AC6001 ADVANCED FINANCIAL REPORTING ALTERNATIVE ASSESSMENT

 

 

 

ACADEMIC YEAR 2020/21

 

MODULE CODE: AC6001

 

MODULE NAME: ADVANCED FINANCIAL REPORTING

 

 

ALTERNATIVE ASSESSMENT

 

 

TERM 2: SUBMISSION  DEADLINE – 18TH MAY 2021

 

 

Module Leader

 

Name: Dr Eric Boahen

Details e.o.boahen@uel.ac.uk

Room: US2.47

Student Hours: Tuesday 12:00 – 2:pm, Thursday 2pm:00- 16:00

 

 

Other Tutors

 

Name: Martin Agyemang-Badu

Contact Details:

k.m.agyemang-badu@uel.ac.uk

 

 

 

ASSESSMENT

 

COMPONENT WEIGHT  

RELEASE DATE & TIME

DEADLINE DATE & TIME

 

Component 2 – Alternative Assessment  

60%

 

17th May 2021 @ 9.00AMs

 

 

18TH May 2021

AT 9.00AM

 

 

DURATION

 

 

 

24HOURS

This Alternative Assessment accounts for 60% of the module marks. Total Word Count: 2,000 Words Maximum

 

 

 

 

 

 

 

 

 

 

ASSESSMENT

 

This is the FINAL assessment of this module. You have already completed Component 1 (40%) of this assessment in January 2021.

 

Component 2: This is an ALTERNATIVE ASSESSMENT and consists of FOUR TASKS. You are to attempt THREE questions and present your answers in an individual report. This component makes up 60% of the total module mark.  THIS ALTERNATIVE ASSESSMENT IS MADE UP OF TWO SECTIONS.

 

 

 

 

 

SECTION A

YOU ARE TO ANSWER ALL QUESTIONS IN SECTION A (TASK ONE). ALL QUESTIONS IN THIS SECTION ARE COMPULSORY.

 

 

 

 

 

 

 

 

 

SECTION B

YOU ARE TO ANSWER ANY TWO QUESTIONS IN SECTION B

 

 

 

 

 

 

 

 

 

 

 

SECTION A

YOU ARE TO ANSWER ALL QUESTIONS IN SECTION A (TASK ONE). ALL QUESTIONS IN THIS SECTION ARE COMPULSORY.

 

TASK ONE:

 

The balance sheets of Pin plc as at 31 March 2021 and 2020 are as given below.

 

  2021 2021 2020 2020
  £’000 £’000 £’000 £’000
Assets
Non-current assets
Property, plant and equipment     118,000     94,000
Investments       20,000     17,000
Deferred taxation         5,000       4,000
      143,000   115,000
Current assets
Inventories 38,000 34,000
Receivables 36,000 32,000
Bank   2,200   76,200   2,800   68,800
Total assets 219,200 183,800
Equity and liabilities
Capital and reserves

 

Ordinary shares of 5p  each   42,000 20,000
Share premium   5,000 25,000
Revaluation reserve 15,000   5,000
Retained reserves 38,600   58,600 24,000 54,000
  100,600   74,000
Non-current liabilities
11% Debentures     55,000   48,000
Current liabilities
Payables 18,400 19,000
Bank overdraft   7,200   4,800
Taxation 28,000   26,000  
Interest 10,000   63,600 12,000  61,800
219,200 183,800

 

 

 

 

 

 

The following details are relevant:

 

  1. i) The following is an extract from the Income Statement for the year ended 31 March 2021

 

£’000
Operating profit 48,100
Interest expense (5,500)
Profit before tax 42,600
Income tax expense (8,000)
Profit after tax period 34,600
Dividends (20,000)
Retained profit for the year 14,600

 

 

  1. ii) A bonus issue was made during the year by utilising £20 million of the share There were no other changes to share premium account in the year

 

iii)    On 31 March 2021 Pin recorded an increase in the value of land of £10 million.

