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3秒自动关闭窗口精品资源共享课程：财务会计（国家级双语示范课程）
提供学校：
西安外国语大学
专业大类：
课程编号：
& & & & 本课程主要阐述了财务会计的本质、特征、基本程序和方法;资产、负债、所有者权益、收入、费用和利润的确认及计量;会计报告原理及会计报表编制，以及一些特殊的会计问题等内容。通过学习可以全面、具体地掌握和解决一些会计实务问题。& & & &&西安外国语大学商学院作为国内最早开设会计学（ACCA）专业的外语类高校，致力于培养具有国际视野、创新精神、外语特长和跨文化沟通能力的国际化会计人才。依托学校独特的外语语言优势，本专业将ACCA全球统考课程融入本科教学计划，形成学历教育与国际权威认证资格相结合的人才培养模式。先后获得国家级双语教学示范课程、省级教学成果特等奖，省级特色专业、省级专业综合改革项目等。在专业建设和学科建设的带动下，为社会培养了一大批从事国际会计工作的精英人才，得到了ACCA中国总部及跨国公司等用人单位的高度认可。& & & &&财务会计(Financial Accounting)课程是ACCA全球统考体系中的一门核心课程，也是会计学（ACCA）专业重点建设课程，经过几年的努力和全方位立项建设，已荣获省级教学成果奖，成为国家级双语示范课，开创出了特色鲜明的教学模式。课程教学师资队伍知识结构、年龄结构、职称结构合理，在教学内容、教学方式、方法及教学手段、考核形式上不断改革、创新，使本课程在省内财经会计类课程中已处于领先地位。
英文名称：Financial&Accounting课程编号：BSACC0018学时：72&&&&&&&&&&&&学分：4适用对象：ACCA教改班、会计专业本科二年级先修课程：基础会计（中文）、管理学（中文）使用教材及参考书：1.&Financial&Accounting,&BPP&Professional&Education,&2012年10月2.&Intermediate&Accounting,&11th&Edition,&Kieso,&Weygandt&and&Warfield,&Wiley&publishing,&2005一、&课程性质、目的和任务The&objective&of&Financial&Accounting&is&to&ensure&that&you&have&the&necessary&basic&accounting&knowledge&and&skill&to&progress&to&the&more&advanced&work&of&&Financial&Reporting.&The&two&main&skills&required&are:o&The&ability&to&prepare&basic&financial&statements&and&the&underlying&accounting&records&on&which&they&are&based.o&An&understanding&of&the&principles&on&which&accounting&is&based.The&key&topic&areas&are&as&follows:o&Preparation&of&financial&statements&for&limited&liability&companies&for&internal&purposes&or&for&publicationo&Preparation&of&financial&statements&for&partnerships&and&sole&traders&(including&incomplete&records)o&Basic&group&accounts&–&consolidated&balance&sheet&for&a&company&with&one&subsidiaryo&Basic&bookkeeping&and&accounting&procedureso&accounting&conventions&and&conceptso&Interpretation&of&financial&statementso&Cash&flow&statementso&Accounting&standards&(as&listed&in&the&exam&notes)二、&教学基本要求To&develop&knowledge&and&understanding&of&the&techniques&used&to&prepare&financial&statements,&including&necessary&underlying&records,&and&the&interpretation&of&financial&statements&for&incorporated&enterprises,&partnerships&and&sole&traders.o&describe&the&role&and&function&of&external&financial&reports&and&identify&their&userso&explain&the&accounting&concepts&and&conventions&used&in&preparing&financial&statementso&Record&and&summaries&accounting&datao&maintain&records&relating&to&non-current&asset&acquisition&and&disposalo&prepare&basic&financial&statements&for&sole&traders,&partnerships,&incorporated&enterprises&and&simple&groupso&appraise&financial&performance&and&the&position&of&an&organization&through&the&calculation&and&review&of&basic&ratioso&demonstrate&the&skills&expected&in&Part&1.二、教学内容Part&A.&The&context&and&purpose&of&financial&reportingPart&B.&The&qualitative&characteristics&of&financial&information&and&the&fundamental&bases&of&accountingPart&C.&The&use&of&double-entry&and&accounting&systems&Part&D.&Recording&transactions&and&events&Part&E.&Preparing&a&trial&balance&Part&F.&Preparing&basic&financial&statements&四、学时分配&& & & & & & & & & & & & & &内容&&& 学时&Part A: The context and purpose of financial reporting&1.the reason for and objectives of financial &reporting&2&2.Users’ and stakeholders’ needs&&2&&3.The main elements of financial reports&&2&&4.The regulatory framework&2&Part B: The qualitative characteristics of &financial information and the fundamental bases of accounting&&1.The qualitative characteristics of financial reporting&2&2.Alternative bases used in the preparation of financial information&&2Part C: The use of double-entry and accounting systems&&2&1.Double-entry book-keeping principles including &the maintenance of accounting records and sources of information&2&2.Ledger accounts, books of prime entry, and journals&&2&3.Accounting systems and the impact of information technology on financial reporting&2Part D: Recording transactions and events1.Sales and purchases 4&4&2.Cash&23.Inventory&44.Tangible non-current assets&45.Depreciation&26.Intangible non-current assets and amortization&2&7.Accruals and prepayments&28.Receivables and payables&4&9.Provisions and contingencies&210.Capital structure and finance costs&2Part E: Preparing a trial balance1.Trial balance&22.Correction of errors&23.Control accounts and reconciliations&24.Bank reconciliations&25.Suspense accounts&2&Part F: Preparing basic financial statements1.Statements of financial position&2&2.Income statements and statements of comprehensive income&2&3.Events after the reporting period&2&4.Accounting for partnerships&2&5.Statements of cash flows (excluding partnerships)&4&6.Incomplete records&2&Final Examination&&2&Total&72&大纲制定者：商学院会计教研室《财务会计》（双语）教学课题组
教学手段与方法
&1.&课堂讲授，其目的是为了帮助学生完整准确地理解教材的基本内容，主要是通过PPT与板书的形式逐章讲解。课堂时间安排以“2：1”划分，即2/3的时间用于讲解，1/3的时间让学生完成典型题型的解答，以加深学生对原理的认知。每堂课布置相关习题，让学生独立完成，第二节课授课前对相关关键问题再进行总结。多年的教学效果显示绝大部分的学生对教材内容都有很好的掌握。&2.&案例分析与讨论，本课程选用的是国际流行的ACCA教材，在每一章后面都有一个小案例供学生学习与讨论，我们选用书后案例让学生阅读分析，结果很受学生欢迎。学生认为案例分析与讨论能很好地激发学习兴趣，培养实际应用能力。&3.&教学实践，我们利用课程的间歇带领学生在会计实验室里参加教学实践，包括制作教学课件，通过实验课程让学生自己完成实验报告，学生普遍反映学习效果显著，并希望增加实验课时。另外我们还设法带领学生参观会计事务所，现场与注册会计师进行交流，了解企业对课程的知识要求，增加了学生的感性认识。&4.&课后辅导，我们安排了36学时，利用这些学时进行答疑，引导学生反复运用国际财务报告准则编制财务报表，大大提高了学生学习的应用能力。
案例介绍与分析
《财务会计》案例介绍Case 1&On 1 October2005 Hydan, a publicly listed company, acquired a 60% controlling interest inSystan paying $9 per share in cash. Prior to the acquisition Hydan had beenexperiencing difficulties with the supply of components that it used in itsmanufacturing process. Systan is one of Hydan’s main suppliers and theacquisition was motivated by the need to secure supplies. In order to financean increase in the production capacity of Systan, Hydan made a non-dated loanat the date of acquisition of $4 million to Systan that carried an actual andeffective interest rate of 10% per annum. The interest to 31 March 2006 on thisloan has been paid by Systan and accounted for by both companies. Thesummarised draft financial statements of the companies are:&Income statements for the year ended 31 March 2006&Hydan &&&&&&&&&&&&&&&&&Systanpre-acquisition &&&&&&&&&post-acquisition$’000&& &&&&$’000&&&&&&&&&&&&&&&&& &$’000Revenue&&&&&&&&&&&&&&&& &98,000&&&&&24,000 &&&&&&&&&&&&&&&&&35,200Cost of sales &&&&&&&&&&&&&(76,000) &&&&&(18,000) &&&&&&&&&&&&&&&(31,000)––––––– &&&&&–––––––&&&&&&&&&&&&&& &–––––––Gross profit &&&&&&&&&&&&&&22,000 &&&&&&&6,000 &&&&&&&&&&&&&&&&&4,200Operating expenses &&&&&&&(11,800) &&&&&&(1,200) &&&&&&&&&&&&&&&&(8,000)Interest income&&&&&&&&&&& &350 &&&&&&&&&&&nil&&&&&&&&&&&&&&&&&&& nilFinance costs&&&&&&&&&&&& &(420)&&&&&&&&&&nil &&&&&&&&&&&&&&&&&&(200)–––––––&& &&&–––––––&&&&&&&&&&&&&&&&–––––––Profit/(loss) before tax&&&& &10,130&&&&&&&&4,800 &&&&&&&&&&&&&&&&&(4,000)Income tax (expense)/relief &(4,200) &&&&&&&(1,200) &&&&&&&&&&&&&&&&&1,000––––––– &&&&&–––––––&&&&&&&&&&&&&&&& –––––––Profit/(loss) for the period &&&5,930 &&&&&&&3,600 &&&&&&&&&&&&&&&&&&(3,000)–––––––&& &&&–––––––&&&&&&& &&&&&&&&&–––––––&Balance sheets as at 31 March 2006&Hydan&&&&&&&&&&&&&&&&&Systan$’000 &&&&&&&&&&&&&&&&&&$’000Non-current assetsProperty, plant and equipment &&&&&&&&&&&18,400 &&&&&&&&&&&&&&&&&9,500Investments (including loan to Systan)&&&&16,000 &&&&&&&&&&&&&&&&&&&nil––––––– &&&&&&&&&&&&&&&&–––––––34,400 &&&&&&&&&&&&&&&&&9,500Current assets &&&&&&&&&&&&&&&&&&&&&&&&18,000&&&&&&&&&&&&&&&&& 7,200–––––––&&&&&&&&&&&&&&&&–––––––Total assets &&&&&&&&&&&&&&&&&&&&&&&&&&52,400 &&&&&&&&&&&&&&&&&16,700–––––––&&&&&&&&&&&&&&&&–––––––Equity and liabilitiesOrdinary shares of $1 each&&&&&&&&&&& &10,000&&&&&&&&&&&&&&&&&& &2,000Share premium &&&&&&&&&&&&&&&&&&&&&&5,000&&&&&&&&&&&&&&&&&&& &500Retained earnings &&&&&&&&&&&&&&&&&&&20,000 &&&&&&&&&&&&&&&&&&&6,300––––––– &&&&&&&&&&&&&&&&&&–––––––35,000&&&&&&&&&&&&&&&&&&&&8,800Non-current liabilities7% Bank loan &&&&&&&&&&&&&&&&&&&&&&6,000&&&&&&&&&&&&&&&&&&&&& &nil10% loan from Hydan&&&&&&&&&&&&&&&& &nil&&&&&&&&&&&&&&&&&&&&& &4,000Current liabilities &&&&&&&&&&&&&&&&&&&11,400 &&&&&&&&&&&&&&&&&&&&3,900––––––– &&&&&&&&&&&&&&&&&&–––––––Total equity and liabilities&&&&&&&&&&& &52,400 &&&&&&&&&&&&&&&&&&&&16,700–––––––&&&&&&&&&&&&&&&&&&–––––––The following information is relevant:(i) At the date of acquisition, the fair values ofSystan’s property, plant and equipment were $1·2 million in excessof their carrying amounts. This willhave the effect of creating an additional depreciation charge (to cost ofsales)of $300,000 in the consolidatedfinancial statements for the year ended 31 March 2006. Systan has notadjusted its assets to fair value.