22年ACCA/CAT试题7辑

发布时间:2022-03-07
22年ACCA/CAT试题7辑

22年ACCA/CAT试题7辑 第1辑


(b) Discuss how the operating statement you have produced can assist managers in:

(i) controlling variable costs;

(ii) controlling fixed production overhead costs. (8 marks)

正确答案:

(b) Controlling variable costs
The first step in the process of controlling costs is to measure actual costs. The second step is to calculate variances that show
the difference between actual costs and budgeted or standard costs. These variances then need to be reported to those
managers who have responsibility for them. These managers can then decide whether action needs to be taken to bring actual
costs back into line with budgeted or standard costs. The operating statement therefore has a role to play in reporting
information to management in a way that assists in the decision-making process.
The operating statement quantifies the effect of the volume difference between budgeted and actual sales so that the actual
cost of the actual output can be compared with the standard (or budgeted) cost of the actual output. The statement clearly
differentiates between adverse and favourable variances so that managers can identify areas where there is a significant
difference between actual results and planned performance. This supports management by exception, since managers can
focus their efforts on these significant areas in order to obtain the most impact in terms of getting actual operations back in
line with planned activity.
In control terms, variable costs can be affected in the short term and so an operating statement for the last month showing
variable cost variances will highlight those areas where management action may be effective. In the short term, for example,
managers may be able to improve labour efficiency through training, or through reducing or eliminating staff actions which
do not assist the production process. In this way the adverse direct labour efficiency variance of £252, which is 7·3% of the
standard direct labour cost of the actual output, could be reduced.
Controlling fixed production overhead costs
In the short term, it is unlikely that fixed production overhead costs can be controlled. An operating statement from last month
showing fixed production overhead variances may not therefore assist in controlling fixed costs. Managers will not be able to
take any action to correct the adverse fixed production overhead expenditure variance, for example, which may in fact simply
show the need for improvement in the area of budget planning. Investigation of the component parts of fixed production
overhead will show, however, whether any of these are controllable. In general, this is not the case2.
Absorption costing gives rise to a fixed production overhead volume variance, which shows the effect of actual production
being different from planned production. Since fixed production overheads are a sunk cost, the volume variance shows little
more than that the standard hours for actual production were different from budgeted standard hours3. Similarly, the fixed
production overhead efficiency variance offers little more in information terms than the direct labour efficiency variance. While
fixed production overhead variances assist in reconciling budgeted profit with actual profit, therefore, their reporting in an
operating statement is unlikely to assist in controlling fixed costs.

 

 

 

 

 

 

 

 


(ii) Explain the accounting treatment under IAS39 of the loan to Bromwich in the financial statements of

Ambush for the year ended 30 November 2005. (4 marks)

正确答案:
(ii) There is objective evidence of impairment because of the financial difficulties and reorganisation of Bromwich. The
impairment loss on the loan will be calculated by discounting the estimated future cash flows. The future cash flows
will be $100,000 on 30 November 2007. This will be discounted at an effective interest rate of 8% to give a present
value of $85,733. The loan will, therefore, be impaired by ($200,000 – $85,733) i.e. $114,267.
(Note: IAS 39 requires accrual of interest on impaired loans at the original effective interest rate. In the year to
30 November 2006 interest of 8% of $85,733 i.e. $6,859 would be accrued.)


(c) The inheritance tax payable by Adam in respect of the gift from his aunt. (4 marks)

Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum and

the effectiveness with which the information is communicated. (2 marks)

Note: you should assume that the tax rates and allowances for the tax year 2006/07 will continue to apply for the

foreseeable future.

正确答案:
(c) Inheritance tax payable by Adam
The gift by AS’s aunt was a potentially exempt transfer. No tax will be due if she lives until 1 June 2014 (seven years after
the date of the gift).
The maximum possible liability, on the assumption that there are no annual exemptions or nil band available, is £35,216
(£88,040 x 40%). This will only arise if AS’s aunt dies before 1 June 2010.
The maximum liability will be reduced by taper relief of 20% for every full year after 31 May 2010 for which AS’s aunt lives.
The liability will also be reduced if the chargeable transfers made by the aunt in the seven years prior to 1 June 2007 are
less than £285,000 or if the annual exemption for 2006/07 and/or 2007/08 is/are available.


(ii) The percentage change in revenue, total costs and net assets during the year ended 31 May 2008 that

would have been required in order to have achieved a target ROI of 20% by the Beetown centre. Your

answer should consider each of these three variables in isolation. State any assumptions that you make.

(6 marks)

正确答案:
(ii) The ROI of Beetown is currently 13·96%. In order to obtain an ROI of 20%, operating profit would need to increase to
(20% x $3,160,000) = $632,000, based on the current level of net assets. Three alternative ways in which a target
ROI of 20% could be achieved for the Beetown centre are as follows:
(1) Attempts could be made to increase revenue by attracting more clients while keeping invested capital and operating
profit per $ of revenue constant. Revenue would have to increase to $2,361,644, assuming that the current level
of profitability is maintained and fixed costs remain unchanged. The current rate of contribution to revenue is
$2,100,000 – $567,000 = $1,533,000/$2,100,000 = 73%. Operating profit needs to increase by $191,000
in order to achieve an ROI of 20%. Therefore, revenue needs to increase by $191,000/0·73 = $261,644 =
12·46%.
(2) Attempts could be made to decrease the level of operating costs by, for example, increasing the efficiency of
maintenance operations. This would have the effect of increasing operating profit per $ of revenue. This would
require that revenue and invested capital were kept constant. Total operating costs would need to fall by $191,000
in order to obtain an ROI of 20%. This represents a percentage decrease of 191,000/1,659,000 = 11·5%. If fixed
costs were truly fixed, then variable costs would need to fall to a level of $376,000, which represents a decrease
of 33·7%.
(3) Attempts could be made to decrease the net asset base of HFG by, for example, reducing debtor balances and/or
increasing creditor balances, while keeping turnover and operating profit per $ of revenue constant. Net assets
would need to fall to a level of ($441,000/0·2) = $2,205,000, which represents a percentage decrease
amounting to $3,160,000 – $2,205,000 = 955,000/3,160,000 = 30·2%.


8 P and Q are in partnership, sharing profits in the ratio 2:1. On 1 July 2004 they admitted P’s son R as a partner. P

guaranteed that R’s profit share would not be less than $25,000 for the six months to 31 December 2004. The profitsharing

arrangements after R’s admission were P 50%, Q 30%, R 20%. The profit for the year ended 31 December

2004 is $240,000, accruing evenly over the year.

What should P’s final profit share be for the year ended 31 December 2004?

A $140,000

B $139,000

C $114,000

D $139,375

正确答案:B
80,000 + 60,000 – 1,000 = 139,000


22年ACCA/CAT试题7辑 第2辑


(c) Outline the problems with references. (7 marks)

(15 marks)

正确答案:
Part (c)
There can be significant problems with references, these include the fact that most referees are well known to the applicant and
hesitate to say anything critical. However, the more skilful reference reader learns to look for what is conspicuous by omission
although there is always the risk that the writer merely forgot.
Often there are glowing tributes designed to aid the candidate on their way and some can be too ambiguous to be useful.
It is also important to note that references are poor predictors of future performance, are time consuming for the referee and the
subsequent reader. A particular problem is that employers who want to rid themselves of unsatisfactory employees could write an
enthusiastic reference, or at best one which leaves a lot unsaid.
However, care should be taken when providing references. Potentially, there can be legal consequences if a reference is misleading
or misrepresents the person for whom the reference is provided.
In addition, problems can arise when references are sought too early in the recruitment process and therefore breach confidentiality.


(d) Discuss the main benefits that might accrue from the successful implementation of a Total Quality

Management programme by the management of the combined entity. (5 marks)

正确答案:
(d) The benefits that might accrue from the successful implementation of a Total quality management programme by the
management of the combined entity include the following:
– There will be an increased awareness of all personnel within Quicklink Ltd of the need to establish a ‘quality culture’
within the company which will provide a basis of improved performance throughout the organisation.
– The successful adoption of a TQM philosophy would ensure that there is a real commitment to ‘continuous improvement’
in all processes.
– It would place a greater focus on customer satisfaction since at the heart of any TQM programme is a deep-seated
commitment to the satisfaction of every customer.
– There would be a greater emphasis upon teamwork which would be used in a number of forms e.g. quality circles which
could be established with a view to improving performance within every area of the business. The fostering of team spirit
will also improve communication within Quicklink Ltd.
– A major characteristic of a TQM programme is process-redesign which is used to simplify processes, systems,
procedures and the organisation itself. In this respect the adoption of a TQM philosophy will be invaluable since the
integration of the Quicklink Ltd and Celer Transport businesses will require, of necessity, a detailed review of those
processes currently employed.
– The adoption of a TQM philosophy will necessitate the monitoring of quality costs in order to measure whether the
objective of continuous improvement is being achieved. In this respect the aim will be to eliminate internal failure costs
such as late deliveries and lost items which are clearly detrimental to a business which operates in the transport and
haulage industry.