 

  1. iv) During the year an item of plant that had cost £ 24 million was sold for £4.8 million which represented a loss on disposal of £2.8 million. Total depreciation for the year to 31 March 2021 was £6.4 million.

 

REQUIRED:

 

  1. A) As far as the information permits, prepare a cash flow statement for Pin for the                                                      year to 31 March 2021 in accordance with IAS 7 ‘Cash Flow Statements’.

 

 

Note: you are not required to produce a reconciliation of net cash flow to movements in net debt or an analysis of changes in net debt.                        (30 marks)

 

 

 

(B) Companies should not waste time to prepare Cash flow statement. Discuss this statement.                                                                                    (10 marks)

 

 

 

(Total 40 marks)

 

 

END OF SECTION A

 

 

 

 

 

SECTION B

YOU ARE TO ANSWER ANY TWO QUESTIONS IN SECTION B

 

TASK TWO (30Marks):

 

Prior to the publication of IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ there was no international accounting standard that dealt with the general subject of accounting for provisions.

 

REQUIRED TO:

 

  1. a) Discuss why there was a need for guidance on accounting for provisions and explain the circumstances under which a provision should be recognised in the financial statements according to IAS 37 ‘Provisions, contingent liabilities and contingent assets’. Evaluate whether IAS 37 has achieved its objectives.                                                                (10 marks)

 

  1. b) A company purchased an asset costing £1,000,000 at the beginning of year 1. It has an expected life of five years and no residual value. The asset will be depreciated on a straight line basis in line with the company’s policy. The following are the allowances for tax depreciation.
Year £
1 300,000
2 250,000
3 200,000
4 150,000
5 100,000

 

 

 

REQUIRED TO:

 

  1. Calculate the deferred tax that will appear in the income statement in each year and the deferred tax liability in the balance sheet at the end of each year, if the asset is held for the full 5 years and has no disposal value. (14marks)

 

  1. Calculate the deferred tax that will appear in the income statement in each year and the deferred tax liability in the balance sheet at the end of each year, if the asset is held for four years and is sold for £200,000 at the end of year 4. (6 marks)

 

THE TAX RATE IS 30%

 (Total 30 marks)

 

 

TASK THREE (30Marks):

 

  1. a) A Junior Accountant has been criticized over a piece of assessed work that he produced for his study course for giving the definition of a non-current asset as ‘a physical asset of substantial cost, owned by the company, which will last longer than one year’.

 

Asses the weaknesses with the definition of non-current assets provided by the Junior Accountant in line with the provision of the International Accounting Standards Board’s (IASB) view of assets.                                                           (7 marks)                                                                                                      

 

  1. b) The Junior Accountant has also encountered the following transactions when preparing the draft financial statements of Danpong for the year ending 30 September 2020. He has given an explanation of his treatment of them. Danpong spent £150,000 sending its staff on training courses during the year. This has already led to an improvement in the company’s efficiency and resulted in cost savings. The organizer of the course has stated that the benefits from the training should last for a minimum of four years. The Junior Accountant has therefore treated the cost of the training as an intangible asset and charged six months’ amortization based on the average date during the year on which the training courses were completed.

                                                           

You are also required to comment and advise the Junior Accountant on how the following should be treated under Intangible Assets IFRS/IAS 38.      (7marks)

 

 

(c ) Gold plc is a leasing company which leases out assets on terms which constitute finance leases. It has leased an asset to Ruby plc for a primary period of five years commencing 1 July 2020, and the rental payable is £60,000 per annum on 30th June. The lessee has the right to continue the lease after the five year period at a nominal rent. The cash price of the asset at 1 July 2020 was £227,440 and the rate of interest implicit in the lease can be calculated to be 10%. It is the policy of Gold to depreciate this class of asset at 20% on the straight line basis.

