 per tree for such felling.
The notification from the national park was received on 15 May 2011.
Timber Lodges financial year end is 30 June. As of 30 June 2011, the trees were not
removed and no contract was signed for their removal.
Required:
Explain, based on IAS 37, the obligating event triggering the liability for the removal of trees
and the related accounting treatment in the financial statements for the year ending 30 June
2011.
Page8of9
10

[10 Marks]
Page9of9
END OF EXAMINATION
11
12
Chartered Accountants Ireland

Diploma in International Financial Reporting
Standards
Sample Paper 2
There are 3 questions, all of which are compulsory.
An exam total of 100 marks are allocated across the 3 questions.
This is an open-book examination; the duration is 2 hours and 30 minutes of which the
first 30 minutes is designated reading time. Candidates are not permitted to write in
their answer booklets until the reading time has elapsed.
Wherever possible and appropriate, arguments should be supported by reference to

appropriate accounting standards.
Candidates should take care to ensure that the information on the cover of the answer
booklet accurately reflects the questions which have been attempted. The examiner will
mark the answer book on that assumption.
There is a 5 minute allowance at the conclusion of the examination to enable candidates

to tidy his / her answer book including ensuring that the examination number and
number of questions answered have been correctly completed.
Only answers written into the official Chartered Accountants Ireland Examination
booklet will be accepted.
Please submit and reference all workings.
Chartered Accountants Ireland 2012.

Whilst every effort is made to ensure all the information contained in this document is correct at date of
publication, Chartered Accountants Ireland reserves the right to amend any information herein contained at its
discretion and without prior notice.
13
Question 1
Rainbow Ltd.
The following trial balance is for Rainbow Ltd. at 30 June 2011:
Revenue
Purchases
Other expenses
Interest expense
Tax expense
Dividend income Beares plc.
Investment in Beares plc. (note iv)
Land at cost (note ii)
Building- at cost (note ii)
Plant and equipment cost
Depreciation 1 July 2010 - Plant and equipment
Depreciation 1 July 2010 - Building
Trade receivables
Inventory 1 July 2010 (note i)
Bank
Trade payables
Deferred tax liability opening balance (note v)
Share capital
Share premium
Retained earnings 1 July 2010
1,468,000
550,000
350,000
5,000
10,000
1,200
150,000
20,000
80,000
100,000
29,250
8,000
45,000
30,000
4,500
24,500
25,000
21,000
9,000
241,450
The following notes are relevant:

(i) The inventory at 30 June 2011 was measured at a cost value of 85,000. This includes
5,000 of slow moving inventory that is expected to be sold for a net 3,000.
(ii) On 1 July 2010 Rainbow Ltd. revalued its land to 25,000 and its buildings to 105,000.
The building had an estimated life of 40 years as at 1 July 2006. Depreciation is charged
on a straight-line basis. The company elects for the optional transfer of the revaluation
reserve.
Plant and equipment is depreciated at 20% per annum on the diminishing balance basis
and the current year depreciation has not yet been provided for.
(iii) Rainbow Ltd. introduced a share incentive scheme on 1 January 2010. To date, no
adjustments have been recorded as the finance director is of the opinion that the
triggering event to record this will be when the share options are exercised. The terms of
the scheme granted 100,000 options and those options may be exercised on 1 January
2013. At the grant date, 90% of the options are expected to vest, and this was revised to
85% on 30 June 2010 and then to 80% on 30 June 2011.
The fair values of the options were as follows:
4
6
9
1 January 2010
30 June 2010
30 June 2011
14
Page 2 of 6
(iv) In the trial balance, the investment in Beares plc. represents an equity interest of 15%.
Rainbow Ltd. is considered a strategic investor for Beares plc. as Rainbow Ltd. has a
wealth of experience in new technologies that Beares plc. is significantly investing in.
Two members of Rainbow Ltd.s key management were elected to the board of directors
of Beares plc. Beares plc. had a profit for the year of 25,000, and other comprehensive
income of 3,000 due to a revaluation of its Buildings net of deferred tax. Beares plc. has
a 30 June year end.
On 15 May 2011, Rainbow Ltd. sold a large quantity of merchandise to Beares plc. and
this resulted in a profit in Rainbow Ltd. of 40,000. On 30 June 2011, the inventory was
in the warehouse of Beares plc. and was not yet sold to third party customers.
(v) The corporate tax rate is 20% and the deferred tax liability at the end of the year is
30,000 after all adjustments have been made.
Required:
In accordance with IFRS, as far as the information permits, prepare the statement of
comprehensive income and the statement of financial position for the year ended 30 June
2011. (Notes to the statements are not required.) Please show all workings clearly.
[50 Marks]
15
Page 3 of 6
Question 2 (comprises both Part A and Part B)

Part A: GP Ltd.
GP Ltd. has the following information to assist in the preparation of the deferred tax
computation for the 2011 financial year.
(1) Investment properties increased by 2,500 during the year and GP Ltd. has adopted IAS
40 where investment properties are reflected at their current value in the financial
statements. Gains on investment properties are taxable when the property is sold.
(2) On a review of the tax computation it was noted that the current tax liability was
underprovided by 500.
(3) During the year, property, plant and equipment were revalued upwards by 3,000. The
tax capital allowance during the year was 2,500 and depreciation under IFRS was
4,000.
The current years tax expense is 4,500 before taking into account any of the adjustments
above and the corporate tax rate is 20%.
The opening balance of deferred tax was a net liability of 1,200.
Required:
Prepare the extracts of the tax expense to show how it is disclosed in the statement of
comprehensive income and statement of financial position for the 2011 financial year in
accordance with IFRS. In the extracts show only the impact of the tax.
[15 Marks]
16
Page 4 of 6
Part B: Flintstone Ltd.