2 Alpha Division, which is part of the Delta Group, is considering an investment opportunity to which the following

estimated information relates:

(1) An initial investment of $45m in equipment at the beginning of year 1 will be depreciated on a straight-line basis

over a three-year period with a nil residual value at the end of year 3.

(2) Net operating cash inflows in each of years 1 to 3 will be $12·5m, $18·5m and $27m respectively.

(3) The management accountant of Alpha Division has estimated that the NPV of the investment would be

$1·937m using a cost of capital of 10%.

(4) A bonus scheme which is based on short-term performance evaluation is in operation in all divisions within the

Delta Group.

Required:

(a) (i) Calculate the residual income of the proposed investment and comment briefly (using ONLY the above

information) on the values obtained in reconciling the short-term and long-term decision views likely to

be adopted by divisional management regarding the viability of the proposed investment. (6 marks)

正确答案:

 


(b) ‘opinion shopping’; (5 marks)

正确答案:
(b) ‘Opinion shopping’
Explanation of term
‘Opinion shopping’ occurs when management approach auditing firms (other than their incumbent auditors) to ask their views
on the application of accounting standards or principles to specific circumstances or transactions.
Ethical risks
The reasons for ‘opinion shopping’ may be:
■ to find alternative auditors; or
■ to get advice on a matter of contention with the incumbent auditor.
The member who is not the entity’s auditor must be alert to the possibility that their opinion – if it differs from that of the
incumbent auditor – may create undue pressure on the incumbent auditor’s judgement and so threaten the objectivity of the
audit.
Furthermore, by aligning with the interests of management when negotiating taking on an engagement, an incoming auditor
may compromise their objectivity even before the audit work commences. There is a risk that the audit fee might be seen to
be contingent upon a ‘favourable’ opinion (that is, the audit judgement coinciding with management’s preferences).
Employed professional accountants (accountants in industry) who support their company’s management in seeking second
opinions may call into question their integrity and professional behaviour.
Sufficiency of current ethical guidance
Current ethical guidance requires that when asked to provide a ‘second opinion’ a member should seek to minimise the risk
of giving inappropriate guidance, by ensuring that they have access to all relevant information.
The member should therefore:
■ ascertain why their opinion is being sought;
■ contact the auditor to provide any relevant facts;
■ with the entity’s permission, provide the auditor with a copy of their opinion.
The member’s opinion is more likely to differ if it is based on information which is different (or incomplete) as compared with
that available to the incumbent auditor. The member should therefore decline to act if permission to communicate with the
auditor is not given.
‘Opinion shopping’ might be less prevalent if company directors had no say in the appointment and remuneration of auditors.
If audit appointments were made by an independent body ‘doubtful accounting practices’ would (arguably) be less of a
negotiating factor. However, to be able to appoint auditors to multi-national/global corporations, such measures would require
the backing of regulatory bodies worldwide.
Statutory requirements in this area could also be more stringent. For example, an auditor may be required to deposit a
‘statement of circumstances’ (or a statement of ‘no circumstances’) in the event that they are removed from office or resign.
However, disclosure could be made more public if, when a change in accounting policy coincides with a change of auditors,
the financial statements and auditor’s report highlight the change and the auditors state their concurrence (or otherwise) with
the change. This could be made a statutory requirement and International Standards on Auditing (ISAs) amended to give
guidance on how auditors should report on changes.
Further, if the incoming auditor were to have a statutory right of access to the files and working papers of the outgoing auditors
they would be able to make a better and informed assessment of the desirability of the client and also appreciate the validity
(or otherwise) of any ‘statement’ issued by the outgoing auditor.


2 An important part of management is understanding the style. of leadership.

Required:

(a) Explain what Blake and Mouton’s Managerial Grid measures. (5 marks)

正确答案:
2 Overview:
The accountant is frequently the manager or group leader. An understanding of leadership theory and practice is therefore an
important part of an accountant’s training.
Part (a):
Robert Blake and Jane Mouton in their Ohio State Leadership Studies, observed two basic leadership dimensions that were
apparent from their studies; concern for the task and concern for people.
They recognised that it was possible for concern for the task to be independent of concern for people. It was therefore possible for
a leader to be strong on one and weak on the other, strong on both, weak on both or any variation in between.
They devised a series of questions, the answers to which enabled them to plot these two basic leadership dimensions. These two
dimensions were placed as the axes on a grid structure now known as the Managerial Grid. A person who scores 7 on ‘concern
for production’ (the x axis) and 5 on ‘concern for people’ (the y axis) is known as a 7,5 leader.


22年ACCA/CAT试题7辑 第3辑


(c) State any reliefs Bob could claim regarding the fall in value of his shares in Willis Ltd, and describe how the

operation of any such reliefs could reduce Bob’s taxable income. (4 marks)

Relevant retail price index figures are:

September 1990 129·3

April 1998 162·6

December 2004 189·9

正确答案:
(c) Claims for capital losses
Where the value of shares (a chargeable asset) has become negligible (defined as <5% of the original cost), a claim can be
made to treat the asset as though it was sold and then immediately reacquired for its current market value. This is known as
a negligible value claim.
The sale and reacquisition is treated as taking place at the time that the claim is made or at a specified time (up to 2 years
before the start of the tax year in which the claim was made) if the asset was of negligible value at that time.
As the loss is on unquoted shares, a further relief (s.574 ICTA 1988) allows the loss to be relieved against the total income
of the taxpayer for the year in which the loss arose, and/or against the total income of the previous year.
Losses are first relieved against current year income, with any excess being available for offset against the prior year’s income.
Bob can therefore make a negligible value claim as at 1 December 2004. This will give rise to a loss of £14,500
(£500 – £15,000) which will be deemed to arise in the year 2004/05. By doing so, his taxable income for that year will be
reduced from £36,875 to £22,375.


(c) In October 2004, Volcan commenced the development of a site in a valley of ‘outstanding natural beauty’ on

which to build a retail ‘megastore’ and warehouse in late 2005. Local government planning permission for the

development, which was received in April 2005, requires that three 100-year-old trees within the valley be

preserved and the surrounding valley be restored in 2006. Additions to property, plant and equipment during

the year include $4·4 million for the estimated cost of site restoration. This estimate includes a provision of

$0·4 million for the relocation of the 100-year-old trees.

In March 2005 the trees were chopped down to make way for a car park. A fine of $20,000 per tree was paid

to the local government in May 2005. (7 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Volcan for the year ended

31 March 2005.

NOTE: The mark allocation is shown against each of the three issues.

正确答案:
(c) Site restoration
(i) Matters
■ The provision for site restoration represents nearly 2·5% of total assets and is therefore material if it is not
warranted.
■ The estimated cost of restoring the site is a cost directly attributable to the initial measurement of the tangible fixed
asset to the extent that it is recognised as a provision under IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Assets’ (IAS 16 ‘Property, Plant and Equipment’).
■ A provision should not be recognised for site restoration unless it meets the definition of a liability, i.e:
– a present obligation;
– arising from past events;
– the settlement of which is expected to result in an outflow of resources embodying economic benefits.
■ The provision is overstated by nearly $0·34m since Volcan is not obliged to relocate the trees and de facto has
only an obligation of $60,000 as at 31 March 2005 (being the penalty for having felled them). When considered
in isolation, this overstatement is immaterial (representing only 0·2% of total assets and 3·6% of PBT).
■ It seems that even if there are local government regulations calling for site restoration there is no obligation unless
the penalties for non-compliance are prohibitive (unlike the fines for the trees).
■ It is unlikely that commencement of site development has given rise to a constructive obligation, since past actions
(disregarding the preservation of the trees) must dispel any expectation that Volcan will honour any pledge to
restore the valley.
■ Whether commencing development of the site, and destroying the trees, conflicts with any statement of socioenvironmental
responsibility in the annual report.
(ii) Audit evidence
■ A copy of the planning application and permission granted setting out the penalties for non-compliance.
■ Payment of $60,000 to local government in May 2005 agreed to the bank statement.
■ The present value calculation of the future cash expenditure making up the $4·0m provision.
Tutorial note: Evidence supporting the calculation of $0·4m is irrelevant as there is no liability to be provided for.
■ Agreement that the pre-tax discount rate used reflects current market assessments of the time value of money (as
for (a)).
■ Asset inspection at the site as at 31 March 2005.
■ Any contracts entered into which might confirm or dispute management’s intentions to restore the site. For
example, whether plant hire (bulldozers, etc) covers only the period over which the warehouse will be constructed
– or whether it extends to the period in which the valley would be ‘made good’.


