The following statements of financial position are as at 31 March 2019:

You are also provided with the following information which will be relevant to the consolidated financial statements of Herd Ltd.
i) At 1 April 2016, the carrying value of the net assets of Swarm Ltd was the same as their fair value, GH¢325 million.

ii) The estimated fair value of the initial investment in 10% of the shares of Swarm Ltd was GH¢40 million at 31 March 2018.

iii) Herd Ltd wishes to use the full fair value method of accounting for the acquisition of Swarm Ltd. At 1 April 2018 the estimated value of the non-controlling interests was GH¢95 million.

iv) The difference between the carrying amount of Swarm Ltd’s net assets and their fair value at the date of acquisition was due to land valued at cost which on 1 April 2018 had a fair value of GH¢25 million in excess of its carrying value. There has been no subsequent significant change in that value.

v) At 1 April 2017 the fair value of Army Ltd’s land was GH¢16 million in excess of its carrying value. There has been no subsequent significant change in that value.

vi) Goodwill arising on acquisition is tested for impairment at each year end. The recoverable amount of goodwill in Swarm Ltd at 31 March 2019 was GH¢30 million.

vii) There has been no impairment of the investment in Army Ltd.

viii) During the year, the Directors of Herd Ltd decided to form a defined benefit pension scheme for its employees. The company contributed cash to it of GH¢250 million but the only accounting entry for this has been to include it in receivables at 31 March 2019.
At 31 March 2019 the following details relate to the pension scheme:
.                                                         GH¢m
Present value of obligation                317
Fair value of plan assets                    302

Required:
Prepare the consolidated statement of financial position of the Herd Ltd group as at 31 March 2019.                           (20 marks)

The Framework for the Preparation and Presentation of Financial Statements was originally issued in 1989. In 2004, the IASB and the FASB decided to review and revise the conceptual framework. However, this decision changed priorities and the slow progress in the project led to the project being abandoned in 2010. This was after only Phase A of the original joint project was finalised and introduced into the existing framework as Chapters 1 and 3 in September 2010.

The current form of the conceptual framework as at May 2018 provides a revised and complete version of the framework.

Required:
Explain FOUR (4) primary reasons why the IASB believed it was necessary to revise its conceptual framework.         (6 marks)

Bolgatanga Ltd (Bolgatanga), currently operating in the biotechnology research and healthcare sector, is a Ghanaian listed company which prepares financial statements in accordance with International Financial Reporting Standards (IFRS) up to 31 December each year. On 1 January 2015, Bolgatanga acquired 80% interest in Wa Ltd (Wa). You are a newly qualified accountant at Bolgatanga and report directly to Mr. Dominic Atubiga, the Financial Controller (FC). Early 2017, Bolgatanga acquired Sissala Ltd (Sissala), a private company and has recently had an application for additional funds rejected from its current bankers on the basis that there are insufficient assets to offer security.

You have been reviewing the minutes of Bolgatanga’s last board meeting, dated 28 December 2017.The minutes indicate that the sales director resigned on 1 December 2017. In her resignation letter to the board, the sales director states that she can no longer work with Dominic Atubiga who is dominating the board and allowing a close friendship with, and advice from, Salifu Adams (Managing Director of Sissala) to compromise his judgement.

The Human Resources department is currently in the process of recruiting a new sales director. Dominic Atubiga tells the board that, in the interim, the marketing department will just have to cope until a replacement sales director is appointed. Speaking to other staff in Bolgatanga, you have become aware that the wife of the Managing Director of Bolgatanga is a partner in Brother and Co., a firm of solicitors which the company uses to provide legal advice in relation to the market development activities of Wa. However, Brother and Co. has confirmed that the FC’s wife works in a different division and that she has no involvement in the services provided. It is your understanding that legal fees of GH¢500,000 (included in administration expenses) were paid by Bolgatanga to Brother and Co. during the year ended 31 December 2017.

Required:
Discuss the ethical issues arising from the information provided, and the appropriate steps to address them.               (10 marks)

The directors of Kibi Ltd, a bauxite mining company in East Akim Municipal Assembly after reviewing their published financial statements are of the view that their financial statements have a limited environmental information and do not address a broad enough range of users’ needs.

Despite the difficulties in recognising and measuring the financial effects of environmental matters in financial statements, Kibi Ltd discloses the following environmental information in its financial statements:

• Release of minerals and other natural occurring impurities including heavy metals;
• Loss of natural fishing and recreational places;
• Soil erosion and sedimentation, noise and dust.