 

 

REQUIRED TO:

 

  1. Discuss any four (4) reasons for Off-Balance Sheet financing. (6 marks)

 

  1. Compute the figures that will appear in the financial statements of the lessee for the years ending 30th June 2020 to 2024.                     (10marks)                  

 

                                                                                             (Total 30 marks)

 

 

 

 

 

 

TASK FOUR (30Marks):

 

  1. a) The objective of IAS 36 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are not impaired. Discuss the term impairment under IAS36 and explain what is meant by an impairment review (8marks).

 

REQUIRED TO:

 

  1. b) Using the information below, conduct an impairment review to determine whether Ericus plc’s equipment is impaired or not.

 

Ericus plc purchased an item of equipment at a cost of £1,000,000 on 1 January 2014 that is used to produce and package pharmaceutical pills. The equipment had no estimated residual value. The rate of depreciation is 20% per annum. Ericus uses reducing balance method of depreciation. On 31 December 2016, Ericus plc was informed by a major customer (who buys products produced by the equipment) that it would no longer be placing orders with Ericus plc. Even before this information was known, Ericus had been having difficulty finding work for this equipment. It now estimates that net cash inflows earned from the equipment for the next four years will be:

 

 

Year

 

31/12/2017

 

31/12/2018

 

31/12/2019

 

31/12/2020

£’000 £’000 £’000 £’000
Net Cash Flows 300 210 190 150
Discount Factors 0.8696 0.7561 0.6575 0.5718

 

The hurdle rate of return is 15%. The equipment is expected to be sold on 31December 2020. The management of Ericus plc has confirmed that there is no market for the sale of the equipment on 31 December 2016.                                                                                                                                     (12 marks)

 

  1. c) Ericus plc has a cash generating unit (CGU) that suffers a large drop in income due to reduced demand for its products. An impairment review was carried out and the recoverable amount of the cash generating unit was determined at £250m.The assets of the CGU had the following carrying amounts immediately prior to the impairment:

 

Assets Carrying Amount (£m)
Goodwill 80
Intangibles 100
Property, Plant & Equipment 60
Inventory 80
Trade Receivables 100
Total 420

 

Note: Inventory and Trade receivables are shown at their recoverable amounts.

 

REQUIRED TO:

 

To calculate the carrying amount of the intangibles once the impairment loss has been allocated

(8 marks)

 

(Total 30 marks)

 

 

 

 

(TOTAL 100 MARKS)

 

 

 

END OF QUESTIONS

 

 

 

 

 

READ BELOW FOR FURTHER INSTRUCTIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INSTRUCTION ON PREPARATION AND SUBMISSION

 

This ALTERNATIVE ASSESSMENT must show all workings and provide good discussion of the theoretical questions. It must be your own work. Please note, plagiarism does not only exhibit lack of academic discipline BUT constitutes a serious offence! PLEASE REMEMBER TO ADD THE ASSIGNMENT FRONT SHEET BEFORE YOU SUNMIT.

 

NOTE: You should prepare your own answer and structure your answer in a professional manner. You should answer EACH task and show all the relevant workings.  The word count of 2000 words is just a guide.

 

 

Please note that a significant amount of the marks are awarded on the basis of your ability to demonstrate that this submission is your own work. You should show all workings and maintain academic integrity and academic writing conventions. Please see Assessment Criteria on the Moodle.

 

REASSESSMENT

The reassessment will be a resubmission of this report, with track changes made in response to the feedback given.

 

You will need to retrieve this assignment if any of the following occur during the semester:

  • You fail to achieve 30% or more for this assessment
  • You fail to achieve 40% for the module and you failed to achieve 40% or more for this assessment.

 

 

THE DATE FOR REASSESSMENT IS IN AUGUST 2020

 

 

The Learning Outcomes assessed by this assessment are:

 

Knowledge

  1. Prepare and critically evaluate the consolidated financial statements of complex groups of companies.
  2. Translate transactions denominated in a foreign currency and translate the financial statements of foreign entities. Critically evaluate the translation methods applied.
  3. Recognise and critically evaluate the major issues involved in the setting of UK and International accounting regulations.

 

Thinking skills

  1. Critically evaluate the problems presented by off balance sheet financing and evaluate the measures taken to prevent it.