(c) Assuming that she will survive until July 2009, advise on the lifetime inheritance tax (IHT) planning

measures that could be undertaken by Debbie, quantifying the savings that can be made. (7 marks)

For this question you should assume that the rates and allowances for 2004/05 apply throughout.

正确答案:
(c) Debbie survives until July 2009
Debbie should consider giving away some of her assets to her children, while ensuring that she still has enough to live on.
Such gifts would be categorised as PETs. Although Debbie will not survive seven years (at which point the gifts would fall out
of Debbie’s estate for IHT purposes), taper relief will reduce the amount chargeable to IHT. If gifts were made prior to July
2005, 40% taper relief would be available.
It is important to remember that Debbie’s annual exemptions will reduce the value of any PET when assets are gifted. Debbie
has not used her annual exemption for the last two years, and so she can gift £6,000 (2 x £3,000) in the current tax year
as well as £3,000 per year in future tax years. Debbie could therefore give away £18,000, saving tax of £7,200 (£18,000
x 40%). Debbie can also make small exempt gifts of up to £250 per donee per year.
Debbie should consider making gifts to Allison’s children instead of Allison (using, for example, an accumulation &
maintenance trust). This would ensure that the gifts were excluded from Allison’s estate.
It does not make sense for Debbie to gift shares in Dee Limited, as these qualify for full business property relief and therefore
are not subject to IHT.
As Andrew is shortly to be married, Debbie could give up to £5,000 in consideration of his marriage. This would save £2,000
in IHT.
Expenditure out of normal income is also exempt from IHT. This is where the transferor is left with sufficient income to
maintain his/her usual standard of living. Broadly, you need to demonstrate evidence of a prior commitment, or a settled
pattern of expenditure.
If substantial gifts are made, the donees would be advised to consider taking out insurance policies on Debbie’s life to cover
the potential tax liabilities that may arise on PETs in the event of her early death.


(c) Acting as an external consultant to Semer, discuss the validity of the proposed strategy to increase gearing, and explain whether or not the estimates produced in (b) above are likely to be accurate. (10 marks)

正确答案:

(c) Report on the proposed adjustment of gearing through the repurchase of ordinary shares
The effect of capital structure on the value of a company is not fully understood.
Increasing the proportion of debt in the capital structure may reduce the overall cost of capital due to the interest on debt being a tax allowable expense. Even if a company is in a non-tax paying position, mixing additional low cost debt with relatively expensive equity might reduce the weighted average cost of capital. In such circumstances the proposed strategy to increase gearing would have some validity. However, increasing gearing can also bring problems. Risk to investors, and therefore the required returns on equity and debt, will increase as gearing increases. Very high levels of gearing might lead to
direct and indirect bankruptcy costs, with a detrimental effect on cash flow and corporate value. Any benefits from increasing the proportion of debt in the capital structure will be to some extent offset as a result of increased risk with high gearing.
The revised estimates of the effect on the cost of capital and value of Semer are not likely to be accurate. Reasons for this include:
(i) The company will not be able to repurchase the necessary shares at their current market value. Approximately £240 million value of equity would need to be repurchased, or more than one third of the existing market value of equity.
As repurchases take place it is likely that the share price will significantly increase.
(ii) The cost of debt is unlikely to remain constant. As more debt is issued lenders will demand a higher interest rate to compensate for the extra risk resulting from higher gearing levels. The cost of equity will also increase with higher gearing. These effects will increase the weighted average cost of capital to a higher level than that estimated.
(iii) The precise market values of debt and equity after the repurchase are unknown, and again will reflect the market attitude
to the new risk of the higher gearing.
The value of the company is likely to be much lower than that estimated, as the weighted average cost of capital is likely to be underestimated.


(ii) The UK value added tax (VAT) implications for Razor Ltd of selling tools to and purchasing tools from

Cutlass Inc; (2 marks)

正确答案:
(ii) Value added tax (VAT)
Goods exported are zero-rated. Razor Ltd must retain appropriate documentary evidence that the export has taken place.
Razor Ltd must account for VAT on the value of the goods purchased from Cutlass Inc at the time the goods are brought
into the UK. The VAT payable should be included as deductible input tax on the company’s VAT return.


22年ACCA/CAT试题7辑 第4辑


3 The directors of Panel, a public limited company, are reviewing the procedures for the calculation of the deferred tax

provision for their company. They are quite surprised at the impact on the provision caused by changes in accounting

standards such as IFRS1 ‘First time adoption of International Financial Reporting Standards’ and IFRS2 ‘Share-based

Payment’. Panel is adopting International Financial Reporting Standards for the first time as at 31 October 2005 and

the directors are unsure how the deferred tax provision will be calculated in its financial statements ended on that

date including the opening provision at 1 November 2003.

Required:

(a) (i) Explain how changes in accounting standards are likely to have an impact on the provision for deferred

taxation under IAS12 ‘Income Taxes’. (5 marks)

正确答案:

(a) (i) IAS12 ‘Income Taxes’ adopts a balance sheet approach to accounting for deferred taxation. The IAS adopts a full
provision approach to accounting for deferred taxation. It is assumed that the recovery of all assets and the settlement
of all liabilities have tax consequences and that these consequences can be estimated reliably and are unavoidable.
IFRS recognition criteria are generally different from those embodied in tax law, and thus ‘temporary’ differences will
arise which represent the difference between the carrying amount of an asset and liability and its basis for taxation
purposes (tax base). The principle is that a company will settle its liabilities and recover its assets over time and at that
point the tax consequences will crystallise.

Thus a change in an accounting standard will often affect the carrying value of an asset or liability which in turn will
affect the amount of the temporary difference between the carrying value and the tax base. This in turn will affect the
amount of the deferred taxation provision which is the tax rate multiplied by the amount of the temporary differences(assuming a net liability for deferred tax.)

 


(b) One of the hotels owned by Norman is a hotel complex which includes a theme park, a casino and a golf course,

as well as a hotel. The theme park, casino, and hotel were sold in the year ended 31 May 2008 to Conquest, a

public limited company, for $200 million but the sale agreement stated that Norman would continue to operate

and manage the three businesses for their remaining useful life of 15 years. The residual interest in the business

reverts back to Norman after the 15 year period. Norman would receive 75% of the net profit of the businesses

as operator fees and Conquest would receive the remaining 25%. Norman has guaranteed to Conquest that the

net minimum profit paid to Conquest would not be less than $15 million. (4 marks)

Norman has recently started issuing vouchers to customers when they stay in its hotels. The vouchers entitle the

customers to a $30 discount on a subsequent room booking within three months of their stay. Historical

experience has shown that only one in five vouchers are redeemed by the customer. At the company’s year end

of 31 May 2008, it is estimated that there are vouchers worth $20 million which are eligible for discount. The

income from room sales for the year is $300 million and Norman is unsure how to report the income from room

sales in the financial statements. (4 marks)

Norman has obtained a significant amount of grant income for the development of hotels in Europe. The grants

have been received from government bodies and relate to the size of the hotel which has been built by the grant

assistance. The intention of the grant income was to create jobs in areas where there was significant

unemployment. The grants received of $70 million will have to be repaid if the cost of building the hotels is less

than $500 million. (4 marks)

Appropriateness and quality of discussion (2 marks)

Required:

Discuss how the above income would be treated in the financial statements of Norman for the year ended

