In accordance with IFRS 5: Non-Current Assets held for Sale and Discontinued Operations explain with reasons, whether each of the following could most likely be classified as a discontinued operation in this year’s financial statements:
i) A reportable operating segment that met the definition of held for sale after the year end, but before the financial statements were authorised for issue.  (2 marks)

ii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements, but which has not been sold by this year-end due to the sale being referred to the Securities and Exchange Commission (SEC). SEC is not expected to report its findings until 6 months after this year end.   (2 marks)

Ejura Ltd (Ejura) is a Manufacturing and retail company which prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 December each year.

In order to generate or improve sales on one of its older products, Ejura offered a promotion named ‘something for free’. The promotion included free maintenance services for the first two years. On 1 October 2019, under the promotional offer, Ejura sold goods to a supermarket chain for GH¢4.4 million. A two-year maintenance contract would normally be sold for GH¢0.5 million, and the list price of the product would normally be GH¢5 million. The transaction has been included in revenue at GH¢4.4 million.

Required:
In accordance with IFRS 15: Revenue from Contracts with Customers, justify the appropriate accounting treatment for the above transaction in the financial statements of Ejura for the year ended 31 December 2019.   (7 marks)

Naa Ltd on April 1, 2019 acquired 60% of the 75 million equity shares of Shormeh Ltd. The acquisition was achieved through a share exchange transaction of one share in Naa Ltd for every three shares in Shormeh Ltd. At the acquisition date, the share prices of both Naa Ltd and Shormeh Ltd were GH¢4 and GH¢2.50 each respectively. In addition, Naa Ltd will pay GH¢1.54 cash on March 31, 2020 for each share acquired. The cost of capital of Naa Ltd is 10% per annum.

Statements of profit or loss and other comprehensive income for the companies for the year ended 30 September 2019 are stated below:

Additional relevant information:
i) On April 1, 2019, a fair value exercise was conducted and concluded that the carrying amounts of Shormeh Ltd’s net assets were equal to their fair values with the exception of the following:

• The fair value of Shormeh Ltd land was GH¢1 million in excess of its carrying amount.
• An item of plant had a fair value of GH¢3 million in excess of its carrying amount. The plant had a remaining useful life of two years at the date of acquisition. Plant depreciation is charged to cost of sales.

ii) At acquisition date, Naa Ltd placed GH¢2.5 million on Shormeh Ltd’s good trading relationship with its customers. Naa Ltd expects that this customer relationship will last for a further 5-years. Amortisation of intangible assets is charged to administrative expenses.
iii) The group policy of Naa Ltd is to value land to market value at the end of each accounting period. Before the acquisition, Shormeh Ltd land had been valued at historical cost, but it has adopted the group policy since its acquisition. In addition to the fair value increase in Shormeh Ltd land, it had increase by a further GH¢0.5 million since the acquisition.
iv) The successful completion of the acquisition resulted in the sale of goods from Naa Ltd to Shormeh Ltd valued at GH¢10 million. At 30 September 2019, Shormeh Ltd still held one fifth of these goods in inventory. Naa Ltd charged a markup of 25% on cost.
v) On April 1, 2019, Naa Ltd also purchased 20% of Pamela Ltd equity shares. Pamela Ltd profit after tax for the year ended 30 September 2019 was GH¢5 million and during September 2019 Pamela Ltd paid a dividend of GH¢3 million. However, Shormeh Ltd did not pay any dividends in the year ended 30 September 2019.

vi) In September 2019, Naa Ltd also sold goods to Pamela Ltd for an amount of GH¢7.5 million, all of which were still in inventory as at 30 September 2019. Naa Ltd charged 25% mark-up on cost.
vii) It is the group policy of Naa Ltd to value the non-controlling interest at the acquisition date at fair value. For the purpose of this, the share price at acquisition date is representative of the fair value of shares held by the non-controlling interest.
viii) The retained earnings of Shormeh Ltd brought forward to October 1, 2018 were GH¢60 million.
ix) All items of income and expenditure are deemed to accrue evenly throughout the period unless otherwise stated.

Required:
a) Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 September 2019. (17 marks)

b) Calculate the consolidated goodwill that arose on the acquisition date.    (3 marks)

Builsa Ltd (Builsa) is a listed company which assemble personal computers (PCs) and it is preparing its financial statements for the year ended 31 May 2018.

Builsa plans to close down one of its divisions. This division, which is classified as a separate
business segment, will cease all of its activities on 31 July 2018. Most of the assets of the business will be redeployed elsewhere in Builsa’s business, however some smaller items of plant will be sold off or scrapped. Approximately half of the staff of the division will be made redundant and they were notified of the decision in late May 2018. Customers and suppliers
were notified at the same time. The annual 2018 financial statements are scheduled to be released to the markets on 9 August 2018.

Required:
Advise the directors as to the financial reporting issues arising from the above matters and explain the appropriate treatment in Builsa’s financial statements in each case.                                                                                                                          (6 marks)

Negative Goodwill is based on the accounting concept of Goodwill, an intangible asset that represents the worth of a company’s brand name, patents and other intellectual property, customer base, licenses, and other items that are difficult to put an amount on but help to make a company valuable. When the price paid is less than the actual value of the company’s net tangible assets, negative Goodwill results.
Required:
In accordance with IFRS 3: Business Combinations, Identify THREE (3) factors that account for a negative Goodwill and indicate its accounting treatment when it occurs in the preparation of consolidated financial statements.                        (5 marks)

On 1 August 2018 Charlie Ltd, whose functional currency is the cedi, bought a property in Morocco for DH40 million. The property had a 20-year useful economic life with no residual value estimated. On 31 July 2019, the property was revalued to DH45 million.