Flintstone Ltd. is constructing an office block in Ballsbridge on behalf of a third party. The
contract will take five years to complete, and the contract, which commenced in 2010, is now
in the second year.
Flintstone Ltd.s accounting policy for measuring stage of completion is to use the work
certified method. As at 31 December 2010, work certified was 25% and at 31 December
2011, work certified was 50%.
The Directors ascertain that the outcome of a contract can be estimated reliably once it is
20% complete.
The total contract is a fixed price of 10 million.
In 2010, total costs were estimated at 8 million, of which 3 million were incurred.
In 2011, total costs were estimated to be 7 million; of which costs incurred were 5 million.
Required:
Prepare the statement of financial position and the statement of comprehensive income
extracts for the contract for 2010 and 2011.
[15 Marks]
17
Page 5 of 6
Question 3 (comprises both Part A and Part B)

Part A:
IAS specially states that redeemable preferred shares are liabilities and non-redeemable
preferred shares are equity.
Required:
Discuss and justify if the accounting treatment prescribed is consistent with the definition of
equity and liabilities in the conceptual framework.
[10 Marks]
Part B: Young Life Ltd.

Young Life Ltd. has completed the research into enabling technology that automatically
matches photos with a large global database of names. After the research phase was
completed, and the technology was developed to achieve this objective, Young Life Ltd. is
now in the development phase of a number of products for commercial application.
Required:
Under IAS 38, discuss and explain (not merely listing the requirements of the standard), the
supporting evidence and documentation that would be reasonably expected to justify the
capitalisation of costs during the development phase.
[10 Marks]
18
Page 6 of 6
Trafalgar is a public limited company reporting under IFRSs.

The trial balance of Trafalgar extracted from the company's general ledger as at
31 December 2011 showed the following balances
$'000
DR
Land
Buildings revalued
Buildings accumulated depreciation at 1 January 2011
Plant and equipment cost
Plant and equipment accumulated depreciation at
1 January 2011
Development costs
Investment property at 1 January 2011
Inventories at 1 January 2011
Trade receivables
Cash and cash equivalents
Ordinary share capital ($1 shares)
Share premium
Retained earnings at 1 January 2011
Revaluation surplus at 1 January 2011 (land and buildings)
Long-term borrowings
Deferred tax liability at 1 January 2011
Trade and other payables
Dividends paid
Sales
Purchases
Distribution costs
Administrative expenses
Finance costs
$'000
CR
170,000
260,000
10,400
120,000
12,800
10,600
37,300
56,500
8,400
18,000
322,400
60,300
80,700
4,800
1,161,800
22,800
100,000
185,000
101,900
28,000
80,000
33,000
54,900
545,800
1,161,800
The following information needs to be taken into account:

(a) The company's accounting policy in respect of depreciation of its property, plant and
equipment is as follows:
Buildings
Plant and equipment
Straight line to a zero residual value (see below)

10% reducing balance
The buildings were purchased on 1 January 2001 and were last revalued on
31 December 2008, when their remaining useful life was revised to 50 years from that
date.
The company treats depreciation of buildings as an administrative expense and
depreciation of plant and equipment as a cost of sale. No land and buildings were
purchased or sold during the year.
The company wishes to revalue its land and buildings at 31 December 2011. The
surveyor's valuation was $436 million as at that date (including $180 million for the land).
19
The company treats revaluation gains as realised on disposal or retirement of the asset.
Revaluation gains (or losses) are taxable (or tax deductible) when the asset is disposed
of, or otherwise derecognised, in the tax regime in which Trafalgar operates.
(b) The development costs consist of amounts capitalised in 2009 and 2010 relating to a
new product development. No additional development expenditure was incurred in the
year ended 31 December 2011. The product began commercial production on
1 July 2011, and the company estimated, at that date, that the product's useful life was
four years due to its technological nature.
Sales of the product did not achieve the amount expected during the second half of 2011,
and so, at 31 December 2011, management performed an impairment test on the
development expenditure. The estimated net cash flows are (at 31 December 2011
prices):
Year to 31 December 2012
6 months to 30 June 2015
$3.2 million
$3.4 million
$1.6 million
$0.8 million
All cash flows occur on the final day of each period mentioned. An appropriate annual
discount rate (adjusted to exclude the effects of inflation) is 5%.
The fair value of the development expenditure asset was expected to be less than the
sum of the discounted cash flows.
Development expenditure is tax deductible when incurred in the tax regime in which
Trafalgar operates. The company recognises amortisation and impairment losses on
development expenditure in cost of sales.
(c) The inventories figure in the trial balance is the opening inventories balance measured on
the first-in first-out (FIFO) basis. Due to a change in Trafalgar's business, the company
decided to change its accounting policy with respect to inventories to a weighted average
basis, as follows:
FIFO
Weighted average
31 December 2009
$'000
33,200
30,300
31 December 2010
$'000
37,300
34,100
Closing inventories at 31 December 2011, measured under the weighted average basis,
amounted to $41.2 million.
The inventory valuation method has no tax consequences.
(d) The investment property was purchased during 2009. Trafalgar uses the fair value model
for its investment property. The market value of the property at 31 December 2011 had
risen to $11.2 million.
Tax is payable on gains on investment properties when they are sold in the tax regime in
which Trafalgar operates.
20
Patchet is preparing its financial statements for the year ended 31 December 2011. It has a
number of subsidiaries. The following matters relating to two new investments are
outstanding:
(a)
On 1 September 2011, Patchet entered into a contractual arrangement with another