&(ii) In the post acquisition periodSystan’s sales to Hydan were $30 million on which Systan had made a consistentprofit of 5% of the selling price. Ofthese goods, $4 million (at selling price to Hydan) were still in the inventoryof Hydan at 31 March 2006. Prior toits acquisition Systan made all its sales at a uniform gross profit margin.&(iii) Included in Hydan’s current liabilities is $1million owing to Systan. This agreed with Systan’s receivables ledger balancefor Hydan at the year end.&(iv) An impairment review of theconsolidated goodwill at 31 March 2006 revealed that its current value was12·5% less than its carrying amount.&(v) Neither company paid a dividend inthe year to 31 March 2006.Required:(a)&&Prepare theconsolidated income statement for the year ended 31 March 2006 and theconsolidated balance sheet at that date.&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&（&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(b) Discuss theeffect that the acquisition of Systan appears to have had on Systan’s operatingperformance.&&&Case& 2The following trial balance relates toDarius at 31 March 2006:$’000&&&&&& &$’000Revenue&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&213,800Cost of sales &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&143,800Closing inventories – 31 March 2006(note (i))&&&&&&&&& &10,500Operating expenses&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &22,400Rental income from investment property&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,200Finance costs (note (ii)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&5,000Land and building – at valuation (note(iii))&&&&&&&&&&&&& &63,000Plant and equipment – cost (note(iii))&&&&&&&&&&&&&&&&& &36,000Investment property – valuation 1April 2005 (note (iii)) &&&16,000Accumulated depreciation 1 April 2005– plant and equipment &&&&&&&&&&16,800Joint venture (note (iv))&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &8,000Trade receivables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&13,500Bank &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&900Trade payables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&11,800Ordinary shares of 25c each&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &&&&&&&&20,00010% Redeemable preference shares of $1each &&&&&&&&&&&&&&&&&&&&&&10,000Deferred tax (note (v)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&5,200Revaluation reserve (note (iii)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&21,000Retained earnings – 1 April 2005 &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&17,500––––––––&&& ––––––––318,200 &&&&&318,200––––––––&& &––––––––The following notes are relevant:(i) An inventory count at 31 March 2006 listed goods witha cost of $10·5 million. This includes some damaged goods that had cost$800,000. These would require remedial work costing $450,000 before they couldbe sold for an estimated $950,000.&(ii) Finance costs include overdraftcharges, the full year’s preference dividend and an ordinary dividend of 4c pershare that was paid in September 2005.&(iii) Non-current assets:&Land and buildingThe land and building were revalued at$15 million and $48 million respectively on 1 April 2005 creating a $21 millionrevaluation reserve. At this date the building had a remaining life of 15years.Depreciation is on a straight-linebasis. Darius does not make a transfer to realised profits in respect of excessdepreciation.&PlantAll plant, including that of the jointventure (note (iv)), is depreciated at 12·5% on the reducing balance basis.Depreciation on both the building andthe plant should be charged to cost of sales.Investment property On 31 March 2006 aqualified surveyor valued the investment property at $13·5 million. Darius usesthe fair value model in IAS 40 Investment property to value itsinvestment property.&(iv) On 1 April 2005 Darius enteredinto a joint venture with two other entities. Each venturer contributes theirown assets and is responsible for their own expenses including depreciation onjoint venture assets. Darius is entitled to 40% of the joint venture’s totalrevenues. The joint venture is not a separate entity.Details of Darius’s joint venturetransactions are:$’000Plant and equipment at cost &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&12,000Share of joint venture revenue (40% oftotal sales revenue)&&&&&&& &(8,000)Related joint venture cost of salesexcluding depreciation &&&&&&&&&&5,000Trade receivables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,500Trade payables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(2,500)––––––Net balance included in the above listof balances &&&&&&&&&&&&&&&&&8,000––––––&(v) The directors have estimated theprovision for income tax for the year ended 31 March 2006 at $8 million. The deferredtax provision at 31 March 2006 is to be adjusted (through the income statement)to reflect that the tax base of the company’s net assets is $12 million lessthan their carrying amounts. The rate of income tax is 30%.&Required:(a)&& Prepare the income statement for Darius for the year ended31 March 2006.&(b)&& Prepare the statement of recognised income and expensefor Darius for the year ended 31 March 2006.&(c)&&& Prepare the balance sheet for Darius as at 31 March 2006.Notes to the financial statements arenot required.&&&Case3(a) &The IASB’s Frameworkfor the preparation and presentation of financial statements (Framework)sets out the concepts that underlie the preparation and presentation offinancial statements that external users are likely to rely on when makingeconomic decisions about an enterprise.&Required:&Explain the purposeand authoritative status of the Framework. &&&(b) Of particular importance within the Framework are thedefinitions and recognition criteria for assets and liabilities.&Required:&Define assets andliabilities and explain the important aspects of their definitions. Explain whythese definitions are of particular importance to the preparation of anentity’s balance sheet and income statement.&(c) Peterlee is preparing its financial statements for theyear ended 31 March 2006. The following items have been brought to yourattention:(i) &Peterleeacquired the entire share capital of Trantor during the year. The acquisitionwas achieved through a share exchange. The terms of the exchange were based onthe relative values of the two companies obtained by capitalising thecompanies’ estimated future cash flows. When the fair value of Trantor’sidentifiable net assets was deducted from the value ofthe company as a whole, its goodwill was calculated at $2·5 million. A similarexercise valued the goodwill of Peterlee at $4 million. The directors wish to incorporateboth the goodwill values in the companies’ consolidated financial statements.(ii)&&&&&&&&&&&&&&During the yearPeterlee acquired an iron ore mine at a cost of $6 million. In addition, whenall the ore has been extracted (estimated in 10 years time) the company willface estimated costs for landscaping the area affected by the mining that havea present value of $2 million. These costs would still have to be incurred evenif no further ore was extracted. The directors have proposed that an accrual of$200,000 per year for the next ten years should be made for the landscaping.