Required:
i) Explain THREE (3) factors which motivate companies to disclose social and environmental information in their financial statements.                                                                                                                                                                          (3 marks)

ii) Identify FOUR (4) specific difficulties in recognising and measuring the financial effects of environmental matters. (6 marks)

Below are the recently issued financial statements of Madina Ltd, a listed company, for the year ended 30 September 2018, together with comparatives for 2017.
Statements of profit or loss for the year ended 30 September.

Additional Information:
i) On 1 October 2017 Madina Ltd acquired 100% of the net assets of Aboabu Ltd for GH¢50 million. In order to finance this transaction, Madina Ltd issued GH¢50 million 8% loan notes on the acquisition date.
Aboabu Ltd’s results for the year ended 30 September 2018 is shown below:

ii) Aboabu Ltd has not paid any dividend during the year, but Madina Ltd paid a dividend of GH¢0.05 per share.

iii) The following ratios have been calculated for Madina Ltd for the year ended 30 September 2017:
Return on capital employed          7.1%
Gross profit margin                      16.7%
Net profit (before tax) margin      4.4%

Required:
a) Calculate the equivalent ratios for Madina Ltd for 2018:
i) Including the results of Aboabu Ltd acquired during the year.                                                                                     (3 marks)

ii) Excluding all effects of the purchase of Aboabu Ltd.                                                                                                  (3 marks)

b) Analyse the performance of Madina Ltd for the year ended 30 September 2018.                                                       (5 marks)

c) Analyse the cash position of Madina Ltd as at 30 September 2018.                                                                            (4 marks)

The Board of Pogas Furniture Ltd (PFC) after few years of incorporation has decided to get the company listed on the Ghana Stock Exchange. The Board has contacted you to assist in determining the true value of the business as at 31 December 2018 and to provide a range of possible issue price based on Net Assets and Earnings Yield. Oliso Ltd, a listed company and a competitor of PFC, current results show price-earnings ratio of 5 and earnings yield of 20%. The summarised unaudited financial statements of PFC are as follows:

Your examination of the financial statements and the underlying records revealed the following additional information:
i) The sales revenue includes GH¢24 million of revenue for credit sales made on a ‘sale or return’ basis. At 31 December 2018, customers who had not paid for the goods, had the right to return GH¢7.8 million of them. PFC applied a markup on cost of 30% on all these sales. In the past, PFC’s customers have sometimes returned goods under this type of agreement.

ii) The depreciable non-current assets have not been depreciated for the year ended 31 December 2018.

• PFC has a policy of revaluing its land and buildings at the end of each accounting year. The values in the above statement of financial position are as at 1 January 2018 when the buildings had a remaining life of 18 years. A qualified surveyor has valued the land and buildings at 31 December 2018 at GH¢33 million.
• Plant and equipment are depreciated at 12.5% per annum on the reducing balance basis. As at 31 December 2018, the value in use and the fair value less cost to sell were assessed at GH¢21.3 million and GH¢20.25 million respectively.
• The patent right was acquired in January 2018 at a cost of GH¢3 million. It is expected to be used for 5 years after which the right of usage would have to be renewed in January 2023.

iii) The financial assets at fair value through profit or loss are held in a fund whose value changes directly in proportion to a specified market index. At 1 January 2018 the relevant index was 240.0 and at 31 December 2018 the index was 259.2

iv) In late December 2018, the directors of PFC discovered a material fraud perpetrated by the company’s credit controller. Investigations revealed that a total of GH¢9 million of the trade receivables (included in current assets) as shown in the statement of financial position at 31 December 2018 had in fact been paid and the money had been stolen by the credit controller. An analysis revealed that GH¢3 million had been stolen in the year to 31 December 2017 with the rest being stolen in the current year. PFC is not insured for this loss and it cannot be recovered from the credit controller since his whereabout is unknown.

v) As at 31 December 2018, the company’s taxable temporary differences had increased to GH¢24 million. The deferred tax relating to the increase in the temporary differences should be taken to profit or loss. The applicable corporate tax rate is 25%.The above figures do not include the estimated provision for current income tax on the profit for the year ended 31 December 2018. After allowing for any adjustments required in items (i) to (iv), the directors have estimated the provision of current tax liability for 2018 at 25% of adjusted profit. (This is in addition to the deferred tax effects of item (v)).
(Note: Assume that it is about 20% riskier in investing in a non-listed entity (as compared with a listed entity.)