31 May 2008.

正确答案:
(b) Property is sometimes sold with a degree of continuing involvement by the seller so that the risks and rewards of ownership
have not been transferred. The nature and extent of the buyer’s involvement will determine how the transaction is accounted
for. The substance of the transaction is determined by looking at the transaction as a whole and IAS18 ‘Revenue’ requires
this by stating that where two or more transactions are linked, they should be treated as a single transaction in order to
understand the commercial effect (IAS18 paragraph 13). In the case of the sale of the hotel, theme park and casino, Norman
should not recognise a sale as the company continues to enjoy substantially all of the risks and rewards of the businesses,
and still operates and manages them. Additionally the residual interest in the business reverts back to Norman. Also Norman
has guaranteed the income level for the purchaser as the minimum payment to Conquest will be $15 million a year. The
transaction is in substance a financing arrangement and the proceeds should be treated as a loan and the payment of profits
as interest.
The principles of IAS18 and IFRIC13 ‘Customer Loyalty Programmes’ require that revenue in respect of each separate
component of a transaction is measured at its fair value. Where vouchers are issued as part of a sales transaction and are
redeemable against future purchases, revenue should be reported at the amount of the consideration received/receivable less
the voucher’s fair value. In substance, the customer is purchasing both goods or services and a voucher. The fair value of the
voucher is determined by reference to the value to the holder and not the cost to the issuer. Factors to be taken into account
when estimating the fair value, would be the discount the customer obtains, the percentage of vouchers that would be
redeemed, and the time value of money. As only one in five vouchers are redeemed, then effectively the hotel has sold goods
worth ($300 + $4) million, i.e. $304 million for a consideration of $300 million. Thus allocating the discount between the
two elements would mean that (300 ÷ 304 x $300m) i.e. $296·1 million will be allocated to the room sales and the balance
of $3·9 million to the vouchers. The deferred portion of the proceeds is only recognised when the obligations are fulfilled.
The recognition of government grants is covered by IAS20 ‘Accounting for government grants and disclosure of government
assistance’. The accruals concept is used by the standard to match the grant received with the related costs. The relationship
between the grant and the related expenditure is the key to establishing the accounting treatment. Grants should not be
recognised until there is reasonable assurance that the company can comply with the conditions relating to their receipt and
the grant will be received. Provision should be made if it appears that the grant may have to be repaid.
There may be difficulties of matching costs and revenues when the terms of the grant do not specify precisely the expense
towards which the grant contributes. In this case the grant appears to relate to both the building of hotels and the creation of
employment. However, if the grant was related to revenue expenditure, then the terms would have been related to payroll or
a fixed amount per job created. Hence it would appear that the grant is capital based and should be matched against the
depreciation of the hotels by using a deferred income approach or deducting the grant from the carrying value of the asset
(IAS20). Additionally the grant is only to be repaid if the cost of the hotel is less than $500 million which itself would seem
to indicate that the grant is capital based. If the company feels that the cost will not reach $500 million, a provision should
be made for the estimated liability if the grant has been recognised.


(d) Sirus raised a loan with a bank of $2 million on 1 May 2007. The market interest rate of 8% per annum is to

be paid annually in arrears and the principal is to be repaid in 10 years time. The terms of the loan allow Sirus

to redeem the loan after seven years by paying the full amount of the interest to be charged over the ten year

period, plus a penalty of $200,000 and the principal of $2 million. The effective interest rate of the repayment

option is 9·1%. The directors of Sirus are currently restructuring the funding of the company and are in initial

discussions with the bank about the possibility of repaying the loan within the next financial year. Sirus is

uncertain about the accounting treatment for the current loan agreement and whether the loan can be shown as

a current liability because of the discussions with the bank. (6 marks)

Appropriateness of the format and presentation of the report and quality of discussion (2 marks)

Required:

Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment of

the above elements under International Financial Reporting Standards in the financial statements for the year

ended 30 April 2008.

正确答案:
(d) Repayment of the loan
If at the beginning of the loan agreement, it was expected that the repayment option would not be exercised, then the effective
interest rate would be 8% and at 30 April 2008, the loan would be stated at $2 million in the statement of financial position
with interest of $160,000 having been paid and accounted for. If, however, at 1 May 2007, the option was expected to be
exercised, then the effective interest rate would be 9·1% and at 30 April 2008, the cash interest paid would have been
$160,000 and the interest charged to the income statement would have been (9·1% x $2 million) $182,000, giving a
statement of financial position figure of $2,022,000 for the amount of the financial liability. However, IAS39 requires the
carrying amount of the financial instrument to be adjusted to reflect actual and revised estimated cash flows. Thus, even if
the option was not expected to be exercised at the outset but at a later date exercise became likely, then the carrying amount
would be revised so that it represented the expected future cash flows using the effective interest rate. As regards the
discussions with the bank over repayment in the next financial year, if the loan was shown as current, then the requirements
of IAS1 ‘Presentation of Financial Statements’ would not be met. Sirus has an unconditional right to defer settlement for longer
than twelve months and the liability is not due to be legally settled in 12 months. Sirus’s discussions should not be considered
when determining the loan’s classification.
It is hoped that the above report clarifies matters.


5 Jones and Cousin, a public quoted company, operate in twenty seven different countries and earn revenue and incur

costs in several currencies. The group develops, manufactures and markets products in the medical sector. The growth

of the group has been achieved by investment and acquisition. It is organised into three global business units which

manage their sales in international markets, and take full responsibility for strategy and business performance. Only

five per cent of the business is in the country of incorporation. Competition in the sector is quite fierce.

The group competes across a wide range of geographic and product markets and encourages its subsidiaries to

enhance local communities by reinvestment of profits in local educational projects. The group’s share of revenue in a

market sector is often determined by government policy. The markets contain a number of different competitors

including specialised and large international corporations. At present the group is awaiting regulatory approval for a

range of new products to grow its market share. The group lodges its patents for products and enters into legal

proceedings where necessary to protect patents. The products are sourced from a wide range of suppliers, who, once

approved both from a qualitative and ethical perspective, are generally given a long term contract for the supply of

goods. Obsolete products are disposed of with concern for the environment and the health of its customers, with

reusable materials normally being used. The industry is highly regulated in terms of medical and environmental laws

and regulations. The products normally carry a low health risk.

The Group has developed a set of corporate and social responsibility principles during the period which is the

responsibility of the Board of Directors. The Managing Director manages the risks arising from corporate and social

responsibility issues. The group wishes to retain and attract employees and follows policies which ensure equal

opportunity for all the employees. Employees are informed of management policies, and regularly receive in-house

training.

The Group enters into contracts for fixed rate currency swaps and uses floating to fixed rate interest rate swaps. The

cash flow effects of these swaps match the cash flows on the underlying financial instruments. All financial

instruments are accounted for as cash flow hedges. A significant amount of trading activity is denominated in the

Dinar and the Euro. The dollar is its functional currency.

Required:

(a) Describe the principles behind the Management Commentary discussing whether the commentary should be

mandatory or whether directors should be free to use their judgement as to what should be included in such

a commentary. (13 marks)

正确答案:
(a) The purpose of the Management Commentary (MC) is to present a balanced and comprehensive analysis of the development
position and performance of the entity in the year. Additionally, it deals with the main trends and factors behind the
development, position and performance of the entity during the financial year and those factors which are likely to affect the
entity in the future. The MC should enable users to assess the strategies adopted by the entity and the potential success of
those strategies. The key principles are as follows:
– The MC should be seen through the eyes of the directors and should focus on those matters relevant to the members of
the company.
– The review should look forward, identifying trends and factors relevant to the assessment of the current and future
performance of the entity.
– The MC should supplement and complement the financial statements so as to improve disclosure by providing additional
financial and non-financial information.
– The review should be comprehensive, understandable, reliable, relevant and represent faithfully the underlying strategies
and trends.
– Both good and bad aspects of the position of the entity should be discussed in a balanced and neutral way.
– The MC should be comparable over time, and the information should be supportable and consistent with the financial
statements to which it relates.
The increase in transparency and accountability improves the links between strategy, performance and risk, and the
evaluation of directors, and how they are paid.
A mandatory MC would make it easier for companies to judge the content of the reports and the necessary standard of
reporting, and would mean that the reports may be more robust and comparable. If the MC is not mandatory then this could
lead to uncertainty, risks of non compliance and possible mis-information being shown in the review. Directors may adopt a
policy of stating the minimum amount of disclosure which will frustrate the significant benefits to be gained from using
financial reporting as a strategic communication tool. ‘Necessity to report’ decisions will become subjective with possible legal
outcomes. The minimalist approach may also prove problematic if directors’ insurers reject claims because of ‘non-disclosure’
of information. Senior executives and the company board will play a more prominent role in deciding upon matters of MC
content than will be the case with mandatory reporting practice. Influential factors driving MC disclosure practice may become
the following rather than the broader issues:
(1) those expected to have short-term financial impact,
(2) whether shareholder decisions may be influenced,
(3) issues of risk management.
However, it can be argued that a mandatory MC could produce stereo-typed reports which would be based on a checklist
approach. Thus innovation in corporate reporting would be stifled. The power of market forces could be enough to ensure
that entities produce relevant and reliable information. Every company is different as are their challenges and risks and in anon-mandatory environment, companies could produce individual MCs to reflect those challenges and risks.