(iii)&&&&&&&&&&&&&On 1 April2005 Peterlee issued an 8% $5 million convertible loan at par. The loan isconvertible in three years time to ordinary shares or redeemable at par incash. The directors decided to issue a convertible loan because anon-convertible loan would have required an interest rate of 10%. The directorsintend to show the loan at $5 million undernon-current liabilities. The followingdiscount rates are available:&&8%&&&&&&& &10%Year &&&&&&&&&&&&&&&&&1 0·93 &&&&&&&0·91Year &&&&&&&&&&&&&&&&&2 0·86&&&&&& &0·83Year&&&&&&&&&&&&&&&& &3 0·79 &&&&&&&0·75 &&&&&&&&&&&&&&&&&&&&&Required:&Describe (and quantifywhere possible) how Peterlee should treat the items in (i) to (iii) in itsfinancial statements for the year ended 31 March 2006 commenting on thedirectors’ views where appropriate.&Case 4&Shown beloware the summarised financial statements for Boston, a publicly listed company, for theyears ended 31 March 2005 and 2006, together with some segment informationanalysed by class of business for the year ended31 March 2006 only:&Income statements: &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Total &&&&&&&TotalCarpeting&&Hotels &&House building &&31 March 2006 &31 March 2005$m &&&&&&$m &&&&&&&&$m&&&&&&&&&&&&&&&$m &&&&&&&&&&&$mRevenue &&&&&&&&&90 &&&&&130 &&&&&&280&&&&&&&&&&&500 &&&&&&&&450Cost of sales (note (i)) (30) &&&&(95) &&&&&&(168)&&&&&&&&&& &(293) &&&&&&&&(260)––– &&&&–––&&&& &–––– &&&&&&&&&&–––– &&&&&&&––––Gross profit &&&&&&&60 &&&&&35 &&&&&&112 &&&&&&&&&&&207 &&&&&&&&&190Operating expenses &(25)&& &(15) &&&&&(32) &&&&&&&&&&&(72) &&&&&&&&&(60)––– &&&–––&&&& &–––– &&&&&&&&&&––––&&&&&&& &––––Segment result &&&&&35 &&&&&20 &&&&&&80 &&&&&&&&&&&&135 &&&&&&&&&130––– &&&&––– &&&&––––Unallocated corporate expenses&&&&&&&&&&&&&&&&&&&&&& &(60) &&&&&&&&&(50)–––– &&&&&&&&––––Profit from operations&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &75 &&&&&&&&&&80Finance costs &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(10)&&&&&&&& &(5)–––– &&&&&&&&––––Profit before tax &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&65 &&&&&&&&&&75Income tax expense&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &&(25)&&&&&&&&& (30)–––– &&&&&&&&&––––Profit for the period&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &40&&&&&&&&&&45–––– &&&&&&&&––––Balance sheets: &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Total &&&&&&&&TotalCarpeting& Hotels&House building &31 March 2006 &31 March 2005$m&&& &$m &&&&&&$m&&&&&&&&&&& &$m &&&&&&&&&$mTangible non-current assets&& &40& &140 &&&&&200 &&&&&&&&&380 &&&&&&&332Current assets &&&&&&&&&&&&&&40 &&&40 &&&&&75 &&&&&&&&&&155 &&&&&&&130––– &––––&&& &––––&&&&&&&&&–––– &&&&&––––Segment assets &&&&&&&&&&&&&80 &&180 &&&&275 &&&&&&&&&&535 &&&&&&462Unallocated bank balance&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &15&&&&&&&&nil–––– &&&&&––––Consolidated total assets &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&550 &&&&&&462–––– &&&&&––––Ordinary share capital &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&100&&&&&& &80Share premium &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&20 &&&&&&&&nilRetained earnings &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&232 &&&&&&&192–––– &&&&&––––352 &&&&&&&272Segment current liabilities – tax 4 &&&&9 &&&&&&12&&&&&&&&& &&25 &&&&&&&&30– other &&4 &&&&51 &&&&&53 &&&&&&&&&&&108 &&&&&&&115Unallocated loans &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&65 &&&&&&&&40Unallocated bank overdraft &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&nil &&&&&&&&&5–––– &&&&&––––Consolidated equity and totalliabilities &&&&&&&&&&&&&&&&&&&&&550&&&&&&462––––&&&&& &––––The following notes are relevant&(i) Depreciation for the year to 31March 2006 was $35 million. During the year a hotel with a carrying amount of $40million was sold at a loss of $12 million. Depreciation and the loss on thesale of non-current assets are charged to cost of sales. There were no othernon-current asset disposals. As part of the company’s overall acquisition ofnew non-current assets, the hotel segment acquired $104 million of new hotelsduring the year.&(ii) The above figures are based onhistorical cost values. The fair values of the segment net assets are:Carpeting &&&&&Hotels &&&&&&&House building$m&&&&&&&& &$m &&&&&&&&&&&&&$mat 31 March 2005&&&&&&& &80 &&&&&&&&&150&&&&&&&&&&&& &250at 31 March 2006 &&&&&&&&97&&&&&&&&&240&&&&&&&&&&&& &265&(iii) The following ratios (which canbe taken to be correct) have been calculated based on the overall groupresults:Year ended: &&&&&&&&&&&&&&&&31 March 2006 &&&&&&&&31 March 2005Return on capital employed &&&&&&&18·0%&&&&&&&&&&&&&&&&&25·6%Gross profit margin &&&&&&&&&&&&&&41·4% &&&&&&&&&&&&&&&&&42·2%Operating profit margin &&&&&&&&&&&15% &&&&&&&&&&&&&&&&&&17·8%Net assets turnover &&&&&&&&&&&&&1·2 times &&&&&&&&&&&&&&&1·4 timesCurrent ratio &&&&&&&&&&&&&&&&&&&&1·3:1&&&&&&&&&&&&&&&&&& &0·9:1Gearing &&&&&&&&&&&&&&&&&&&&&&&15·6% &&&&&&&&&&&&&&&&&&12·8%&&&&(iv) The following segment ratios(which can be taken to be correct) have been calculated for the year ended 31March 2006 only:Carpeting &&&&&&Hotels&&&&& &&House buildingSegment return on net assets& &48·6% &&&&&&&16·7% &&&&&&&&&&38·1%Segment asset turnover (times) &1·3 &&&&&&&&&&1·1 &&&&&&&&&&&&&1·3Gross profit margin &&&&&&&&&66·7% &&&&&&&26·9% &&&&&&&&&&&40%Net profit margin&&&&&&&&& &38·9% &&&&&&&&15·4% &&&&&&&&&&28·6%Current ratio (excluding bank) &5:1 &&&&&&&&&&0·7:1&&&&&&&&&& &1·2:1&Required:&(a) Prepare a cash flow statement for Boston for the year ended31 March 2006. Note: you are not required to showseparate segmental cash flows or any disclosure notes.&(b) Using theratios provided, write a report to the Board of Boston analysing the company’s financial performanceand position for the year ended 31 March 2006.&&&&& Your answer should make reference toyour cash flow statement and the segmental information and consider theimplication of the fair value information.&Case 5(a) Torrent is a large publicly listed company whose mainactivity involves construction contracts. Details of three of its contracts forthe year ended 31 March 2006 are:Contract &&&&&&&&&&&&&&&&&&&Alfa &&&&&&&&&Beta &&&&&&&&&&&CetaDate commenced &&&&&&&&&1 April 2004 &&1 October 2005 &&1 October 2005Estimated duration &&&&&&&&&3 years &&&&&&18 months &&&&&&&&2 years$m &&&&&&&&&&&$m &&&&&&&&&&&&$mFixed contract price &&&&&&&&&&&&20&&&&&&&&&&& &6 &&&&&&&&&&&&&12Estimated costs at start of contract &15&&& &&&&7·5(note (iii))&&&&&& &10Cost to date:at 31 March 2005&&&&&&&&&&&&&& &5&&&&&&&&&&&&nil&&&&&&&&&&& &nilat 31 March 2006 &&&&&&&&&&12·5 (note (ii)) &&&&&&&2&&&&&&&&&&&& &4Estimated costs at 31 March 2006 tocomplete &&3·5&&&&&&&&&&&&&& &5·5 (note (iii)) &&&&&&&&&6Progress payments received at 31 March2005(note (i)) &&&&&&&&&&&&&&&&&5·4 &&&&&&&&&&&nil &&&&&&&&&&&&nilProgress payments received at 31 March2006(note (i)) &&&&&&&&&&&&&&&&12·6 &&&&&&&&&&&1·8 &&&&&&&&&&&&nil&Notes&(i) The company’s normal policy fordetermining the percentage completion of contracts is based on the value ofwork invoiced to date compared to the contract price. Progress paymentsreceived represent 90% of the work invoiced. However, no progress payments willbe invoiced or received from contract Ceta until it iscompleted, so the percentagecompletion of this contract is to be based on the cost to date compared to the estimatedtotal contract costs.&(ii) The cost to date of $12·5 millionat 31 March 2006 for contract Alfa includes $1 million relating to unplannedrectification costs incurred during the current year (ended 31 March 2006) dueto subsidence occurring on site.&(iii) Since negotiating the price ofcontract Beta, Torrent has discovered the land that it purchased for theproject is contaminated by toxic pollutants. The estimated cost at the start ofthe contract and the estimated costs to complete the contract include theunexpected costs of decontaminating the site before construction could commence.