party, Able, to manufacture products together, using the expertise of both companies.
This involved setting up a new company, Dotun Electronics, in which each party holds
50% of the ordinary shares and is entitled to a 50% share of profits.
Equipment and cash to set up the business were contributed, by each investor, to Dotun
Electronics in pr0oportion to their ownership and in return for the share capital. The
arrangement is to last five years. After the five years, the arrangement can be
terminated and the parties can take back the equipment that they have contributed. Any
new equipment necessary during the period of the agreement will be purchased by one
of the parties and sold to Dotun Electronics in return for an increased shareholding and
rights to the equipment at the end of the arrangement. Each party to the arrangement
uses the equipment it has contributed to perform its part of the work under the
arrangement. Under the terms of the agreement, each party is liable to pay for the
supplies used by their equipment in the event that revenues do not cover costs. Dotun
Electronics also took out loan finance which was guaranteed by the two investors in
proportion to their ownership.
Dotun Electronics has a 31 December year end.
Under the terms of the agreement, financial and operating policy decisions must be
made together by both parties to the arrangement.
(10 marks)
(b)
Patchet had been negotiating the arrangement for some time. As a result, on
1 April 2011, Patchet classified the equipment that was subsequently transferred to
Dotun Electronics as held for sale. No impairment loss was necessary on 1 April 2011,
however, the equipment was not depreciated from 1 April 2011 until its transfer to the
new entity.
(6 marks)
(c)
Patchet also entered into another contractual arrangement on 1 September 2011 with
another company, Cain, setting up an unquoted entity, Regional Electronics. However,
in this arrangement Patchet only has a 15% shareholding and does not have any
influence in day to day financial and operating policies. Patchet has recorded the
investment in Regional Electronics at its cost on 1 September 2011, being the carrying
amount of the equipment and cash transferred at that date. No subsequent changes
were made to the carrying amount.
(5 marks)
Requirements
Advise the directors on the accounting treatment of the above items in Patchet's financial
statements for the year ended 31 December 2011.
Indicate how any changes proposed by the IASB could alter the accounting treatment.
In part (a) you should consider the effect on both the consolidated and separate financial
statements of Patchet. In parts (b) and (c) you should consider the effect on the separate
financial statements of Patchet only.
Note: A report format is not required.
(21 marks)
21
Opening inventories were 30.8 million Blats and were acquired on 31 December 2010.
Closing inventories were purchased just before the year end and do not need
restatement.
Income and expenses (excluding the inventories elements of cost of sales) arose evenly
over the year. No dividends were paid during the year.
Relevant prices indices are:
31 December 2010
560
31 December 2011
780
Weighted average for the year ended 31 December 2011 690
Ignore any deferred tax effects. Work to the nearest 1 million Blats where necessary.
Requirements
(a)
Discuss the indications that an economy is hyperinflationary and explain how an entity
should apply IAS 29 Financial Reporting in Hyperinflationary Economies for the first
time.
(5 marks)
(b)
Restate the above draft statement of comprehensive income (only) for the effects of
hyperinflation as required by IAS 29 (insofar as the information provided permits).
Note: You are not required to restate the draft statement of financial position.
(10 marks)
(15 marks)
22
Q9 Dalta
1 The trial balance of Delta at 31 March 2008 (its financial reporting date) is as follows:
$000
$000
Revenue (Note 1)
164,000
Production costs (Note 2)
90,000
Distribution costs
8,000
26,000
Inventories at 31 March 2007
19,710
Interest paid on interest bearing borrowings (Note 4)
3,000
Income tax (Note 5)
100
Dividends paid on equity shares
5,000
Property, plant and equipment (Note 6):
At cost at 31 March 2008
77,000
Accumulated depreciation at 31 March 2007
22,610
Trade receivables
53,000
33,000
Trade payables
12,000
Long term interest bearing borrowings (Note 4)
50,000
Lease rentals (Note 7)
20,000
Deferred tax (Note 5)
7,000
Issued equity capital
50,000
Retained earnings at 31 March 2007
29,000

334,710 334,710

Notes to the Trial Balance
Note 1 revenue
On 1 April 2007 Delta sold goods for a price of $121 million. The terms of the sale allowed the
customer extended credit and the price was payable by the customer in cash on 31 March 2009.
Delta included $121 million in revenue for the current year and $121 million in closing trade
receivables. A discount rate that is appropriate for the risks in this transaction is 10%.
Note 2 production costs
During the year ended 31 March 2008 Delta sold goods to the value of $20 million under warranty.
The terms of the warranty were that if the goods were defective within 12 months of the date of sale,
Delta would repair or replace them. The warranty was not offered by Delta in respect of goods sold in
previous periods.
The directors of Delta estimate that, for each product sold, there is an 80% chance no defects will
occur in that product. Therefore they have not made a provision for the cost of any future warranty
claims on the grounds that, for each item sold, the most likely outcome is that no additional costs will
be incurred.
Any warranty costs that were incurred were included in the production costs for the year. Where
warranty costs were incurred, on average they amounted to 50% of the revenue received from the
initial sale of the product. Warranty costs of $800,000 were incurred before the year end and included
within production costs in the trial balance.
Note 3 inventories at 31 March 2008
The carrying value of inventories at 31 March 2008 was $25 million.
Note 4 long term interest bearing borrowings
On 1 April 2007 Delta borrowed $50 million for five years at an annual interest rate of 6%. The market
interest rate on loans at this time was 8% and so the terms of the contract provide for a repayment on
1 April 2012 of more than $50 million. The repayment makes the effective interest rate applicable to
the loan 8%. At 31 March 2007 the market value of a loan with identical cash flows was $53 million.
Delta does not consider that the loan is part of a trading portfolio.
Note 5 tax
23
The estimated income tax on the profits for the year to 31 March 2008 is $15 million.
During the year $13 million was paid in full and final settlement of income tax on the profits for the
year ended 31 March 2007. The statement of financial position at 31 March 2007 had included
$14 million in respect of this liability.
At 31 March 2008 the carrying amounts of the net assets of Delta exceeded their tax base by $28
million. This information is before taking account of the property revaluation (see Note 6 below)
The rate of income tax in the jurisdiction in which Delta operates is 30%.
Note 6 property, plant and equipment
Details are as follows:
Property
Land
Buildings
$000
$000
Cost at 31 March 2008 (see below)
22,000
28,000