Exchange rates were:
1 January 2018 GH¢1  = DH 1.32
1 August 2018 GH¢1   = DH 1.25
31 July 2019 GH¢1      = DH 1.125
Required:
In accordance with IAS 21: The Effects of Changes in Foreign Exchange Rates and IAS 16: Property, Plant & Equipment how much should be recognised in Statement of Profit or Loss and Other Comprehensive Income for year ended 31 July 2019?                                                                                                                                                                                             (5 marks)

Mr. Charles Agyekum is a qualified ICAG member who prepares accounts on behalf of a small independent trader. An annual practicing certificate is not required.
This is the first year the member has prepared these accounts. When compiling the most recent accounts, he noticed that some errors were noted in the previous accounts. It appeared that the accounts were based on incomplete records as certain costs were excluded, either intentionally or because records were not maintained.
The client has also requested some additional work to be completed on a complex tax issue. However, the member has no prior experience and does not feel competent to do the work. The client would also like him to provide an audit opinion as they are planning to apply for a bank loan and the bank would like some additional assurance.
Required:
In accordance with IFAC’s code of ethics, explain which ethical principles apply and comment on their relevance to the above scenario.                                                                                                                                                                              (6 marks)

Define ‘equity’, and explain why the conceptual framework does not prescribe any recognition criteria for equity.      (4 marks)

Hukpor Ltd (Hukpor) manufactures a variety of consumer products. The company’s founders have managed the company for thirty years and are now interested in selling the company and retiring. Seekers Ltd is looking into the acquisition of Hukpor and has requested the company’s latest financial statements and selected financial ratios in order to evaluate Hukpor’s financial stability and operating efficiency. The summary of information provided by Hukpor is presented below:

Required:
a) Calculate ratios for the years 2018 for Hukpor in comparison with ratios for 2017.                                                      (5 marks)

b) For each of the ratios computed for 2018, analyse Hukpor’s performance for 2018 based on the results of the ratio computed, in comparison with the results for 2017.                                                                                                                           (10 marks)

c) Explain FIVE (5) limitations of accounting ratios.                                                                                                         (5 marks)

Biggs Ltd has a financial year ending 31 December. Its trial balance extracted as at 31 December, 2018 was as follows:

Additional information:
i) The carrying value of inventories at cost at 31 December 2018 was GH¢39.5 million.
ii) On 1 January 2018 Biggs Ltd sold some of its plant and equipment to a finance company. Biggs Ltd credited the sales proceeds of GH¢25.6 million to revenue. The plant and equipment was purchased by Biggs Ltd on 1 January 2017 at a total cost of GH¢32 million and was being depreciated over its estimated useful life of five years. The cost and accumulated depreciation of the disposed asset is still included in the PPE cost and accumulated depreciation accounts.

On 1 January 2018 Biggs Ltd began to lease the plant and equipment from the finance company on a four-year lease. Lease rentals were GH¢7.2 million, payable annually in advance. If Biggs Ltd had borrowed funds from the finance company on 1 January 2018, the annual interest rate would have been 8.5%.
iii) On 1 January 2018 Biggs Ltd issued 200 million preference shares at 32.50 pesewas each. Costs of issue were GH¢1 million so the net proceeds of the issue were GH¢64 million. The preference shareholders will receive an annual dividend on 31 December each year of GH¢3.9 million. The shares will be redeemed at par on 31 December 2022. The effective annual finance cost attaching to these shares is approximately 6.4%. The first annual dividend was paid on 31 December 2018 and is included in dividends paid. The equity shareholders were paid a dividend of GH¢4 million in the year.
iv) The estimated income tax on the profits for the year to 31 December 2018 is GH¢4.5 million. During the year GH¢4.2 million was paid in full and final settlement of income tax on the profits for the year ended 31 December 2017. The statement of financial position at 31 December 2017 had included GH¢4.4 million in respect of this liability. At 31 December 2018 the carrying amounts of the net assets of Biggs Ltd exceeded their tax base by GH¢35.8 million. Assume an income tax rate of 25%.
v) The details of property, plant and equipment are as follows:

Estimate of useful economic life (at date of purchase) of PPE components:
Land                                    – nil (infinite life)
Building                              – 50 years
Plant and Equipment          – 5 years

On 30 June 2018 the directors decided to sell the property because more suitable leasehold property had become available at a very competitive cost. They advertised the property for sale at that date at what was considered to be a realistic asking price of GH¢68 million. They estimated that costs of GH¢3 million would be necessary in order to sell the property. On 1 December 2018 they reduced the asking price to GH¢64.5 million and they sold the property at this price shortly after the year end. Costs to sell totaled GH¢2.5 million.
Required:
Prepare for Biggs Ltd,
a) The Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2018.              (10 marks)

b) The Statement of Financial Position as at 31 December 2018.                                                                                     (10 marks)