(d) Job rotation. (3 marks)

正确答案:
(d) Job rotation is an important training method and is often also seen as a means of motivation. It involves moving the trainee from one job to another and is therefore more suitable for lower level employees. The trainee is required to do different jobs in logical succession, thus broadening experience and gaining a picture of the organisation’s wider activities.


22年ACCA/CAT试题7辑 第5辑


(iii) Whether or not you agree with the statement of the marketing director in note (9) above. (5 marks)

Professional marks for appropriateness of format, style. and structure of the report. (4 marks)

正确答案:

(iii) The marketing director is certainly correct in recognising that success is dependent on levels of service quality provided
by HFG to its clients. However, whilst the number of complaints is an important performance measure, it needs to be
used with caution. The nature of a complaint is, very often, far more indicative of the absence, or a lack, of service
quality. For example, the fact that 50 clients complained about having to wait for a longer time than they expected to
access gymnasium equipment is insignificant when compared to an accident arising from failure to maintain properly a
piece of gymnasium equipment. Moreover, the marketing director ought to be aware that the absolute number of
complaints may be misleading as much depends on the number of clients serviced during any given period. Thus, in
comparing the number of complaints received by the three centres then a relative measure of complaints received per
1,000 client days would be far more useful than the absolute number of complaints received.
The marketing director should also be advised that the number of complaints can give a misleading picture of the quality
of service provision since individuals have different levels of willingness to complain in similar situations.
The marketing director seems to accept the current level of complaints but is unwilling to accept any increase above this
level. This is not indicative of a quality-oriented organisation which would seek to reduce the number of complaints over
time via a programme of ‘continuous improvement’.
From the foregoing comments one can conclude that it would be myopic to focus on the number of client complaints
as being the only performance measure necessary to measure the quality of service provision. Other performance
measures which may indicate the level of service quality provided to clients by HFG are as follows:
– Staff responsiveness assumes critical significance in service industries. Hence the time taken to resolve client
queries by health centre staff is an important indicator of the level of service quality provided to clients.
– Staff appearance may be viewed as reflecting the image of the centres.
– The comfort of bedrooms and public rooms including facilities such as air-conditioning, tea/coffee-making and cold
drinks facilities, and office facilities such as e-mail, facsimile and photocopying.
– The availability of services such as the time taken to gain an appointment with a dietician or fitness consultant.
– The cleanliness of all areas within the centres will enhance the reputation of HFG. Conversely, unclean areas will
potentially deter clients from making repeat visits and/or recommendations to friends, colleagues etc.
– The presence of safety measures and the frequency of inspections made regarding gymnasium equipment within
the centres and compliance with legislation are of paramount importance in businesses like that of HFG.
– The achievement of target reductions in weight that have been agreed between centre consultants and clients.
(Other relevant measures would be acceptable.)


(b) Paying a dividend of 10c per share (1 mark)

正确答案:
(b) Paying a dividend of 10c per share.
There are insufficient retained earnings to pay a dividend of more than 5c per share.


6 The explosive growth of investing and raising capital in the global markets has put new emphasis on the development

of international accounting, auditing and ethical standards. The International Federation of Accountants (IFAC) has

been at the forefront of the development of the worldwide accountancy profession through its activities in ethics,

auditing and education.

Required:

Explain the developments in each of the following areas and indicate how they affect Chartered Certified

Accountants:

(a) IFAC’s ‘Code of Ethics for Professional Accountants’; (5 marks)

正确答案:
6 DEVELOPMENTS AND CERTIFIED CHARTERED ACCOUNTANTS
Tutorial note: The answer which follows is indicative of the range of points which might be made. Other relevant material will
be given suitable credit.
(a) IFAC’s ‘Code of Ethics for Professional Accountants’
Since its issue in 1996, IFAC’s ‘Code of Ethics for Professional Accountants’ (‘The Code’) has undergone several revisions
(1996, 1998, 2001, 2004 and 2005). IFAC holds the view that due to national differences (of culture, language, legal and
social systems) the task of preparing detailed ethical requirements is primarily that of the member bodies in each country
concerned (and that they also have the responsibility to implement and enforce such requirements).
In recognizing the responsibilities of the accountancy profession, IFAC considers its own role to be in providing guidance and
promoting harmonization. IFAC has established ‘The Code’ to provide a basis on which the ethical requirements for
professional accountants in each country should be founded.
IFAC’s conceptual approach is principles-based. It provides a route to convergence that emphasises the profession’s integrity.
This approach may be summarised as:
■ identifying and evaluating circumstances and relationships that create threats (e.g. to independence); and
■ taking appropriate action to:
– eliminate these threats; or
– reduce them to an acceptable level by the application of safeguards.
If no safeguards are available to reduce a threat to an acceptable level an assurance engagement must be refused or
discontinued.
This approach was first introduced to Section 8 of The Code, on independence, and is applicable to assurance engagements
when the assurance report is dated on or after 31 December 2004.
Further to the cases of Enron, Worldcom and Parmalat, IFAC issued a revised Code in July 2005 that applies to all professional
accountants, whether in public practice, business, industry or government2.
A member body of IFAC may not apply less stringent standards than those stated in the Code. The Code is effective from
30 June 2006.
Practicing accountants and members in business must maintain the high standards of professional ethics that are expected
by their professional bodies (such as ACCA). These developments codify current best practice in the wake of the
aforementioned recent corporate scandals.
The developments in The Code have wider application in that it:
■ applies to all assurance services (not just audit);
■ considers the standpoints of the firm and of the assurance team.
Since ACCA is a member-body of IFAC the elevation of The Code to a standard will affect all Chartered Certified Accountants.
.


(ii) Comment on the figures in the statement prepared in (a)(i) above. (4 marks)

正确答案:
(ii) The statement of product profitability shows that CTC is forecast to achieve a profit of $2·185 million in 2008 giving a
profit:sales ratio of 11·9%. However, the forecast profit in 2009 is only $22,000 which would give a profit:sales ratio
of just 0·19%! Total sales volume in 2008 is 390,000 units which represent 97·5% utilisation of total annual capacity.
In stark contrast, the total sales volume in 2009 is forecast to be 240,000 units which represents 60% utilisation of
total annual capacity and shows the expected rapid decline in sales volumes of Bruno and Kong products. The rapid
decline in the sales of these two products is only offset to a relatively small extent by increased sales volume from the
Leo product. It is vital that a new product or products with healthy contribution to sales ratios are introduced.
Management should also undertake cost/benefit analyses in order to assess the potential of extending the life of Bruno
and Kong products.


(c) With specific reference to Hugh Co, discuss the objective of a review engagement and contrast the level of

assurance provided with that provided in an audit of financial statements. (6 marks)

正确答案:
(c) The objective of a review engagement is to enable the auditor to obtain moderate assurance as to whether the financial
statements have been prepared in accordance with an identified financial reporting framework. This is defined in ISRE 2400
Engagements to Review Financial Statements.
In order to obtain this assurance, it is necessary to gather evidence using analytical procedures and enquiries with
management. Detailed substantive procedures will not be performed unless the auditor has reason to believe that the
information may be materially misstated.
The auditor should approach the engagement with a high degree of professional scepticism, looking for circumstances that
may cause the financial statements to be misstated. For example, in Hugh Co, the fact that the preparer of the financial
statements is part-qualified may lead the auditor to believe that there is a high inherent risk that the figures are misstated.
As a result of procedures performed, the auditor’s objective is to provide a clear written expression of negative assurance on
the financial statements. In a review engagement the auditor would state that ‘we are not aware of any material modifications
that should be made to the financial statements….’
This is normally referred to as an opinion of ‘negative assurance’.
Negative assurance means that the auditor has performed limited procedures and has concluded that the financial statements
appear reasonable. The user of the financial statements gains some comfort that the figures have been subject to review, but
only a moderate level of assurance is provided. The user may need to carry out additional procedures of their own if they
want to rely on the financial statements. For example, if Hugh Co were to use the financial statements as a means to raise
further bank finance, the bank would presumably perform, or require Hugh Co to perform, additional procedures to provide
a higher level of assurance as to the validity of the figures contained in the financial statements.
In comparison, in an audit, a high level of assurance is provided. The auditors provide an opinion of positive, but not absolute
assurance. The user is assured that the figures are free from material misstatement and that the auditor has based the opinion
on detailed procedures.