Estimate of useful economic life (at date of purchase) Infinite 50 years
Accumulated depreciation at 31 March 2007
0
5,600
Plant and
equipment
$000
27,000
4 years
17,010
On 1 April 2007 the open market value of the property was $60 million, including $32 million relating
to the building. The directors wish to reflect this revaluation in the financial statements, but no entries
regarding the revaluation have yet been made. The directors do not wish to make an annual transfer
of excess depreciation to retained earnings. The original estimate of the useful economic life of the
building is still considered valid. No assets were fully depreciated at 31 March 2008.
All of the depreciation is to be charged to cost of sales.
Note 7 Lease rentals
On 1 April 2007 Delta began to lease a large group of machines that were used in the production
process. The lease was for 4 years and the annual rental (payable in advance on 1 April each year)
was $20 million. The lessor paid $71 million for the machines on 31 March 2007. The lessor has
advised Delta that the lease is a finance lease and that the rate of interest implicit in the lease can be
taken as 9% per year.
Required:
(a) Prepare the statement of comprehensive income for Delta for the year ended 31 March
2008. (14 marks)
(b) Prepare the statement of financial position for Delta as at 31 March 2008 (11 marks)
Note: notes to the statement of comprehensive income and statement of financial position are not
required.
(25 marks)
(Taken from ACCA Dip IFRS June 2008 Q2)
24
Q10 Rose
2 Rose, a public limited company, operates in the mining sector. The draft statements of financial
position are as follows, at 30 April 2011:
Rose
Petal
Stem
$m
$m
Dinars m
Assets:
Non-current assets
Property, plant and equipment
370
110
380
Investments in subsidiaries
Petal
113
Stem
46
Financial assets
15
7
50
544
117
430
Current assets
118
100
330
Total assets
662
217
760
Equity and liabilities:

Share capital
158
38
200
Retained earnings
256
56
300
Other components of equity
7
4
Total equity
421
98
500
Non-current liabilities
56
42
160
Current liabilities
185
77
100
Total liabilities
241
119
260
Total equity and liabilities

662
217
760
The following information is relevant to the preparation of the group financial statements:
1 On 1 May 2010, Rose acquired 70% of the equity interests of Petal, a public limited company. The
Purchase consideration comprised cash of $94 million. The fair value of the identifiable net assets
recognised by Petal was $120 million excluding the patent below. The identifiable net assets of
Petal at 1 May 2010 included a patent which had a fair value of $4 million. This had not been
recognised in the financial statements of Petal. The patent had a remaining term of four years to run
at that date and is not renewable. The retained earnings of Petal were $49 million and other
components of equity were $3 million at the date of acquisition. The remaining excess of the fair
value of the net assets is due to an increase in the value of land.
Rose wishes to use the full goodwill method. The fair value of the non-controlling interest in Petal
was $46 million on 1 May 2010. There have been no issues of ordinary shares since acquisition
and goodwill on acquisition is not impaired.
Rose acquired a further 10% interest from the non-controlling interest in Petal on 30 April 2011 for a
Cash consideration of $19 million.
2 Rose acquired 52% of the ordinary shares of Stem on 1 May 2010 when Stems retained earnings
were 220 million dinars. The fair value of the identifiable net assets of Stem on 1 May 2010 was 495
million dinars. The excess of the fair value over the net assets of Stem is due to an increase in the
value of land. The fair value of the non-controlling interest in Stem at 1 May 2010 was 250 million
dinars.
25
Stem is located in a foreign country and operates a mine. The income of Stem is denominated and
settled in dinars. The output of the mine is routinely traded in dinars and its price is determined
initially by local supply and demand. Stem pays 40% of its costs and expenses in dollars with the
remainder being incurred locally and settled in dinars. Stems management has a considerable
degree of authority and autonomy in carrying out the operations of Stem and is not dependent upon
group companies for finance.
Rose wishes to use the full goodwill method to consolidate the financial statements of Stem. There
have been no issues of ordinary shares and no impairment of goodwill since acquisition.
The following exchange rates are relevant to the preparation of the group financial statements:
1 May 2010
30 April 2011
Average for year to 30 April 2011
Dinars to $
6
5
58
3 Rose has a property located in the same country as Stem. The property was acquired on 1 May
2010 and is carried at a cost of 30 million dinars. The property is depreciated over 20 years on the
straight-line method. At 30 April 2011, the property was revalued to 35 million dinars. Depreciation
has been charged for the year but the revaluation has not been taken into account in the
preparation of the financial statements as at 30 April 2011.
4 Rose commenced a long-term bonus scheme for employees at 1 May 2010. Under the scheme
Employees receive a cumulative bonus on the completion of five years service. The bonus is 2% of
the total of the annual salary of the employees. The total salary of employees for the year to 30
April 2011 was $40 million and a discount rate of 8% is assumed. Additionally at 30 April 2011, it is
assumed that all employees will receive the bonus and that salaries will rise by 5% per year.
5 Rose purchased plant for $20 million on 1 May 2007 with an estimated useful life of six years. Its
Estimated residual value at that date was $14 million. At 1 May 2010, the estimated residual value
changed to $26 million. The change in the residual value has not been taken into account when
preparing the financial statements as at 30 April 2011.
Required:
(a) (i) Discuss and apply the principles set out in IAS 21 The Effects of Changes in Foreign
Exchange Rates in order to determine the functional currency of Stem. (7 marks)
(ii) Prepare a consolidated statement of financial position of the Rose Group at 30 April
2011, in accordance with International Financial Reporting Standards (IFRS), showing the
exchange difference arising on the translation of Stems net assets. Ignore deferred
taxation. (35 marks)
(b) Rose was considering acquiring a service company. Rose stated that the acquisition may be
made because of the value of the human capital and the opportunity for synergies and crossselling opportunities. Rose estimated the fair value of the assets based on what it was prepared to
pay for them. Rose further stated that what it was willing to pay was influenced by its future plans
for the business.
The company to be acquired had contract-based customer relationships with well-known domestic
and international companies and some mining companies. Rose estimated that the fair value of
all of these customer relationships to be zero because Rose already enjoyed relationships with
the majority of those customers.
Required:
Discuss the validity of the accounting treatment proposed by Rose and whether such a
proposed treatment raises any ethical issues. (8 marks)
(50 marks)
(Taken from ACCA P2 Corporate Reporting June 2011 Q1)
26
Q11 Alpha (1)