&Required:Prepare extracts ofthe income statement and balance sheet for Torrent in respect of the aboveconstruction& contracts for the yearended 31 March 2006 &&&&&&&&&&&&&&&&&&&&&&&(b) (i) &The issuedshare capital of Savoir, a publicly listed company, at 31 March 2003 was $10million. Its shares are denominated at 25 cents each. Savoir’s earningsattributable to its ordinary shareholders for the yearended 31 March 2003 were also $10million, giving an earnings per share of 25 cents.Year ended 31 March 2004 On 1 July2003 Savoir issued eight million ordinary shares at full market value. On 1January 2004 a bonus issue of one new ordinary share for every four ordinaryshares held was made. Earnings attributable toordinary shareholders for the yearended 31 March 2004 were $13,800,000.Year ended 31 March 2005 On 1 October2004 Savoir made a rights issue of shares of two new ordinary shares at a priceof $1·00 each for every five ordinary shares held. The offer was fullysubscribed. The market price of Savoir’s ordinary shares immediately prior tothe offer was $2·40 each. Earnings attributable to ordinary shareholders forthe year ended 31 March 2005 were $19,500,000.&Required:&Calculate Savoir’searnings per share for the years ended 31 March 2004 and 2005 includingcomparative figures&(ii) On 1 April 2005 Savoir issued $20 million 8% convertibleloan stock at par. The terms of conversion (on 1 April 2008) are that for every$100 of loan stock, 50 ordinary shares will be issued at the option of loan stockholders.Alternatively the loan stock will be redeemed at par for cash. Also on 1 April2005 the directors of Savoir were awarded share options on 12 million ordinaryshares exercisable from 1 April 2008 at $1·50 per share. The average marketvalue of Savoir’s ordinary shares for the year ended 31 March 2006 was $2·50each. The income tax rate is 25%. Earnings attributable to ordinaryshareholders for the year ended 31 March 2006 were $25,200,000. The shareoptions have been correctly recorded in the income statement.&Required:Calculate Savoir’sbasic and diluted earnings per share for the year ended 31 March 2006(comparative figures are not required).You mayassume that both the convertible loan stock and the directors’ options aredilutive. &&&&&&Case 6Hosterling purchased the followingequity investments:On 1 October 2005: 80% of the issuedshare capital of Sunlee. The acquisition was through a share exchange of threeshares in Hosterling for every five shares in Sunlee. The market price ofHosterling’s shares at 1 October 2005 was $5 per share.On 1 July 2006: 6 million shares inAmber paying $3 per share in cash and issuing to Amber’s shareholders 6% (actualand effective rate) loan notes on the basis of $100 loan note for every 100shares acquired.The summarised income statements forthe three companies for the year ended 30 September 2006 are:Hosterling&& &Sunlee &&&&Amber$’000 &&&&&&$’000 &&&$’000Revenue &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&105,000 &&&&62,000 &&&50,000Cost of sales&&&&&&&&&&&&&&&&&&&&&&&&&& &(68,000) &&&(36,500)&&(61,000)––––––––& &–––––––– &––––––––Gross profit/(loss)&&&&&&&&&&&&&&&&&&&&&&& &37,000 &&&&25,500 &&&(11,000)Other income (note (i)) &&&&&&&&&&&&&&&&&&&&&400&&&&&&&& &nil &&&&&nilDistribution costs &&&&&&&&&&&&&&&&&&&&&&&&(4,000) &&&&&(2,000) &&&(4,500)Administrative expenses &&&&&&&&&&&&&&&&&&&(7,500)&&&& &(7,000) &&&(8,500)Finance costs&&&&&&&&&&&&&&&&&&&&&&&&&&& &(1,200)&&&&&&(900)&&&&nil––––––––&& &–––––––– &––––––––Profit/(loss) before tax&&&&&&&&&&&&&&&&&&&&& 24,700&&&&& &15,600 &&(24,000)Income tax (expense)/credit &&&&&&&&&&&&&&&&&(8,700) &&&&&&(2,600)&&4,000––––––––&& &–––––––– ––––––––Profit/(loss) for the period &&&&&&&&&&&&&&&&&&16,000 &&&&&&13,000 &&(20,000)––––––––&& &–––––––– ––––––––The following information is relevant:(i) The other income is a dividendreceived from Sunlee on 31 March 2006.(ii) The details of Sunlee’s andAmber’s share capital and reserves at 1 October 2005 were:Sunlee &&&&Amber$’000&&&& &$’000Equity shares of $1 each &&&&&&&&&&&&&&&&&&&&&20,000&&& &15,000Retained earnings &&&&&&&&&&&&&&&&&&&&&&&&&&&18,000 &&&&35,000&(iii) A fair value exercise wascarried out at the date of acquisition of Sunlee with the following results:&&&carrying &&fair value &&remaining life (straight line)amount$’000& &&$’000Intellectual property&&&&&&&&&&&&&&&& &18,000 &&22,000&&still in developmentLand &&&&&&&&&&&&&&&&&&&&&&&&&&&&&17,000& &20,000& &&not applicablePlant &&&&&&&&&&&&&&&&&&&&&&&&&&&&&30,000& &35,000&& &fiveyearsThe fair values have not beenreflected in Sunlee’s financial statements.Plant depreciation is included in costof sales.No fair value adjustments wererequired on the acquisition of Amber.(iv) In the year ended 30 September2006 Hosterling sold goods to Sunlee at a selling price of $18 million.Hosterling made a profit of cost plus25% on these sales. $7·5 million (at cost to Sunlee) of these goods were stillin the inventories of Sunlee at 30 September 2006.(v) Impairment tests for both Sunleeand Amber were conducted on 30 September 2006. They concluded that the goodwillof Sunlee should be written down by $1·6 million and, due to its losses sinceacquisition, the investment in Amber was worth $21·5 million.&(vi) All trading profits and lossesare deemed to accrue evenly throughout the year.&Required:(a) Calculate the goodwill arising onthe acquisition of Sunlee at 1 October 2005. &(b) Calculate thecarrying amount of the investment in Amber at 30 September 2006 under theequity method prior to the impairment test.&&&&&&& &(c) Prepare theconsolidated income statement for the Hosterling Group for the year ended 30September 2006.&&&&Case 7&Thefollowing trial balance relates to Tadeon, a publicly listed company, at 30September 2006:$’000&&&&&&& &$’000Revenue&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&277,800Cost of sales &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&118,000Operating expenses &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&40,000Loan interest paid (note (i)) &&&&&&&&&&&&&&&&&&&&&&&&1,000Rental of vehicles (note (ii)) &&&&&&&&&&&&&&&&&&&&&&&&6,200Investment income &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&2,00025 year leasehold property at cost(note (iii)) &&&&&&&&&&225,000Plant and equipment at cost &&&&&&&&&&&&&&&&&&&&&&&&181,000Investments at amortised cost &&&&&&&&&&&&&&&&&&&&&&&42,000Accumulated depreciation at 1 October2005 – leasehold property &&&&&&36,000– plant and equipment &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&85,000Equity shares of 20 cents each fullypaid &&&&&&&&&&&&&&&&&&&&&&&&&150,000Retained earnings at 1 October 2005 &&&&&&&&&&&&&&&&&&&&&&&&&&&&&18,6002% Loan note (note (i)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&50,000Deferred tax balance 1 October 2005(note (iv)) &&&&&&&&&&&&&&&&&&&&12,000Trade receivables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&53,500Inventories at 30 September 2006 &&&&&&&&&&&&&&&&&&33,300Bank &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,900Trade payables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&18,700Suspense account (note (v)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&48,000–––––––– &&––––––––700,000&&&& &700,000––––––––&& &––––––––The following notes are relevant:(i) The loan note was issued on 1 October2005. It is redeemable on 30 September 2010 at a large premium (in order tocompensate for the low nominal interest rate). The finance department hascalculated that the effective interest rate on the loan is 5·5% per annum.&(ii) The rental of the vehiclesrelates to two separate contracts. These have been scrutinised by the finance departmentand they have come to the conclusion that $5 million of the rentals relate to afinance lease. The finance lease was entered into on 1 October 2005 (the datethe $5 million was paid) for a four year period. The vehicles had a fair valueof $20 million (straight-line depreciation should be used) at 1 October 2005and the lease agreement requires three further annual payments of $6 millioneach on the anniversary of the lease. The interest rate implicit in the leaseis to be taken as 10% per annum. (Note: you are not required to calculate the presentvalue of the minimum lease payments.) The other contract is an operating leaseand should be charged to operating expenses.Other plant and equipment isdepreciated at 121/2% per annumon the reducing balance basis.All depreciation of property, plantand equipment is charged to cost of sales.