Required:
a) Redraft the financial statements above (taking into consideration the additional information (i) – (v) above.            (11 marks)

b) Based on the revised financial statements, provide a range of possible issue prices per share using Net Assets Method and Earnings Yield/Price Earnings Ratio Method.                                                                                                              (4 marks)

Asawasi Ltd made a decision to sell a business unit on 15 June 2017, and the criteria to classify the unit as held for sale were met on 1 July 2017. Asawasi Ltd’s accounting year end is 31 December. At 1 July 2017, the carrying amount of the assets and liabilities of the business unit (before any 2017 depreciation or revaluation adjustments) was as follows:
.                                                                 GH¢ million
Land and buildings                                       120
Equipment                                                     50
Trade receivables                                         30
Inventories                                                    20
Trade payables                                           (26)

Additional Information:
i) The land and buildings are held under the revaluation model of IAS 16: Property, Plant and Equipment and were last revalued on 31 December 2016 to GH¢120 million. Their market valuation on 1 July 2017 was GH¢124 million and selling costs were estimated at GH¢2.5 million at that date. Residual value was, and continues to be, expected to be higher than cost.

ii) The equipment is held under the cost model of IAS 16. The equipment was purchased on 1 July 2015 for GH¢80 million and is being depreciated straight line over a four-year period to a zero residual value. Its sale value at 1 July 2017 was GH¢55 million. Selling costs are insignificant.

iii) The trade receivables are recorded at invoiced value, reduced by any allowances for credit losses recognised at 31 December 2016. No adjustment to these allowances was necessary at 1 July 2017. The receivables, if factored, would realise approximately GH¢26 million, net of transaction costs at 1 July 2017.

iv) The inventories are merchandise purchased for resale and are held at cost. Their market value at 1 July 2017 was GH¢28 million. Associated selling costs would amount to GH¢1.4 million.

v) It was anticipated at 1 July 2017 that the business unit will be sold for GH¢200 million, net of selling costs, to a rival company in a single transaction.

Required:
In respect of Asawasi Ltd’s year ended 31 December 2017, show, and briefly explain, the amount recognised as Non-Current Assets Held for Sale under IFRS 5 at 1 July 2017 and the impairment charge (if any) for the business unit.                (5 marks)

Bongo Designs is the parent company of a small group. Its shares are stock market quoted, with many shareholders. Only one shareholder, Akwasi Boakye has a holding over 5%. Akwasi Boakye holds 20% of the shares and was the founder of the company. He still retains a seat on the board which is made up of four executive directors (including himself) and two non-executive directors.

Akwasi Boakye’s domestic live-in partner of ten years, Abena Lamptey, recently set up a company, Gushegu Ltd, in the textile industry with a friend, Akosua Pokuaa. Abena Lamptey and Akosua Pokuaa each own 50% of the shares of Gushegu Ltd, and decisions are made jointly under a contract that both parties signed.

Bongo Designs has two subsidiaries, Zabzugu Fabrics which is 100% owned and Binduri Textiles which is 60% owned. The other 40% of Binduri Textiles is owned by a single shareholder, Innovative Sissala, which has two seats on Binduri Textiles’s five-member board. Yaw Abdulai is the Finance Director of Zabzugu Fabrics. He is also the person responsible for finance at the group level, but is not a member of the group’s board.

Required:
In accordance with IAS 24: Related Party Disclosures, identify the related parties of Bongo Designs in the above scenario, explaining why each is a related party.                                                                                                                              (5 marks)

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance sets out the requirements for recognising as income any grants received from government agencies, together with any repayments of such grants.
Required:
Detail the requirements of IAS 20 with respect to government grants to aid capital expenditure.                                  (3 marks)

The trial balance of Alabar Ltd extracted from the company’s general ledger as at 31 December 2017 showed a development costs balance of GH¢12.8 million. The development costs consist of amounts capitalised in 2015 and 2016 relating to a new product development. No additional development expenditure was incurred in the year ended 31 December 2017. The product began commercial production on 1 July 2017, 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 2017, and so, at 31 December 2017, management performed an impairment test on the development expenditure. The estimated net cash flows are (at 31 December 2017 prices):
Year to 31 December 2018          GH¢3.2 million
Year to 31 December 2019          GH¢3.4 million
Year to 31 December 2020          GH¢1.6 million
6 months to 30 June 2021            GH¢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.

The company recognises amortisation and impairment losses on development expenditure in cost of sales.

Required:
Set out the accounting treatment as the above information permits in the financial statements of Alabar Ltd for the year 31 December 2017.                                                                                                                                                                 (6 marks)