The following trial balance relates to Binkabi Ltd as at 30 September 2017:

Additional Information:
i) Binkabi Ltd’s revenue includes GH¢16 million for goods sold to Kofi on 1 October 2016. The terms of the sale are that Binkabi Ltd will incur ongoing service and support costs of GH¢1.2 million per annum for three years after the sale. Binkabi Ltd normally makes a gross profit of 40% on such servicing and support work. Ignore the time value of money.
ii) Administrative expenses include an equity dividend of ¢12 million paid during the year.
iii) The 5% convertible loan note was issued for proceeds of ¢20 million on 1 October 2015. It has an effective interest rate of 8% due to the value of its conversion option.
iv) During the year Binkabi Ltd sold an equity investment for GH¢11 million. At the date of sale it had a carrying amount of GH¢8.8 million and had originally cost GH¢7 million. Binkabi Ltd has recorded the disposal of the investment. The remaining equity investments (the GH¢26.5 million in the trial balance) have a fair value of GH¢29 million at 30 September 2017. The other reserve in the trial balance represents the net increase in the value of the equity investments as at 1 October 2016. Binkabi Ltd made an irrevocable decision at initial recognition of these instruments to recognise all changes in fair value through other comprehensive income, and makes a transfer of realised profit from the other reserve to income surplus on disposal of the investments. Ignore deferred tax on these transactions.
v) The balance on current tax represents the under/over provision of the tax liability for the year ended 30 September 2016. The directors have estimated the provision for income tax for the year ended 30 September 2017 at GH¢16.2 million. At 30 September 2017 the carrying amounts of Binkabi Ltd’s net assets were GH¢13 million in excess of their tax base. The income tax rate of Binkabi Ltd is 30%.
vi) Non-current assets
The freehold property has a land element of GH¢13 million. The building element is being depreciated on a straight-line basis. Plant and equipment is depreciated at 40% per annum using the reducing balance method. Binkabi Ltd’s brand in the trial balance relates to a product line that received bad publicity during the year which led to falling sales revenues. An impairment review was conducted on 1 April 2017 which concluded that, based on estimated future sales, the brand had a value in use of GH¢12 million and a remaining life of only three years. However, on the same date as the impairment review, Binkabi Ltd received an offer to purchase the brand for GH¢15 million.
Prior to the impairment review, it was being depreciated using the straight-line method over a 10 year life. No depreciation/amortisation has yet been charged on any non-current asset for the year ended 30 September 2017. Depreciation, amortisation and impairment charges are all charged to cost of sales.
Required:
a) Prepare the statement of profit or loss and other comprehensive income for Binkabi Ltd for the year ended 30 September 2017.                                                                                                                                                                                   (8 marks)

b) Prepare the statement of financial position of Binkabi Ltd as at 30 September 2017.                                                 (12 marks)

In accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, a non-current asset (disposal group) is classified as “held for sale” if it’s carrying amount will be recovered principally through a sale transaction rather than through continuing use. However, to qualify to be classified as held for sale, a detailed criteria must be met.
Required:
Identify any TWO criteria to be met before an asset can be classified as held for sale.                                                    (2 marks)

Delali Ltd adopts revaluation model for subsequent measurement of its intangible assets in accordance with IAS 38: Intangible assets. The policy of Delali is to revalue its intangible asset at the end of each year. An intangible asset with an estimated useful life of 9 years was acquired on 1 January 2016 for GH¢45,000. It was revalued to GH¢54,400 on 31 December 2016 and the revaluation surplus was correctly recognized on that date. As at 31 December 2017, the asset was revalued at GH¢32,000.
Required:
Discuss the accounting treatment required in 2016 and 2017 financial statements.                                                           (4 marks)

Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5 rights issue on 1 October 2017 at a price of GH¢1. The market value on the last day of quotation with rights was GH¢1.60. Total earnings are GH¢50,000 in 2017, and GH¢40,000 in 2016.
Required:
Calculate the Earnings per Share for the year ended 31 December 2017 and the corresponding figure for 2016 in accordance with IAS 33: Earnings per Share.                                                                                                                                      (4 marks)

On 1 October 2016, the Government of Ghana awarded Sea Fishing Ltd one of six licences issued to operate a production facility for five years. A subsidised sum of GH¢1m was paid by Sea Fishing Ltd for the licence. The Government of Ghana considers the difference between the nominal value and its fair value which is GH¢3,000,000 as a grant to Sea Fishing Ltd.
Required:
Explain the TWO ways that the Directors of Sea Fishing Ltd can account for this transaction. (Apply the relevant accounting standards).                                                                                                                                                                           (4 marks)

Devine Education Ltd acquired an item of plant at a cost of GH¢800,000 on 1 April 2016. The plant had an estimated residual value of GH¢50,000 and an estimated useful life of five years, neither of which has changed. Devine Education Ltd uses straight-line depreciation.
On 31 March 2018, Devine Education Ltd was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Devine Education Ltd. Even before this information was known, Devine Education Ltd had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be:

Year ended:                                           GH¢’000
31 March 2019                                         220.00
31 March 2020                                         180.00
31 March 2021                                         170.00
Devine Education Ltd has confirmed that there is no market in which to sell the plant as at 31 March 2018, but is confident that it can still be sold for its original estimated realisable value on 31 March 2021. Devine Education Ltd’s cost of capital is 10% and the following values should be used:
Value of GH¢1 at:                                  GH¢
End of year 1                                          0.91
End of year 2                                          0.83
End of year 3                                          0.75
Required:
In line with IAS 36: Impairment of Assets, calculate the carrying amounts of the asset above as at 31 March 2018 after applying any impairment losses. (Note: Calculations should be to the nearest GH¢1,000)                                                          (6 marks)

On 1 April 2017, Tamale Ltd acquired 60% of the 4 million ordinary shares of Navrongo Ltd in a share exchange of two shares in Tamale Ltd for three shares in Navrongo Ltd. The issue of shares has not yet been recorded by Tamale Ltd. At the date of acquisition, shares in Tamale Ltd had a market value of GH¢6 each. Below are the summarised draft financial statements of both companies.

The following information is relevant:
i) At the date of acquisition, the fair values of Navrongo Ltd’s assets were equal to their carrying amounts with the exception of an item of plant, which had a fair value of GH¢2 million in excess of its carrying amount. It had a remaining life of five years at that date (straight-line depreciation is used). Navrongo Ltd has not adjusted the carrying amount of its plant as a result of the fair value exercise.

ii) Sales from Navrongo Ltd to Tamale Ltd in the post-acquisition period were GH¢8 million. Navrongo Ltd made a markup on cost of 40% on these sales. Tamale Ltd had sold GH¢5.2 million (at cost) as at 30 September 2017.
iii) Other than where indicated, profit or loss items are deemed to accrue evenly on a time basis.
iv) Navrongo Ltd’s trade receivables at 30 September 2017 include GH¢600,000 due from Tamale Ltd which did not agree with Tamale Ltd’s corresponding trade payable. This was due to cash in transit of GH¢200,000 from Tamale Ltd to Navrongo Ltd. Both companies have positive bank balances.
v) Tamale Ltd has a policy of accounting for any non-controlling interest at fair value. The fair value of the non-controlling interest in Navrongo Ltd at the date of acquisition was estimated to be GH¢5.9 million. Consolidated goodwill was not impaired at 30 September 2017.
Required:
a) Prepare the consolidated statement of profit or loss for Tamale Ltd for the year ended 30 September 2017.                (8 marks)

b) Prepare the consolidated statement of financial position for Tamale Ltd as at 30 September 2017.                            (12 marks)

Explain why IFRS 3 Business Combinations requires an acquirer to consolidate the fair values of the assets and liabilities of an acquired subsidiary, at the acquisition date.                                                                                                                   (3 marks)

Ashaiman and Nima are in partnership sharing profits and losses 2:1. They had originally invested GH¢50,000 and GH¢40,000, respectively. Their current account balances on 1 November 2016 were GH¢14,000 credit for Ashaiman and GH¢9,900 debit for Nima.
The partnership agreement specifies the following:

• The payment of interest on drawings and receipt of interest on capital at the rate of 5% per annum and 3% per annum, respectively.
• The partners take drawings in the same proportion as they share profits or losses. Ashaiman takes drawings of GH¢2,400 a month with Nima taking the amount of drawings as allowed by the partnership rules.
• Nima is entitled to take a salary of GH¢2,000 a month.
• The interest on drawings is calculated as if the drawings for the six month period had been taken in full on the first day of the period.

On 1 May 2017, Ashaiman decides to retire. Both partners agree to have the partnership valued and bring in the resultant goodwill into the partnership. Ashaiman agrees to leave GH¢30,000 of his capital as a loan to the business earning interest at the rate of 4% per annum and to withdraw the balance of what is owing to him. An independent expert values the goodwill on 1 May 2017 at GH¢90,000.
On 1 May 2017, Nima decides to enter into a new partnership with Asawasi where they share profits or losses 3:1. They decided to keep the same interest rates from the previous partnership agreement in relation to drawings and capital. Nima’s salary was changed to GH¢2,200 a month from this period to the year-end, Nima took drawings of GH¢10,000 and Asawasi took drawings of GH¢5,000. Asawasi introduced capital of GH¢25,000 on his admission to the partnership. The goodwill was cancelled in the same proportion as they share profits or losses.
The profits for the year amounted to GH¢108,000 and these profits accrued evenly throughout the year.
Required:
For the year ended 31 October 2017:
i) Prepare the Profit & loss Appropriation Accounts.                                                                                                        (9 marks)

ii) Prepare the Current Account of all the individual partners.                                                                                          (6 marks)

b) Financial statements are the prime measure of management performance by the shareholders. However, as management is responsible for the preparation of financial statements, shareholders have to rely on external verification by auditors in order to gain reasonable assurance that the accounts are free from material misstatements and can therefore be relied upon to give true and fair view of the affairs of the company.
Required:
Identify FIVE limitations which the preparation of financial statements imposes on discharge of accountability to the users of such statements.                                                                                                                                                                   (5 marks)

c) It is sometimes argued that companies should be given a choice in matters of financial reporting on the grounds that accounting standards are detrimental to the quality of such reporting.
Required:
Identify FIVE points in favour of the adoption of accounting standards.                                                                          (5 marks)