&(iii) On 30 September 2006 theleasehold property was revalued to $200 million. The directors wish toincorporate this valuation into the financial statements.(iv) The directors have estimated theprovision for income tax for the year ended 30 September 2006 at $38 million.At 30 September 2006 there were $74million of taxable temporary differences, of which $20 million related to therevaluation of the leasehold property (see (iii) above). The income tax rate is20%.&(v) The suspense account balance canbe reconciled from the following transactions:The payment of a dividend in October2005. This was calculated to give a 5% yield on the company’s share price of 80cents as at 30 September 2005.The net receipt in March 2006 of afully subscribed rights issue of one new share for every three held at a price of32 cents each. The expenses of the share issue were $2 million and should becharged to share premium.Note: the cash entries for thesetransactions have been correctly accounted for.&Required:Prepare for Tadeon:(a)&& An income statement for the year ended 30 September 2006;and &(b)&& A balance sheet as at 30 September 2006. &&&&&&&&&&&&&&&&&&&&Note: A statement of changes in equityis not required. Disclosure notes are not required.&Case 8&(a) Recording the substance of transactions, rather than their legal form, isan important principle in financial accounting. Abuse of this principle canlead to profit manipulation, non-recognition of assets and substantial debt notbeing recorded on the balance sheet.&Required:Describe how theuse of off balance sheet financing can mislead users of financial statements.Note: your answer should refer tospecific user groups and include examples where recording the legal form oftransactions may mislead them. &&&&&&&&&&&(b) Angelino has entered into the following transactionsduring the year ended 30 September 2006:&(i) In September 2006 Angelino sold(factored) some of its trade receivables to Omar, a finance house. On selectedaccount balances Omar paid Angelino 80% of their book value. The agreement wasthat Omar would administer the collection of the eceivables and remit aresidual amount to Angelino depending upon how quickly individual customerspaid. Any balance uncollected by Omar after six months will be refundedto Omar by Angelino. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(ii) On 1 October 2005 Angelino owneda freehold building that had a carrying amount of $7·5 million and had anestimated remaining life of 20 years. On this date it sold the building toFinaid for a price of $12 million and entered into an agreement with Finaid to rentback the building for an annual rental of $1·3 million for a period of fiveyears. The auditors of Angelino have commented that in their opinion thebuilding had a market value of only $10 million at the date of its sale and torent an equivalent building under similar terms to the agreement betweenAngelino and Finaid would only cost $800,000 per annum. Assume any finance costsare 10% per annum. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(iii) Angelino is a motor car dealerselling vehicles to the public. Most of its new vehicles are supplied on consignmentby two manufacturers, Monza and Capri, who trade on different terms.Monza supplies cars on terms thatallow Angelino to display the vehicles for a period of three months from thedate of delivery or when Angelino sells the cars on to a retail customer ifthis is less than three months.Within this period Angelino can returnthe cars to Monza or can be asked by Monza to transfer the cars to anotherdealership (both at no cost to Angelino). Angelino pays the manufacturer’s listprice at the end of the three month period (or at the date of sale if sooner).In recent years Angelino has returned several cars to Monza that were notselling very well and has also been required to transfer cars to otherdealerships atMonza’s request.Capri’s terms of supply are thatAngelino pays 10% of the manufacturer’s price at the date of delivery and 1% ofthe outstanding balance per month as a display charge. After six months (orsooner if Angelino chooses), Angelino must pay the balance of the purchaseprice or return the cars to Capri. If the cars are returned to themanufacturer, Angelino has to pay for the transportation costs and forfeits the10% deposit.Because of this Angelino has onlyreturned vehicles to Capri once in the last three years. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Required:Describe how theabove transactions and events should be treated in the financial statements of Angelinofor the year ended 30 September 2006. Your answer should explain, whererelevant, the difference between the legal form of the transactions and theirsubstance.Note: The mark allocation is shownagainst each of the three transactions above.&&Case 9Minster is a publicly listed company.Details of its financial statements for the year ended 30 September 2006,together with a comparative balancesheet, are:Balance Sheet at&&&&&&&&&&&&&&&&&&& &30 September 2006 &&30 September 2005$000&&& &$000&&& &$000 &&&&$000Non-current assets (note (i))Property, plant and equipment &&&&&&&&&&&&&&&&&&&&1,280 &&&&&&&&&&&&940Software &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&135&&&&&&&&&&&&& &nilInvestments at fair value throughprofit and loss &&&&&&150&&&&&&&&&&&& &125––––––&&&&&&&& &––––––1,565&&&&&&&&&&& &1,065Current assetsInventories&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &480&&&&&&&&&&&&& &510Trade receivables &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&270&&&&&&&&&&&&& &380Amounts due from constructioncontracts &&&&&&&&&&&80&&&&&&&&&&&&&& &55Bank&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &nil&&&& &830 &&&&&35&&&&&980–––– &&&–––––– &&–––– &&&––––––Total assets &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&2,395&&&&&&&&&&& &2,045––––––&&&&&&&&&& &––––––Equity and liabilitiesEquity shares of 25 cents each &&&&&&&&&&&&&&&&&&&500 &&&&&&&&&&&&&&300ReservesShare premium (note (ii)) &&&&&&&&&&&&&&150&&&&&&&&&&&&&& &85Revaluation reserve &&&&&&&&&&&&&&&&&&&60&&&&&&&&&&&&&&& &25Retained earnings &&&&&&&&&&&&&&&&&&&950&&& &1,160 &&&&&&965 &&&1,075–––– &&&–––––– &&&&&–––– &&––––––1,660&&&&&&&&&&&& &1,375Non-current liabilities9% loan note &&&&&&&&&&&&&&&&&&&&&&&120&&&&&&&&&&&&&&&& &nilEnvironmental provision&&&&&&&&&&&&& &162 &&&&&&&&&&&&&&&&&nilDeferred tax &&&&&&&&&&&&&&&&&&&&&&&&18 &&&&&300&&&&&&&&&25&&& &25–––– &&&&&&&&&&&&&&&&––––Current liabilitiesTrade payables &&&&&&&&&&&&&&&&&&&&&350&&&&&&&&&&&&&&&&& &555Bank overdraft &&&&&&&&&&&&&&&&&&&&&&25&&&&&&&&&&&&&&&&&& &40Current tax payable &&&&&&&&&&&&&&&&&&60&&&& &435&&&&&&&& &&50&& &645––––&&& &–––––– &&&&&&&–––– &–––––Total equity and liabilities &&&&&&&&&&&&&&&&&&&&2,395&&&&&&&&&&&&&& &2,045–––––– &&&&&&&&&&&&&–––––Income statement for the year ended 30September 2006Revenue &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,397Cost of sales&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &&&&&&&&&&&&(1,110)––––––Gross profit &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&287Operating expenses &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(125)––––––162Finance costs (note (i))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &(40)Investment income and gain oninvestments &&&&&&&&&&&&&&&&&&&&&&&&&&&&20––––––Profit before tax &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&142Income tax expense &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(57)––––––Profit for the year &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&85––––––The following supporting informationis available:(i) Included in property, plant andequipment is a coal mine and related plant that Minster purchased on 1 October 2005.Legislation requires that in ten years’ time (the estimated life of the mine)Minster will have to landscape the area affected by the mining. The future costof this has been estimated and discounted at a rate of 8% to apresent value of $150,000. This costhas been included in the carrying amount of the mine and, together with theunwinding of the discount, has also been treated as a provision. The unwindingof the discount is included within finance costs in the income statement.Other land was revalued (upward) by$35,000 during the year.Depreciation of property, plant andequipment for the year was $255,000.There were no disposals of property,plant and equipment during the year.The software was purchased on 1 April2006 for $180,000.The market value of the investmentshad increased during the year by $15,000. There have been no sales of theseinvestments during the year.