3
The income statements and summarised statements of changes in equity of Alpha, Beta and
Gamma for the year ended 31 March 2008 are given below:
Income Statements
Alpha
Beta
Gamma
$000
$000
$000
150,000 100,000
96,000
(110,000) (78,000) (66,000)

40,000
22,000
30,000
(7,000)
(6,000)
(6,000)
(8,000)
(7,000) (7,200)

25,000
9,000
16,800
5,000
500
500
(4,000)
(3,000) (3,200)

26,000
6,500
14,100
(7,000)
(1,800) (3,600)

19,000
4,700
10,500

Revenue
Cost of sales
Gross profit
Distribution costs
Profit from operations
Investment income
Finance cost
Profit before tax
Income tax expense
Net profit for the period
Summarised Statements of Changes in Equity

Balance at 1 April 2007
Net profit for the period
Dividends paid on 31 January 2008
Balance at 31 March 2008
122,000
91,000
82,000
19,000
4,700 10,500
(6,500)
(3,000) (5,000)

134,500
92,700 87,500

Note 1 purchase of shares in Beta

On 1 October 2005 Alpha purchased an 80% equity shareholding in Beta. The equity of Beta as
shown in its own financial statements at that date was $32 million.
Alpha issued 20 million shares to the former shareholders of Beta in exchange for the shares
purchased. The market value of Alphas shares on 1 October 2005 was $2.
At the date of acquisition Beta owned a property with a book value of $28 million and a market value
of $35 million. Beta had purchased the property for $30 million on 1 October 2000 and estimated that
the depreciable amount of the property (the buildings element) was $16 million at 1 October 2000.
The estimated useful economic life of the building at 1 October 2000 was 40 years.
The directors of Alpha estimated that the buildings element of the property comprised 50% of its
market value at 1 October 2005. They considered that the original estimate of the total useful
economic life of the buildings element (40 years from 1 October 2000) was still valid.
At 1 October 2005 the plant of Beta had a book value of $12 million and a market value of $15 million.
The plant is depreciated on a straight line basis and the remaining useful economic life of the plant at
1 October 2005 was estimated at five years.
All depreciation is charged on a monthly basis and presented in cost of sales. No adjustments were
made to the individual financial statements of Beta to reflect the information given in this note.
27
Note 2 purchase of shares in Gamma

On 1 July 2007 Alpha purchased 40% of the equity shares of Gamma. This purchase allowed Alpha
to exercise a significant influence over Gamma, but Alpha was not able to control its operating and
financial policies. No material differences between the market value and the book value of the net
assets of Gamma was apparent at the date of the share purchase.
Note 3 impairment reviews
An impairment review at 31 March 2008 indicated that 25% of the goodwill on acquisition of Beta
needed to be written off. Apart from this, no other impairments of goodwill on acquisition of Beta have
been required.
No impairment of the investment in Gamma has yet been necessary.
All impairments are charged to cost of sales.
Note 4 inter-company sales
Alpha supplies products used by Beta and Gamma. Sales of the products to Beta and Gamma during
the year ended 31 March 2008 were as follows (all sales were made at a mark up of 25% on cost):
Sales to Beta $125 million.
Sales to Gamma (all in the post-acquisition period) $4 million.
At 31 March 2008 and 31 March 2007 the inventories of Beta and Gamma included the following
amounts in respect of goods purchased from Alpha.
Amount in inventory at
31 March 2008 31 March 2007
$000
$000
3,000
1,600
2,000
Nil
Beta
Gamma
Note 5 dividend payments

The dividend received from Gamma on 31 January 2008 was credited to the income statement of
Alpha as investment income as the post-acquisition profits of Gamma were in excess of the dividend
received.
Required:
(a) Prepare the consolidated income statement for Alpha for the year ended 31 March 2008.
(18 marks)
(b) Prepare the summarised consolidated statement of changes in equity for Alpha for the year
ended 31 March 2008. (7 marks)
Note: ignore deferred tax.
(25 marks)
(Taken from ACCA Diploma in International Financial Reporting June 2008 Q1)
28
Q12 Alpha (2)