22年ACCA/CAT试题7辑 第6辑


(b) Explain what is meant by McGregor’s

(i) Theory X; (5 marks)

正确答案:
(b) Douglas McGregor has suggested that the managers’ view of the individuals’ attitude to work can be divided into two categories, which he called Theory X and Theory Y. The style. of management adopted will stem from the view taken as to how subordinates behave. However, these two typologies are not distinct; they do in fact represent the two ends of a continuum.
(i) Theory X is based on traditional organisational thinking. It assumes that the average person is basically indolent and has an inherent dislike of work which should be avoided at all costs. The individual lacks ambition, shuns responsibility, has no ambition and is resistant to change. This theory holds that the individual seeks only security and is driven solely by self-interest. It follows that because of this dislike of work, most have to be directed, controlled, organised or coerced. Management is based on fear and punishment and will have an exploitative or authoritarian style. This reflects the thinking of the classical school of management, based on a scientific approach, specialisation, standardisation and obedience to superiors.


(b) As a newly-qualified Chartered Certified Accountant in Boleyn & Co, you have been assigned to assist the ethics

partner in developing ethical guidance for the firm. In particular, you have been asked to draft guidance on the

following frequently asked questions (‘FAQs’) that will be circulated to all staff through Boleyn & Co’s intranet:

(i) What Information Technology services can we offer to audit clients? (5 marks)

Required:

For EACH of the three FAQs, explain the threats to objectivity that may arise and the safeguards that should

be available to manage them to an acceptable level.

NOTE: The mark allocation is shown against each of the three questions.

正确答案:
(b) FAQs
(i) Information Technology (IT) services
The greatest threats to independence arise from the provision of any service which involves auditors in:
■ auditing their own work;
■ the decision-making process;
■ undertaking management functions of the client.
IT services potentially pose all these threats:
■ self-interest threat – on-going services that provide a large proportion of Boleyn’s annual fees will contribute to a
threat to objectivity;
■ self-review threat – e.g. when IT services provided involve (i) the supervision of the audit client’s employees in the
performance of their normal duties; or (ii) the origination of electronic data evidencing the occurrence of
transactions;
■ management threat – e.g. when the IT services involve making judgments and taking decisions that are properly
the responsibility of management.
Thus, services that involve the design and implementation of financial IT systems that are used to generate information
forming a significant part of a client’s accounting system or financial statements is likely to create significant ethical
threats.
Possible safeguards include:
■ disclosing and discussing fees with the client’s audit committees (or others charged with corporate governance);
■ the audit client providing a written acknowledgment (e.g. in an engagement letter) of its responsibility for:
– establishing and monitoring a system of internal controls;
– the operation of the system (hardware or software); and
– the data used or generated by the system;
■ the designation by the audit client of a competent employee (preferably within senior management) with
responsibility to make all management decisions regarding the design and implementation of the hardware or
software system;
■ evaluation of the adequacy and results of the design and implementation of the system by the audit client;
■ suitable allocation of work within the firm (i.e. staff providing the IT services not being involved in the audit
engagement and having different reporting lines); and
■ review of the audit opinion by an audit partner who is not involved in the audit engagement.
Services in connection with the assessment, design and implementation of internal accounting controls and risk
management controls are not considered to create a threat to independence provided that the firm’s personnel do not
perform. management functions.
It would be acceptable to provide IT services to an audit client where the systems are not important to any significant
part of the accounting system or the production of financial statements and do not have significant reliance placed on
them by the auditors, provided that:
■ a member of the client’s management has been designated to receive and take responsibility for the results of the
IT work undertaken; and
■ appropriate safeguards are put in place (e.g. using separate partners and staff for each role and review by a partner
not involved in the audit engagement).
It would also generally be acceptable to provide and install off-the-shelf accounting packages to an audit client.


(c) In October 2004, Volcan commenced the development of a site in a valley of ‘outstanding natural beauty’ on

which to build a retail ‘megastore’ and warehouse in late 2005. Local government planning permission for the

development, which was received in April 2005, requires that three 100-year-old trees within the valley be

preserved and the surrounding valley be restored in 2006. Additions to property, plant and equipment during

the year include $4·4 million for the estimated cost of site restoration. This estimate includes a provision of

$0·4 million for the relocation of the 100-year-old trees.

In March 2005 the trees were chopped down to make way for a car park. A fine of $20,000 per tree was paid

to the local government in May 2005. (7 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Volcan for the year ended

31 March 2005.

NOTE: The mark allocation is shown against each of the three issues.

正确答案:
(c) Site restoration
(i) Matters
■ The provision for site restoration represents nearly 2·5% of total assets and is therefore material if it is not
warranted.
■ The estimated cost of restoring the site is a cost directly attributable to the initial measurement of the tangible fixed
asset to the extent that it is recognised as a provision under IAS 37 ‘Provisions, Contingent Liabilities and
Contingent Assets’ (IAS 16 ‘Property, Plant and Equipment’).
■ A provision should not be recognised for site restoration unless it meets the definition of a liability, i.e:
– a present obligation;
– arising from past events;
– the settlement of which is expected to result in an outflow of resources embodying economic benefits.
■ The provision is overstated by nearly $0·34m since Volcan is not obliged to relocate the trees and de facto has
only an obligation of $60,000 as at 31 March 2005 (being the penalty for having felled them). When considered
in isolation, this overstatement is immaterial (representing only 0·2% of total assets and 3·6% of PBT).
■ It seems that even if there are local government regulations calling for site restoration there is no obligation unless
the penalties for non-compliance are prohibitive (unlike the fines for the trees).
■ It is unlikely that commencement of site development has given rise to a constructive obligation, since past actions
(disregarding the preservation of the trees) must dispel any expectation that Volcan will honour any pledge to
restore the valley.
■ Whether commencing development of the site, and destroying the trees, conflicts with any statement of socioenvironmental
responsibility in the annual report.
(ii) Audit evidence
■ A copy of the planning application and permission granted setting out the penalties for non-compliance.
■ Payment of $60,000 to local government in May 2005 agreed to the bank statement.
■ The present value calculation of the future cash expenditure making up the $4·0m provision.
Tutorial note: Evidence supporting the calculation of $0·4m is irrelevant as there is no liability to be provided for.
■ Agreement that the pre-tax discount rate used reflects current market assessments of the time value of money (as
for (a)).
■ Asset inspection at the site as at 31 March 2005.
■ Any contracts entered into which might confirm or dispute management’s intentions to restore the site. For
example, whether plant hire (bulldozers, etc) covers only the period over which the warehouse will be constructed
– or whether it extends to the period in which the valley would be ‘made good’.


(c) Assess the likely criteria which would need to be satisfied for software to be regarded as ‘quality software’.

(4 marks)

正确答案:
(c) The following are important considerations regarding the quality of the business software:
– The software is error-free as this will improve its reliability. Whilst in practice this might not always be achievable the
directors of SSH must recognise the dangers involved in supplying bespoke software which may prove damaging to their
clients’ businesses with the resulting loss of client goodwill.
– The software should meet quality control standards such as those specified by the ISO (International Standards
Organisation).
– The software must be delivered on time. Late delivery of business software will prove problematic since clients may rely
on updated software to meet new customer needs or to fulfil revised business objectives.
– The software must meet the initial specification of the customer. In meeting the specification SSH will be demonstrating
that the software has been produced correctly with an appropriate focus on the requirements of end users.
– The software must be usable i.e. as well as being able to do what it is supposed to do it is important that it is easy to
use.
– The software should be capable of being updated in the light of future changes that occur in the clients’ requirements.


(c) Using the information contained in Appendix 1.2, compare the performance of HLP and MAS incorporating

relevant percentage and ratio statistics under the following headings:

(i) Competitiveness; (5 marks)

正确答案:


22年ACCA/CAT试题7辑 第7辑


2 The Rubber Group (TRG) manufactures and sells a number of rubber-based products. Its strategic focus is channelled

through profit centres which sell products transferred from production divisions that are operated as cost centres. The

profit centres are the primary value-adding part of the business, where commercial profit centre managers are

responsible for the generation of a contribution margin sufficient to earn the target return of TRG. The target return is

calculated after allowing for the sum of the agreed budgeted cost of production at production divisions, plus the cost

of marketing, selling and distribution costs and central services costs.

The Bettamould Division is part of TRG and manufactures moulded products that it transfers to profit centres at an

agreed cost per tonne. The agreed cost per tonne is set following discussion between management of the Bettamould

Division and senior management of TRG.

The following information relates to the agreed budget for the Bettamould Division for the year ending 30 June 2009:

(1) The budgeted output of moulded products to be transferred to profit centres is 100,000 tonnes. The budgeted

transfer cost has been agreed on a two-part basis as follows:

(i) A standard variable cost of $200 per tonne of moulded products;

(ii) A lump sum annual charge of $50,000,000 in respect of fixed costs, which is charged to profit centres, at

$500 per tonne of moulded products.