 

  1. Analyse the accounting problems presented by current taxation and deferred taxation.
  2. Analyse and evaluate professional and business ethics in relation to financial reporting and the issue of creative accounting.

 

Subject-based practical skills

 

  1. Prepare and critically evaluate cash flow statements.
  2. Critically examine the implications of selected reporting standards on financial reporting and analyse the nature of accounting choices made by business entities.

 

Skills for life

  1. Be able to take responsibility for own output.
  2. Undertake individual research within the literature on financial reporting developing research skills of data analysis and evaluation and to present their findings in a fully referenced report.

 

 

We strongly suggest that you try to submit this ALTERNATIVE ASSESSMENT by the deadline set as meeting deadlines will be expected in employment.  However, in our regulations, UEL has permitted students to be able to submit their coursework up to 24 hours after the deadline.  The deadline is published in this module guide.  Coursework which is submitted late, but within 24 hours of the deadline, will be assessed but subjected to a fixed penalty of 5% of the total marks available (as opposed to marks obtained).  If you submit twice, once before the deadline and once during the 24 hour late period, then the second submission will be marked and 5% deducted.  This rule only applies to coursework.  It does not apply to examinations, presentations, performances, practical assessments or viva voce examinations.  If you miss these for a genuine reason, then you will need to apply for extenuating circumstances, or accept that you will receive a zero mark.

 

Further information is available in the Assessment & Feedback Policy at

https://www.uel.ac.uk/Discover/Governance/Policies-Regulations-Corporate-documents/Student-Policies (click on other policies)

 

 

  1. Details of submission procedures – to include

Notice is hereby given that all submissions for this component (Individual Coursework) of this Module must be submitted to Turnitin.”  If you fail to submit component (Individual Coursework ), to Turnitin, in accordance with the guidance provided on the Virtual Learning Environment (Moodle), a mark of 0 will be awarded for the component.

 

 

 

Submitting Assessments Using Turnitin:

Turnitin is required for coursework assessments, such as report/research papers or projects in Microsoft Word, PowerPoint, and in PDF format.  There are two main reasons we want you to use Turnitin:

  • Turnitin can help you avoid academic breaches and plagiarism. When you use Turnitin before a submission deadline, you can use the Originality Report feature to compare your work to thousands of other sources (like websites, Wikipedia, and even other student papers).  Anything in your work that identically matches another source is highlighted for you to see.  When you use this feature before the deadline, you will have time to revise your work to avoid an instance of academic breach/plagiarism.
  • Turnitin saves paper. When using Turnitin to electronically submit your work, you will almost never have to submit a paper copy.

 

Late Submissions Using Turnitin

UEL has permitted students to be able to submit their coursework up to 24 hours after the deadline.  Assessments that are submitted up to 24 hours late are still marked, but with a 5% deduction.  However, you have to be very careful when you are submitting your assessment.  If you submit your work twice, once using the original deadline link and then again using the late submission link on Turnitin, your assignment will be graded as late with the 5% deduction.

 

Turnitin System Failure

Best advice: Don’t wait until the last minute to submit your assessments electronically.  If you experience a problem submitting your work with Turnitin, you should notify your lecturer/tutor by email immediately.  However, deadlines are not extended unless there is a significant systems problem with Turnitin.  UEL has specific plans in place to address these issues.  If UEL finds that the issue with the system was significant, you will receive an email notifying you of the issue and that you have been given a 24 hour extensionIf you don’t receive any email that specifically states you have been given an extension, then the original deadline has not been changed. 

 

  1. Feedback and return of work

Work should be submitted on Turnitin and all feedback will be on Turnitin.

 

Both formative and summative feedback on assessment will be given on the module. Students are required to observe the students’ hours and come for the feedback on their coursework before final submission.  Constructive and detailed feedback will be given on the marked scripts. In addition, students will be given verbal feedback to further clarify areas where students are not clear. Marked work will be released within the stipulated duration to meet the assessments standards of the University. Generic feedback will be given to the whole class.