4 Alpha holds investments in Beta and Gamma. The statements of financial position of the three
entities at 30 September 2011 were as follows:
Alpha
$000
ASSETS
Non-current assets:
Property, plant and equipment (Note 1)
Investments:
in Beta (Note 1)
in Gamma (Note 3)
in Sigma (Note 6)
Beta
$000
Gamma
$000
210,000 165,000 120,000

180,000
Nil
Nil
52,000
Nil
Nil
15,000
Nil
Nil

457,000 165,000 120,000

Current assets:
Inventories (Note 4)
Trade receivables (Note 5)
65,000 36,000 29,000

55,000 38,000 35,000
12,000 7,000
9,000

132,000 81,000 73,000

589,000 246,000 193,000
Total assets
EQUITY AND LIABILITIES
Equity
Share capital ($1 shares)
Retained earnings
180,000 100,000 60,000

183,000 67,000 64,000
90,000 5,000
Nil

453,000 172,000 124,000

Total equity
Non-current liabilities:
Contingent consideration (Note 1)
Long-term borrowings (Note 8)
Deferred tax
20,000
Nil
Nil
50,000 35,000 30,000
15,000 9,000 12,000

85,000 44,000 42,000


Current liabilities:
Trade and other payables
Short term borrowings
34,000 23,000 21,000

17,000 7,000 6,000

51,000 30,000 27,000

589,000 246,000 193,000

Note 1 Alphas investment in Beta

On 1 April 2010 Alpha acquired 80 million shares in Beta by means of a share exchange. Alpha
issued one share for every two shares acquired in Beta. On 1 April 2010 the market value of an Alpha
share was $4 and the market value of a Beta share was $180. The terms of the business
combination provide for an additional cash payment to the former shareholders of Beta on 30 June
2012 based on its post-acquisition financial performance in the first two years since acquisition. The
fair value of this additional payment was $20 million on 1 April 2010. The post acquisition
performance of Beta was such that the fair value of this payment had increased to $22 million by
30 September 2011. The investment in Beta and the non-current liabilities of Alpha at 30 September
2010 include $20 million in respect of the additional payment due to be made on 30 June 2012.
29
On 1 April 2010 the individual financial statements of Beta showed the following reserves balances:
Retained earnings $41 million.
Other components of equity $3 million.
The directors of Alpha carried out a fair value exercise to measure the identifiable assets and
liabilities of Beta at 1 April 2010. The following matters emerged:
A property, having a carrying amount of $50 million (depreciable amount $30 million), had a fair
value of $70 million (depreciable amount $33 million). The estimated future economic life of the
depreciable amount of the property at 1 April 2010 was 30 years. This property was still held by
Beta at 30 September 2011.
Plant and equipment, having a carrying amount of $60 million, had an estimated market value of
$64 million. The estimated future economic life of the plant at 1 April 2010 was four years. This plant
was still held by Beta at 30 September 2011.
Inventory, having a carrying amount of $30 million, had an estimated market value of $31 million. All
of this inventory had been sold since 1 April 2010.
The fair value adjustments have not been reflected in the individual financial statements of Beta. In
the consolidated financial statements the fair value adjustments will be regarded as temporary
differences for the purposes of computing deferred tax. The rate of tax to apply to temporary
differences (where required but see notes 3, 4, 6 and 7 below) is 20%.
It is the group policy to value the non-controlling interest in subsidiaries at the date of acquisition at
fair value. The fair value of an equity share in Beta at 1 April 2010 can be used for this purpose.
Note 2 Impairment reviews Beta
On 1 April 2010 the directors of Alpha identified that Beta comprised five cash-generating units and
allocated the goodwill arising on acquisition equally across each unit. No impairment of goodwill was
apparent in the year ended 30 September 2010.
During the year ended 30 September 2011 four of the five cash-generating units performed very
satisfactorily and no impairment of the goodwill allocated to these units had occurred. However the
performance of the other unit was below expectations. During the impairment review carried out at 30
September 2011 assets (excluding goodwill) having a carrying amount in the consolidated financial
statements of $50 million were allocated to this unit. The recoverable amount of these assets was
estimated at $52 million.
Note 3 Alphas investment in Gamma
On 1 October 2010 Alpha paid $52 million for 40% of the equity shares of Gamma. The retained
earnings of Gamma on 1 October 2010 were $60 million. You can ignore any deferred taxation
implications of the investment by Alpha in Gamma. The investment in Gamma has not suffered any
impairment since 1 October 2010.
Note 4 Inter-company sale of inventories
The inventories of Beta and Gamma at 30 September 2011 included components purchased from
Alpha during the year at a cost of $16 million to Beta and $10 million to Gamma. Alpha generated a
gross profit margin of 25% on the supply of these components. You can ignore any deferred tax
implications of the information in this note.
Note 5 Trade receivables and payables
The trade receivables of Alpha included $5 million receivable from Beta and $4 million receivable from
Gamma in respect of the purchase of components (see Note 4). The trade payables of Beta and
Gamma included equivalent amounts payable to Alpha.
30
Note 6 Alphas investment in Sigma