&(ii) On 1 April 2006 there was a bonus(scrip) issue of equity shares of one for every four held utilising the share premiumreserve. A further cash share issue was made on 1 June 2006. No shares wereredeemed during the year.&(iii) A dividend of 5 cents per sharewas paid on 1 July 2006.&Required:(a) Prepare a cashflow statement for Minster for the year to 30 September 2006 in accordance withIAS 7 Cash flow statements. &&&&&&&&&&&&&(b) Comment on thefinancial performance and position of Minster as revealed by the abovefinancial statements and your cash flow statement. &&&&&Case 10(a) (i) State thedefinition of both non-current assets held for sale and is continued operationsand explain the usefulness of information for discontinued operations. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&Partway is in the process of preparingits financial statements for the year ended 31 October 2006. The company’s mainactivity is in the travel industry mainly selling package holidays (flights andaccommodation) to the general public through the Internet and retail travelagencies. During the current year the number of holidayssold by travel agencies declineddramatically and the directors decided at a board meeting on 15 October 2006 tocease marketing holidays through its chain of travel agents and sell off therelated high-street premises.Immediately after the meeting thetravel agencies’ staff and suppliers were notified of the situation and an announcementwas made in the press. The directors wish to show the travel agencies’ resultsas a discontinued operation in the financial statements to 31 October 2006. Dueto the declining business of the travel agents, on 1 August 2006 (three monthsbefore the year end) Partway expanded its Internet operations to offer car hirefacilities to purchasers of its Internet holidays.The following are Partway’s summarisedincome statement results – years ended:31 October&&& 200631 &&&&October 2005&Internet &&travel agencies &&car hire&&total& &&&&total$’000 &&&&&&$’000 &&&&&&&$’000 &&&$’000&&&$’000Revenue &&&&&&&&&&23,000 &&&&&14,000 &&&&&&&2,000 &&&9,000&&&40,000Cost of sales &&&&&&(18,000)&&&& (16,500) &&&&&(1,500)&&(36,000) &(32,000)––––––– &&&&–––––––&&&&&––––––– &–––––– &&––––––Gross profit/(loss) &&&5,000 &&&(2,500) &&&&&&&500 &&&&&3,000 &&&&8,000Operating expenses &&(1,000)&&(1,500) &&&&&&(100) &&&&(2,600) &&&(2,000)–––––– &&––– –– &&&&&&&–––– &&&&––––––&&&––––––Profit/(loss) before tax &4,000& &(4,000) &&&&&&400 &&&&&&&400 &&&&&6,000––––––&& –––––– &&&&&––––– &&&&&–––––&&&–––––The results for the travel agenciesfor the year ended 31 October 2005 were: revenue $18 million, cost of sales $15million and operating expenses of $1·5 million.&Required:&(ii) Discusswhether the directors’ wish to show the travel agencies’ results as adiscontinued operation is justifiable.&&&&&&&&&&&&&&&&&&&&&&& &(4 marks)&(iii) Assuming theclosure of the travel agencies is a discontinued operation, prepare the(summarised) income statement of Partway for the year ended 31 October 2006together with its comparatives.&Note: Partway discloses the analysisof its discontinued operations on the face of its income statement.&&(b) (i) Describe the circumstances in which anentity may change its accounting policies and how a change should be applied.&&&&&&&&&&&&&&&& &&The terms under which Partway sellsits holidays are that a 10% deposit is required on booking and the balance ofthe holiday must be paid six weeks before the travel date. In previous yearsPartway has recognised revenue (and profit) from the sale of its holidays atthe date the holiday is actually taken. From the beginning of November2005, Partway has made it a conditionof booking that all customers must have holiday cancellation insurance and as aresult it is unlikely that the outstanding balance of any holidays will beunpaid due to cancellation. In preparing its financial statements to 31 October2006, the directors are proposing to change to recognisingrevenue (and related estimated costs)at the date when a booking is made. The directors also feel that this change willhelp to negate the adverse effect of comparison with last year’s results (yearended 31 October 2005) which were better than the current year’s.&Required:&(ii) Comment onwhether Partway’s proposal to change the timing of its recognition of itsrevenue is acceptable and whether this would be a change of accounting policy. &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&《财务会计》案例分析&Case 1&(a) HydanConsolidated incomestatement year ended 31 March 2006$’000 &&&&&&$’000Revenue (98,000 + 35,200 – 30,000intra-group sales) &&&&&&&&&&&&&&&&&&103,200Cost of sales (w (i)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(77,500)––––––––Gross profit&&&&&&&&&&&&&&&&&&&&&&&&&&& &&&&&&&&&&&&&&&&&&&&&&&&&25,700Operating expenses (11,800 + 8,000 +375 goodwill (w (ii))) &&&&&&&&&&&&(20,175)Interest receivable (350 – 200intra-group (4,000 x 10% x 6/12)) &&&&&&&&&&&&150Finance costs &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(420)––––––––5,255Income tax expense (4,200 – 1,000 taxrelief) &&&&&&&&&&&&&&&&&&&&&&&&&(3,200)––––––––Profit for the period &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&2,055––––––––Attributable to:Equity holders of the parent &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&3,455Minority interest (w (iv)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(1,400)––––––––2,055––––––––Consolidated balance sheet as at 31March 2006Non-current assets:Property, plant and equipment (18,400 +9,500 + 1,200 – 300 depreciation adjustment) 28,800Goodwill (3,000 – 375 (w (ii)))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &2,625Investment (16,000 – 10,800 – 4,000loan) &&&&&&&&&&&&&&&&&&&&&&&&&&&&1,200–––––––32,625Current assets (w (v)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&24,000–––––––Total assets &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&56,625–––––––Equity attributable to holders of theparentOrdinary shares of $1 each &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&10,000Share premium &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&5,000Retained earnings (w (iii))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& 17,525–––––––32,525Minority interest (w (iv))&&&&&&&&&&&&&&&&&& &&&&&&&&&&&&&&&&&&&&&&&&3,800–––––––Total equity &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&36,325Non-current liabilities7% bank loan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&6,000Current liabilities (w (v)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&14,300–––––––Total equity and liabilities &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&56,625–––––––Workings in $’000(i) Cost of salesHydan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&76,000Systan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&31,000Intra-group