(2) Budgeted standard variable costs (as quoted in 1 above) have been set after incorporating each of the following:

(i) A provision in respect of processing losses amounting to 15% of material inputs. Materials are sourced on

a JIT basis from chosen suppliers who have been used for some years. It is felt that the 15% level of losses

is necessary because the ageing of the machinery will lead to a reduction in the efficiency of output levels.

(ii) A provision in respect of machine idle time amounting to 5%. This is incorporated into variable machine

costs. The idle time allowance is held at the 5% level partly through elements of ‘real-time’ maintenance

undertaken by the machine operating teams as part of their job specification.

(3) Quality checks are carried out on a daily basis on 25% of throughput tonnes of moulded products.

(4) All employees and management have contracts based on fixed annual salary agreements. In addition, a bonus

of 5% of salary is payable as long as the budgeted output of 100,000 tonnes has been achieved;

(5) Additional information relating to the points in (2) above (but NOT included in the budget for the year ending

30 June 2009) is as follows:

(i) There is evidence that materials of an equivalent specification could be sourced for 40% of the annual

requirement at the Bettamould Division, from another division within TRG which has spare capacity.

(ii) There is evidence that a move to machine maintenance being outsourced from a specialist company could

help reduce machine idle time and hence allow the possibility of annual output in excess of 100,000 tonnes

of moulded products.

(iii) It is thought that the current level of quality checks (25% of throughput on a daily basis) is vital, although

current evidence shows that some competitor companies are able to achieve consistent acceptable quality

with a quality check level of only 10% of throughput on a daily basis.

The directors of TRG have decided to investigate claims relating to the use of budgeting within organisations which

have featured in recent literature. A summary of relevant points from the literature is contained in the following

statement:

‘The use of budgets as part of a ‘performance contract’ between an organisation and its managers may be seen as a

practice that causes management action which might lead to the following problems:

(a) Meeting only the lowest targets

(b) Using more resources than necessary

(c) Making the bonus – whatever it takes

(d) Competing against other divisions, business units and departments

(e) Ensuring that what is in the budget is spent

(f) Providing inaccurate forecasts

(g) Meeting the target, but not beating it

(h) Avoiding risks.’

Required:

(a) Explain the nature of any SIX of the eight problems listed above relating to the use of budgeting;

(12 marks)

正确答案:
2 Suggested answer content for each of the eight problems contained within the scenario is as follows:
(a) The nature of each of the problems relating to the use of budgeting is as follows:
Meeting only the lowest targets
– infers that once a budget has been negotiated, the budget holder will be satisfied with this level of performance unless
there is good reason to achieve a higher standard.
Using more resources than necessary
– Once the budget has been agreed the focus will be to ensure that the budgeted utilisation of resources has been adhered
to. Indeed the current system does not provide a specific incentive not to exceed the budget level. It may be, however,
that failure to achieve budget targets would reflect badly on factors such as future promotion prospects or job security.
Making the bonus – whatever it takes
– A bonus system is linked to the budget setting and achievement process might lead to actions by employees and
management which they regard as ‘fair game’. This is because they view the maximisation of bonuses as the main
priority in any aspect of budget setting or work output.
Competing against other divisions, business units and departments
– Competition may manifest itself through the attitudes adopted in relation to transfer pricing of goods/services between
divisions, lack of willingness to co-operate on sharing information relating to methods, sources of supply, expertise, etc.
Ensuring that what is in the budget is spent
– Management may see the budget setting process as a competition for resources. Irrespective of the budgeting method
used, there will be a tendency to feel that unless the budget allowance for one year is spent, there will be imposed
reductions in the following year. This will be particularly relevant in the case of fixed cost areas where expenditure is
viewed as discretionary to some extent.
Providing inaccurate forecasts
– This infers that some aspects of budgeting problems such as ‘Gaming’ and ‘misrepresentation’ may be employed by the
budget holder in order to gain some advantage. Gaming may be seen as a deliberate distortion of the measure in order
to secure some strategic advantage. Misrepresentation refers to creative planning in order to suggest that the measure
is acceptable.
Meeting the target but not beating it
– There may be a view held by those involved in the achievement of the budget target that there is no incentive for them
to exceed that level of effectiveness.
Avoiding risks
– There may be a prevailing view by those involved in the achievement of the budget target that wherever possible
strategies incorporated into the achievement of the budget objective should be left unchanged if they have been shown
to be acceptable in the past. Change may be viewed as increasing the level of uncertainty that the proposed budget
target will be achievable.


(ii) Any increase or decrease in the group’s budgeted corporation tax liability for the year ending 30 June

2008 due to the restructuring on the assumption that trading losses will be used as efficiently as

possible. (8 marks)

正确答案:

(ii) The budgeted corporation tax liability for the year ending 30 June 2008
Following the proposed restructuring, Rapier Ltd will be carrying on four separate trades. The current year loss arising
in the Dirk trade can be offset against its total profits. Its three subsidiaries will be dormant and will not be associates
for the purpose of determining the rate of corporation tax.


3 Local neighbourhood shops are finding it increasingly difficult to compete with supermarkets. However, three years

ago, the Perfect Shopper franchise group was launched that allowed these neighbourhood shops to join the group

and achieve cost savings on tinned and packaged goods, particularly groceries. Perfect Shopper purchases branded

goods in bulk from established food suppliers and stores them in large purpose-built warehouses, each designed to

serve a geographical region. When Perfect Shopper was established it decided that deliveries to these warehouses

should be made by the food suppliers or by haulage contractors working on behalf of these suppliers. Perfect Shopper

places orders with these suppliers and the supplier arranges the delivery to the warehouse. These arrangements are

still in place. Perfect Shopper has no branded goods of its own.

Facilities are available in each warehouse to re-package goods into smaller units, more suitable for the requirements

of the neighbourhood shop. These smaller units, typically containing 50–100 tins or packs, are usually small trays,

sealed with strong transparent polythene. Perfect Shopper delivers these to its neighbourhood shops using specialist

haulage contractors local to the regional warehouse. Perfect Shopper has negotiated significant discounts with

suppliers, part of which it passes on to its franchisees. A recent survey in a national grocery magazine showed that

franchisees saved an average of 10% on the prices they would have paid if they had purchased the products directly

from the manufacturer or from an intermediary – such as cash and carry wholesalers.

As well as offering savings due to bulk buying, Perfect Shopper also provides, as part of its franchise:

(i) Personalised promotional material. This usually covers specific promotions and is distributed locally, either using

specialist leaflet distributors or loosely inserted into local free papers or magazines.

(ii) Specialised signage for the shops to suggest the image of a national chain. The signs include the Perfect Shopper

slogan ‘the nation’s local’.

(iii) Specialist in-store display units for certain goods, again branded with the Perfect Shopper logo.

Perfect Shopper does not provide all of the goods required by a neighbourhood shop. Consequently, it is not an

exclusive franchise. Franchisees agree to purchase specific products through Perfect Shopper, but other goods, such

as vegetables, fruit, stationery and newspapers they source from elsewhere. Deliveries are made every two weeks to

franchisees using a standing order for products agreed between the franchisee and their Perfect Shopper sales

representative at a meeting they hold every three months. Variations to this order can be made by telephone, but only

if the order is increased. Downward variations are not allowed. Franchisees cannot reduce their standing order

requirements until the next meeting with their representative.

Perfect Shopper was initially very successful, but its success has been questioned by a recent independent report that

showed increasing discontent amongst franchisees. The following issues were documented.

(i) The need to continually review prices to compete with supermarkets

(ii) Low brand recognition of Perfect Shopper

(iii) Inflexible ordering and delivery system based around forecasts and restricted ability to vary orders (see above)

As a result of this survey, Perfect Shopper has decided to review its business model. Part of this review is to reexamine

the supply chain, to see if there are opportunities for addressing some of its problems.

Required:

(a) Describe the primary activities of the value chain of Perfect Shopper. (5 marks)

正确答案:
(a) Inbound logistics: Handling and storing bulk orders delivered by suppliers and stored on large pallets in regional warehouses.
All inbound logistics currently undertaken by the food suppliers or by contractors appointed by these suppliers.
Operations: Splitting bulk pallets into smaller packages, packing, sealing and storing these packages.
Outbound logistics: Delivery to neighbourhood shops using locally contracted distribution companies.
Marketing & Sales: Specially commissioned signs and personalised sales literature. Promotions and special offers.
Service: Specialist in-store display units for certain goods, three monthly meeting between franchisee and representative.


(a) An assistant of yours has been criticised 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’.