Alphas investment in Sigma does not give Alpha sole control, joint control or significant influence.
The investment was purchased on 1 January 2011 for $15 million. The investment was classified as
fair value through other comprehensive income. The fair value of the investment in Sigma on 30
September 2011 was $16 million. In the tax jurisdiction in which Alpha is located unrealised profits on
the revaluation of equity investments are not subject to current tax. Any such profits are taxed only
when the investment is sold.
Note 7 Employees share option scheme
On 1 October 2009 Alpha granted 5,000 share options to 1,000 key employees. The options are due
to vest on 30 September 2013 provided the employees remain in employment at 30 September 2013.
On 1 October 2009 the directors of Alpha estimated that 90% of the key employees would satisfy the
vesting condition. Actual employee turnover was such that this estimate was revised to 92% on 30
September 2010 and 93% on 30 September 2011.
At 1 October 2009 the fair value of each share option was estimated to be $120. This estimate was
revised to $125 on 30 September 2010 and $128 on 30 September 2011. You can ignore the
deferred tax implications of the information in this note.
Alpha correctly recognised this transaction in the financial statements for the year ended 30
September 2010. However, they have made no additional adjustments in the financial statements for
the year ended 30 September 2011.
Note 8 Long-term borrowings
On 1 October 2010 Alpha issued 50 million loan notes of $1 each at par. The annual interest payable
on these notes is 5 cents per note, payable in arrears. The notes are redeemable at par on 30
September 2015 or convertible (at the option of the note-holders) into equity shares on that date. On
1 October 2010 investors in loan notes with no conversion option would have required an annual rate
of return of 8%. On 1 October 2010 the directors of Alpha included $50 million in long-term
borrowings in respect of the loan notes. The actual interest paid of $25 million was charged as a
finance cost in Alphas income statement for the year ended 30 September 2011.
Relevant discount factors are as follows:
Present value of $1 payable at the end of year 5
Cumulative present value of $1 payable at the end of years 1-5
5%
784 cents
$433
8%
681 cents
$399
Note 9 Modification of vehicles

On 1 January 2011 legislation was passed requiring Alpha to carry out modifications to its motor
vehicles to enable harmful emissions to be reduced. The modifications should have been completed
by 30 June 2011 at an estimated cost to Alpha of $3 million. In fact by 30 September 2011 none of
the vehicles had been modified although they continued to be used. It is likely that Alpha will be fined
$500,000 per month for the illegal use of the vehicles. The directors of Alpha are uncertain exactly
when they will carry out the modifications but they intend to do so sometime during the year ended 30
September 2012. They expect that a fine will become payable very shortly as legal action has
commenced against Alpha.
Required:
Prepare the consolidated statement of financial position of Alpha at 30 September 2011.
(40 marks)
(Taken for ACCA Diploma in International Financial Reporting Dec 2011 Q1)
31
Q13- JOCATT
5 The following draft group financial statements relate to Jocatt, a public limited company:
Jocatt Group: Statement of financial position as at 30 November
Assets
Non-current assets
Investment property
Goodwill
Intangible assets
Investment in associate
Available-for-sale financial assets
Current assets
Inventories
Trade receivables
Total assets
Equity and Liabilities
Equity attributable to the owners of the parent:
Share capital
Retained earnings
Non-controlling interest
Total equity
Non-current liabilities:
Long-term borrowings
Deferred tax
Long-term provisions-pension liability
Current liabilities:
Trade payables
Current tax payable
Total liabilities
32
2010
$m
2009
$m
327
8
48
85
54
94
616
254
6
68
72
90
490
105
62
232
399
1,015
128
113
143
384
874
290
351
15
656
55
711
275
324
20
619
36
655
67
35
25
127
71
41
22
134
144
33
177
304
1,015
55
30
85
219
874
Jocatt Group: Statement of comprehensive income for the year ended 30 November 2010
$m
432
(317)
115
25
(555)
(36)
(6)
105
6
59
(11)
48
Revenue
Cost of sales
Gross profit
Other income
Distribution costs
Finance costs paid
Gains on property
Share of profit of associate
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income after tax:
Gain on available for sale financial assets (AFS)
Losses on property revaluation
Actuarial losses on defined benefit plan
2
(7)
(6)
(11)
37
Other comprehensive income for the year, net of tax

Total comprehensive income for the year
Profit attributable to:
Owners of the parent
38
10
48
Total comprehensive income attributable to:

$m
27
10
37
Owners of the parent

Jocatt Group: Statement of changes in equity for the year ended 30 November 2010
Share Retained AFS Revaluation
Capital Earnings financial Surplus
assets
(PPE)
$m
$m
$m
$m
275
324
4
16
15
(5)
Balance at 1 December 2009

Share capital issued
Dividends
Rights issue
Acquisitions
Total comprehensive income for the year
Balance at 30 November 2010

290
32
351
33
(7)
Total NonTotal
controlling equity
Interest
$m
$m
$m
619
36
655
15
15
(5)
(13)
(18)
2
2
20
20
27
10
37

656
55
711

The following information relates to the financial statements of Jocatt:

(i) On 1 December 2008, Jocatt acquired 8% of the ordinary shares of Tigret. Jocatt had treated this
Investment as available-for-sale in the financial statements to 30 November 2009. On 1 December
2009, Jocatt acquired a further 52% of the ordinary shares of Tigret and gained control of the
company. The consideration for the acquisitions was as follows:
Holding
1 December 2008
1 December 2009
8%
52%
60%
Consideration
$m
4
30
34
At 1 December 2009, the fair value of the 8% holding in Tigret held by Jocatt at the time of the
business combination was $5 million and the fair value of the non-controlling interest in Tigret was
$20 million. No gain or loss on the 8% holding in Tigret had been reported in the financial
statements at 1 December 2009. The purchase consideration at 1 December 2009 comprised
cash of $15 million and shares of $15 million.
The fair value of the identifiable net assets of Tigret, excluding deferred tax assets and liabilities,
at the date of acquisition comprised the following:
$m
15
18
5
7