sales &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(30,000)URP in inventories &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&200Additional depreciation re fair values &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&300–––––––77,500–––––––(ii) Goodwill/Cost of control inSystan:Investment at cost (2,000 x 60% x $9) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&10,800Less – ordinary shares of Systan &&&&&&&&&&&&&&&&&&&&2,000– share premium &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&500– pre-acquisition reserves (6,300 +3,000 post acq loss) &&9,300– fair value adjustment &&&&&&&&&&&&&&&&&&&&&&&&&&&1,200–––––––13,000 x 60% &&&&&&&(7,800)––––––Goodwill on consolidation &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&3,000––––––Goodwill is impaired by 12·5% of itscarrying amount = &&&&&&&&&&&&&&&&&375––––––&(iii) Consolidated reserves:Hydan’s reserves &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&20,000Systan’s post acquisition losses (seebelow) (3,500 x 60%) &&&&&&&&&&&&&&(2,100)Goodwill impairment (w (ii))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &(375)–––––––17,525–––––––The adjusted profits of Systan are:Per question &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&6,300Adjustments – URP in inventories (4,000x 5%) &&&&&&&&&&&&&&&&&&&&&&&&&(200)– additional depreciation &&&&&&&&&&&&&&&&&&&&&&&&&(300) &&&&&&&&&&&&&(500)––––– &&&&&&&&&&&–––––––5,800–––––––(iv) Minority interest in incomestatementSystan’s post acquisition loss aftertax&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &3,000Adjustments from (w (iii)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&500––––––Adjusted losses &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&3,500 x40% =1,400Minority interest in balance sheetOrdinary shares and premium of Systan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&2,500Adjusted profits (w (iii))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &5,800Fair value adjustments &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,200––––––9,500 x 40% = 3,800(v) Current assets and liabilitiesCurrent assets:Hydan&&&&&&&&&&&&&&&& &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&18,000Systan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&7,200URP in inventories&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &(200)Intra-group balance &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(1,000)–––––––24,000–––––––Current liabilities:Hydan&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&11,400Systan &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&3,900Intra-group balance&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &(1,000)–––––––14,300–––––––(b) &AlthoughSystan’s revenue has increased since its acquisition by Hydan, its operatingperformance appears to have deteriorated markedly. Its gross profit margin hasfallen from 25% (6m/24m) in the six months prior to the acquisition to only11·9% (4·2m/35·2m) in thepost-acquisition period. The decline in gross profit is worsened by a hugeincrease in operating expenses in the post-acquisition period. These have gonefrom $1·2 million pre-acquisition to $8 million post-acquisition.Taking into account the effects ofinterest and tax a $3·6 million first half profit (pre-acquisition) has turnedinto a $3 million second half loss (post-acquisition). Whilst it is possiblethat some of the worsening performance may be due to marketconditions, the major cause is probablydue to the effects of the acquisition. As the question states Hydan hasacquired a controlling interest in Systan and thus the two companies arerelated parties. Since the acquisition most of Systan’s sales have been toHydan. This is not surprising as Systan was acquired to secure supplies toHydan. The terms under which the sales are made are now determined by themanagement of Hydan, whereas they were previously determined by the managementof Systan. The question says sales to Hydan yield a consistent gross profit ofonly 5%. This is very low and much lower than the profit margin on sales toHydan prior to the acquisition and also much lower than the few sales that weremade to third parties in the post acquisition period. It may also be that Hydanhas shifted the burden of some of thegroup operating expenses to Systan –this may explain the large increase in Systan’s post acquisition operatingexpenses. The effect of these (transfer pricing) actions would move profitsfrom Systan’s books into those of Hydan. The implications of thisare quite significant. Initially theremay be a tendency to think the effect is not important as on consolidation bothcompanies’ results are added together, but other parties are affected by theseactions. The most obvious is the significant (40%) minority interest, they areeffectively having some of their share of Systan’s profit and balance sheetvalue taken from them. It may also be that the management and staff of Systanmay be losing out on profit related bonuses. Finally, any party using Systan’sentity financial statements, forwhatever purpose, would be basing any decisions they make on potentiallymisleading information.&Case 2 (a) Darius income statement for the year ended 31 March 2006$’000&&&&&&& &$’000Revenue (w (i))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&221,800Cost of sales (w (i))&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& &(156,200)–––––––––Gross profit &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&65,600Operating expenses &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(22,400)Investment income &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&1,200Loss on investment property (16,000 –13,500 w (ii)) &&&&&&&&&&&&&&&&&&(2,500)Financing cost (5,000 – 3,200 ordinarydividend (w (v))&&&&&&&&&&&&&&& &(1,800)–––––––––Profit before tax &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&40,100Income tax expense (w (iii)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&(6,400)–––––––––Profit for the period &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&33,700–––––––––(b) Statement of recognised income and expense for the yearended 31 March 2006Unrealised surplus on land and building&&&&&&&&&&&&&&&&&&&&&&&&&&&& &21,000Profit for the period &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&33,700–––––––Total recognised income and expense forthe period &&&&&&&&&&&&&&&&&&&54,700–––––––&(c) Darius balance sheet as at 31 March 2006Non-current assetsProperty, plant and equipment (w (iv)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&87,100Investment property (w (ii)) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&13,500––––––––100,600Current assetsInventories (10,500 – 300 (w (i))) &&&&&&&&&&&&&&&&&10,200Trade receivables (13,500 + 1,500 JV) &&&&&&&&&&&&&15,000 &&&&&&&&&&25,200––––––– &&&&&&&––––––––Total assets &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&125,800––––––––Equity and liabilities:Ordinary shares of 25c each &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&20,000Reserves:Revaluation &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&21,000Retained earnings (w (v)) &&&&&&&&&&&&&&&&&&&&&&48,000 &&&&&&&&&&&69,000–––––––&&&&&& &––––––––89,000Non-current liabilitiesDeferred tax (w (iii)) &&&&&&&&&&&&&&&&&&&&&&&&&&3,600Redeemable preference shares of $1 each&&&&&&&&&10,000 &&&&&&&&&&&13,600–––––––Current liabilitiesTrade payables (11,800 + 2,500 JV) &&&&&&&&&&&&14,300Bank overdraft &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&900Current tax payable &&&&&&&&&&&&&&&&&&&&&&&&&&8,000 &&&&&&&&&&&&23,200––––––– &&&&&&&&&&––––––––Total equity and liabilities &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&125,800––––––––Workings in $’000(i) RevenuePer question &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&213,800Joint venture revenue&&&&&&&&&&&&&&&&&&&&&&& &8,000––––––––221,800––––––––Cost of sales:Per question &&&&&&&&&&&&&&&&&&&&&&&&&&&&&143,800Closing inventories adjustment (seebelow) &&&&&&&&300Joint venture costs &&&&&&&&&&&&&&&&&&&&&&&&&&&5,000Depreciation (w (iv)) – building &&&&&&&&&&&&&&&&3,200– plant &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&3,900––––––––156,200––––––––The damaged inventories will requireexpenditure of $450,000 to repair them and then have an expected selling price of$950,000. This gives a net realisable value of $500,000, as their cost was$800,000, a write down of $300,000 is required.&(ii) The fair value model in IAS 40 Investmentproperty requires investment properties to be included in the balance sheetat their fair value (in this case taken to be the open market value). Anysurplus or deficit is recorded in income.(iii) Taxation:Provision for year &&&&&&&&&&&&&&&&&&&&&&&&&&8,000Deferred tax (see below) &&&&&&&&&&&&&&&&&&&&(1,600)––––––6,400––––––Taxable temporary differences are $12million. At a rate of 30% this would require a balance sheet provision fordeferred tax of $3·6 million. The opening provision is $5·2 million, thus acredit of $1·6 million will be made in the income statement.&(iv) Non-current assetsLand and buildingDepreciation of the building for theyear ended31 March 2006 will be (48,000/15 years)&&&&&&&&3,200–––––––Plant and equipmentPer trial balance &&&&&&&&&&&&&&&&&&&&&&&&&&&&36,000Joint venture plant&&&&&&&&&&&&&&&&&&&&&&&& &&12,000–––––––48,000Accumulated depreciation 1 April 2005 &&&&&&&&(16,800)–––––––Carrying amount prior to charge foryear &&&&&&&&31,200Depreciation year ended 31 March 2006at 12·5% &(3,900)–––––––Carrying amount at 31 March 2006&&&&&&&&&&&& &27,300–––––––Summarising:&&&& &&&&&cost/valuation&&&&&& &accumulated depreciation&&& n carrying amountLand and building &&&&&&63,000 &&&&&&&&&&&&&3,200 &&&&&&&&&&&&&&&59,800Plant and equipment &&&&48,000 &&&&&&&&&&&&&20,700 &&&&&&&&&&&&&&27,300––––––––&&&&&&&&&&&&––––––– &&&&&&&&&&&–––––––Property, plant and equipment 111,000 &&&&&&&&&23,900 &&&&&&&&&&&&&&&87,100–––––––– &&&&&&&&&&–––––––&&&&&&&&&&&&&–––––––(v) Retained earningsBalance b/f &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&17,500Profit for period &&&&&&&&&&&&&&&&&&&&&&&&&&&33,700Ordinary dividends paid (20,000 x 4 x4c)&&&&& &(3,200)–––––––48,000–––––––Case 3&(a) The purpose of the Framework is to assist the various bodies and usersthat may be interested in the financial statements of an entity. It is there toassist the IASB itself, other standard setters, preparers, auditors and usersof financial statements andany other party interested in the workof the IASB. More specifically:–&&to assist the Board in thedevelopment of new and the review of existing standards. It is also believedthat the Framework will assist in promoting harmonisation of the preparation offinancial statements and also reduce the number of alternative accountingtreatments permitted by IFRSs– &&national standard setters that have expresseda desire for local standards to be compliant with IFRS will be assisted by theFramework– &&the Framework will help preparers to applyIFRS more effectively if they understand the concepts underlying the Standards,additionally the Framework should help in dealing with new or emerging issueswhich are, as yet, not covered by an IFRS–&&the above is also true of thework of the auditor, in particular the Framework can assist the auditor indetermining whether the financial statements conform to IFRS– &&users should be assisted by the Framework ininterpreting the performance of entities that have complied with IFRS.It is important to realise that theFramework is not itself an accounting standard and thus cannot override arequirement of a specific standard. Indeed, the Board recognises that there maybe (rare) occasions where a particular IFRS is in conflict with the Framework.In these cases the requirements of the standard should prevail. The Boardbelieves that such conflicts will diminish over time as the development of newand (revised) existing standards will be guided by the Framework and theFramework itself may be revised basedon the experience of working with it.(b) &Definitions –assets:The IASB’s Framework defines assets as‘a resource controlled by an entity as a result of past events and from whichfuture economic benefits are expected to flow to the entity’. The first part ofthe definition puts the emphasis on control rather thanownership. This is done so that thebalance sheet reflects the substance of transactions rather than their legalform. This means that assets that are not legally owned by an entity, but overwhich the entity has the rights that are normally conveyed by ownership, arerecognised as assets of the entity. Common examples of this would be financeleased assets and other contractual rights such as aircraft landing rights. Animportant aspect of control of assets is that it allows the entity to restrict theaccess of others to them. The reference to past events prevents assets that mayarise in future from being recognised early.– liabilities:The IASB’s Framework defines liabilitiesas ‘a present obligation of the entity arising from past events, the settlementof which is expected to result in an outflow from the entity of resourcesembodying economic benefits’. Many aspects of this definitionare complementary (as a mirror image)to the definition of assets, however the IASB stresses that the essentialcharacteristic of a liability is that the entity has a present obligation. Suchobligations are usually legally enforceable (by a binding contractor by statute), but obligations alsoarise where there is an expectation (by a third party) of an entity assumingresponsibility for costs where there is no legal requirement to do so. Suchobligations are referred to as constructive (by IAS 37 Provisions,contingentliabilities and contingent assets). An exampleof this would be repairing or replacing faulty goods (beyond any warrantyperiod) or incurring environmental costs (e.g. landscaping the site of aprevious quarry) where there is no legal obligation to do so. Where entities doincur constructive obligations it is usually to maintain the goodwill andreputation of the entity. One area of difficulty is where entities cannot besure whether an obligation exists or not, it may depend upon a future uncertainevent. These are more generally known as contingent liabilities.Importance of the definitions of assetsand liabilities:The definitions of assets andliabilities are fundamental to the Framework. Apart from forming the obviousbasis for the preparation of a balance sheet, they are also the two elements offinancial statements that are used to derive the equity interest (ownership)which is the residue of assets less liabilities. Assets and liabilities alsohave a part to play in determining when income (which includes gains) and expenses(which include losses) should be recognised. Income is recognised (in the incomestatement) when there is an increase in future economic benefits relating toincreases in assets or decreases in liabilities, provided they can be measuredreliably. Expenses are the opposite of this. Changes in assets and liabilitiesarising from contributions from, and distributions to, the owners are excludedfrom the definitions of income and expenses.Currently there is a great deal ofconcern over ‘off balance sheet finance’. This is an aspect of what is commonlyreferred to as creative accounting. Many recent company failure scandals havebeen in part due to companies having often massiveliabilities that have not been includedon the balance sheet. Robust definitions, based on substance, of assets andliabilities in particular should ensure that only real assets are included onthe balance sheet and all liabilities are also included. In contradiction tothe above point, there have also been occasions where companies have includedliabilities on their balance sheets where they do not meet the definition ofliabilities in the Framework. Common examples of this are general pr