Intangible assets
Trade receivables
Cash
The tax base of the identifiable net assets of Tigret was $40 million at 1 December 2009. The tax
rate of Tigret is 30%.
(ii) On 30 November 2010,Tigret made a rights issue on a 1 for 4 basis. The issue was fully
subscribed and raised $5 million in cash.
(iii) Jocatt purchased a research project from a third party including certain patents on 1 December
2009 for $8 million and recognised it as an intangible asset. During the year, Jocatt incurred
further costs, which included $2 million on completing the research phase, $4 million in
developing the product for sale and $1 million for the initial marketing costs. There were no
other additions to intangible assets in the period other than those on the acquisition of Tigret.
(iv) Jocatt operates a defined benefit scheme. The current service costs for the year ended 30
November 2010 are $10 million. Jocatt enhanced the benefits on 1 December 2009 however,
these do not vest until 30 November 2012. The total cost of the enhancement is $6 million. The
expected return on plan assets was $8 million for the year and Jocatt recognises actuarial gains
and losses within other comprehensive income as they arise.
(v) Jocatt owns an investment property. During the year, part of the heating system of the property,
which had a carrying value of $05 million, was replaced by a new system, which cost $1 million.
Jocatt uses the fair value model for measuring investment property.
(vi) Jocatt had exchanged surplus land with a carrying value of $10 million for cash of $15 million
and plant valued at $4 million. The transaction has commercial substance. Depreciation for the
period for property, plant and equipment was $27 million.
(vii) Goodwill relating to all subsidiaries had been impairment tested in the year to 30 November
2010 and any impairment accounted for. The goodwill impairment related to those subsidiaries
which were 100% owned.
34
(viii) Deferred tax of $1 million arose on the gains on available-for-sale investments in the year.
(ix) The associate did not pay any dividends in the year.
Required:
(a) Prepare a consolidated statement of cash flows for the Jocatt Group using the indirect
method under IAS 7 Statement of Cash Flows.
Note: Ignore deferred taxation other than where it is mentioned in the question. (35 marks)
(b) Jocatt operates in the energy industry and undertakes complex natural gas trading arrangements,
which involve exchanges in resources with other companies in the industry. Jocatt is entering into
a long-term contract for the supply of gas and is raising a loan on the strength of this contract. The
proceeds of the loan are to be received over the year to 30 November 2011 and are to be repaid
over four years to 30 November 2015. Jocatt wishes to report the proceeds as operating cash flow
because it is related to a long-term purchase contract. The directors of Jocatt receive extra
income if the operating cash flow exceeds a predetermined target for the year and feel that
the indirect method is more useful and informative to users of financial statements than the direct
method.
(i) Comment on the directors view that the indirect method of preparing statements of cash
flow is more useful and informative to users than the direct method. (7 marks)
(ii) Discuss the reasons why the directors may wish to report the loan proceeds as an
operating cash flow rather than a financing cash flow and whether there are any ethical
implications of adopting this treatment. (6 marks)
Professional marks will be awarded in part (b) for the clarity and quality of discussion. (2 marks)
(50 marks)
(TakenfromACCACorporateReportingDecember2010Q1)
35

IFRS 17 Module 7 - Revision Pack V3 30-06-2012

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DiplomainIFRS(June2012)

Chartered Accountants Ireland

XXXXXXX, Y:00 p.m. G.M.T GAV IS THIS NEEDED FOR

There are 3 questions, all of which are compulsory.

An exam total of 100 marks are allocated across the 3 questions.

Wherever possible and appropriate, arguments should be supported by reference to

There is a 5 minute allowance at the conclusion of the examination to enable candidates

Please submit and reference all workings.

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Income from associate

Profit before tax

Profit after tax

Other comprehensive income

Total Comprehensive Income

Plant and machinery

Total non-current assets

Total current assets

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Finance lease liabilities

Total non-current liabilities

Provision for legal claims

Finance lease liabilities

Total current liabilities

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

the consideration was 45 million cash.

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Chartered Accountants Ireland DIPLOMA IN IFRS 2011 Course Exam: QUESTIONS

Chartered Accountants Ireland

There are 3 questions, all of which are compulsory.

An exam total of 100 marks are allocated across the 3 questions.

Wherever possible and appropriate, arguments should be supported by reference to

There is a 5 minute allowance at the conclusion of the examination to enable candidates

Please submit and reference all workings.

Chartered Accountants Ireland 2012.

The following notes are relevant:

Question 2 (comprises both Part A and Part B)

Part B: Flintstone Ltd.

Question 3 (comprises both Part A and Part B)

Part B: Young Life Ltd.

Trafalgar is a public limited company reporting under IFRSs.

The following information needs to be taken into account:

Straight line to a zero residual value (see below)

On 1 September 2011, Patchet entered into a contractual arrangement with another

(Taken from ACCA Dip IFRS June 2008 Q2)

Equity and liabilities:

Total equity and liabilities

Q11 Alpha (1)

Summarised Statements of Changes in Equity

Note 1 purchase of shares in Beta

Note 2 purchase of shares in Gamma

Note 5 dividend payments

Q12 Alpha (2)

210,000 165,000 120,000

65,000 36,000 29,000

180,000 100,000 60,000

Total non-current liabilities

34,000 23,000 21,000

Total current liabilities

Note 1 Alphas investment in Beta

Note 6 Alphas investment in Sigma