Required:

Provide an explanation to your assistant of the weaknesses in his definition of non-current assets when

compared to the International Accounting Standards Board’s (IASB) view of assets. (4 marks)

(b) The same assistant has encountered the following matters during the preparation of the draft financial statements of Darby for the year ending 30 September 2009. He has given an explanation of his treatment of them.

(i) Darby spent $200,000 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 organiser of the course has stated that the benefits from the training should last for a minimum of four years. The assistant has therefore treated the cost of the training as an intangible asset and charged six months’ amortisation based on the average date during the year on which the training courses were completed. (3 marks)

(ii) During the year the company started research work with a view to the eventual development of a new

processor chip. By 30 September 2009 it had spent $1·6 million on this project. Darby has a past history

of being particularly successful in bringing similar projects to a profitable conclusion. As a consequence the

assistant has treated the expenditure to date on this project as an asset in the statement of financial position.

Darby was also commissioned by a customer to research and, if feasible, produce a computer system to

install in motor vehicles that can automatically stop the vehicle if it is about to be involved in a collision. At

30 September 2009, Darby had spent $2·4 million on this project, but at this date it was uncertain as to

whether the project would be successful. As a consequence the assistant has treated the $2·4 million as an

expense in the income statement. (4 marks)

(iii) Darby signed a contract (for an initial three years) in August 2009 with a company called Media Today to

install a satellite dish and cabling system to a newly built group of residential apartments. Media Today will

provide telephone and television services to the residents of the apartments via the satellite system and pay

Darby $50,000 per annum commencing in December 2009. Work on the installation commenced on

1 September 2009 and the expenditure to 30 September 2009 was $58,000. The installation is expected

to be completed by 31 October 2009. Previous experience with similar contracts indicates that Darby will

make a total profit of $40,000 over the three years on this initial contract. The assistant correctly recorded

the costs to 30 September 2009 of $58,000 as a non-current asset, but then wrote this amount down to

$40,000 (the expected total profit) because he believed the asset to be impaired.

The contract is not a finance lease. Ignore discounting. (4 marks)

Required:

For each of the above items (i) to (iii) comment on the assistant’s treatment of them in the financial

statements for the year ended 30 September 2009 and advise him how they should be treated under

International Financial Reporting Standards.

Note: the mark allocation is shown against each of the three items above.

正确答案:
(a)Therearefourelementstotheassistant’sdefinitionofanon-currentassetandheissubstantiallyincorrectinrespectofallofthem.Thetermnon-currentassetswillnormallyincludeintangibleassetsandcertaininvestments;theuseoftheterm‘physicalasset’wouldbespecifictotangibleassetsonly.Whilstitisusuallythecasethatnon-currentassetsareofrelativelyhighvaluethisisnotadefiningaspect.Awastepaperbinmayexhibitthecharacteristicsofanon-currentasset,butonthegroundsofmaterialityitisunlikelytobetreatedassuch.Furthermorethepastcostofanassetmaybeirrelevant;nomatterhowmuchanassethascost,itistheexpectationoffutureeconomicbenefitsflowingfromaresource(normallyintheform.offuturecashinflows)thatdefinesanassetaccordingtotheIASB’sFrameworkforthepreparationandpresentationoffinancialstatements.Theconceptofownershipisnolongeracriticalaspectofthedefinitionofanasset.Itisprobablythecasethatmostnoncurrentassetsinanentity’sstatementoffinancialpositionareownedbytheentity;however,itistheabilityto‘control’assets(includingpreventingothersfromhavingaccesstothem)thatisnowadefiningfeature.Forexample:thisisanimportantcharacteristicintreatingafinanceleaseasanassetofthelesseeratherthanthelessor.Itisalsotruethatmostnon-currentassetswillbeusedbyanentityformorethanoneyearandapartofthedefinitionofproperty,plantandequipmentinIAS16Property,plantandequipmentreferstoanexpectationofuseinmorethanoneperiod,butthisisnotnecessarilyalwaysthecase.Itmaybethatanon-currentassetisacquiredwhichprovesunsuitablefortheentity’sintendeduseorisdamagedinanaccident.Inthesecircumstancesassetsmaynothavebeenusedforlongerthanayear,butneverthelesstheywerereportedasnon-currentsduringthetimetheywereinuse.Anon-currentassetmaybewithinayearoftheendofitsusefullifebut(unlessasaleagreementhasbeenreachedunderIFRS5Non-currentassetsheldforsaleanddiscontinuedoperations)wouldstillbereportedasanon-currentassetifitwasstillgivingeconomicbenefits.Anotherdefiningaspectofnon-currentassetsistheirintendedusei.e.heldforcontinuinguseintheproduction,supplyofgoodsorservices,forrentaltoothersorforadministrativepurposes.(b)(i)TheexpenditureonthetrainingcoursesmayexhibitthecharacteristicsofanassetinthattheyhaveandwillcontinuetobringfutureeconomicbenefitsbywayofincreasedefficiencyandcostsavingstoDarby.However,theexpenditurecannotberecognisedasanassetonthestatementoffinancialpositionandmustbechargedasanexpenseasthecostisincurred.Themainreasonforthislieswiththeissueof’control’;itisDarby’semployeesthathavethe‘skills’providedbythecourses,buttheemployeescanleavethecompanyandtaketheirskillswiththemor,throughaccidentorinjury,maybedeprivedofthoseskills.AlsothecapitalisationofstafftrainingcostsisspecificallyprohibitedunderInternationalFinancialReportingStandards(specificallyIAS38Intangibleassets).(ii)Thequestionspecificallystatesthatthecostsincurredtodateonthedevelopmentofthenewprocessorchipareresearchcosts.IAS38statesthatresearchcostsmustbeexpensed.Thisismainlybecauseresearchistherelativelyearlystageofanewprojectandanyfuturebenefitsaresofarinthefuturethattheycannotbeconsideredtomeetthedefinitionofanasset(probablefutureeconomicbenefits),despitethegoodrecordofsuccessinthepastwithsimilarprojects.Althoughtheworkontheautomaticvehiclebrakingsystemisstillattheresearchstage,thisisdifferentinnaturefromthepreviousexampleastheworkhasbeencommissionedbyacustomer,Assuch,fromtheperspectiveofDarby,itisworkinprogress(acurrentasset)andshouldnotbewrittenoffasanexpense.Anoteofcautionshouldbeaddedhereinthatthequestionsaysthatthesuccessoftheprojectisuncertainwhichpresumablymeansitmaynotbecompleted.ThisdoesnotmeanthatDarbywillnotreceivepaymentfortheworkithascarriedout,butitshouldbecheckedtothecontracttoensurethattheamountithasspenttodate($2·4million)willberecoverable.Intheeventthatsay,forexample,thecontractstatedthatonly$2millionwouldbeallowedforresearchcosts,thiswouldplacealimitonhowmuchDarbycouldtreatasworkinprogress.Ifthiswerethecasethen,forthisexample,Darbywouldhavetoexpense$400,000andtreatonly$2millionasworkinprogress.(iii)Thequestionsuggeststhecorrecttreatmentforthiskindofcontractistotreatthecostsoftheinstallationasanon-currentassetand(presumably)depreciateitoveritsexpectedlifeof(atleast)threeyearsfromwhenitbecomesavailableforuse.Inthiscasetheassetwillnotcomeintouseuntilthenextfinancialyear/reportingperiodandnodepreciationneedstobeprovidedat30September2009.Thecapitalisedcoststodateof$58,000shouldonlybewrittendownifthereisevidencethattheassethasbecomeimpaired.Impairmentoccurswheretherecoverableamountofanassetislessthanitscarryingamount.Theassistantappearstobelievethattherecoverableamountisthefutureprofit,whereas(inthiscase)itisthefuture(net)cashinflows.Thusanyimpairmenttestat30September2009shouldcomparethecarryingamountof$58,000withtheexpectednetcashflowfromthesystemof$98,000($50,000perannumforthreeyearslessfuturecashoutflowstocompletiontheinstallationof$52,000(seenotebelow)).Asthefuturenetcashflowsareinexcessofthecarryingamount,theassetisnotimpairedanditshouldnotbewrittendownbutshownasanon-currentasset(underconstruction)atcostof$58,000.Note:asthecontractisexpectedtomakeaprofitof$40,000onincomeof$150,000,thetotalcostsmustbe$110,000,withcoststodateat$58,000thisleavescompletioncostsof$52,000.


(b) Calculate the amount of input tax that will be recovered by Vostok Ltd in respect of the new premises in the

year ending 31 March 2009 and explain, using illustrative calculations, how any additional recoverable input

tax will be calculated in future years. (5 marks)

正确答案:
(b) Recoverable input tax in respect of new premises
Vostok Ltd will recover £47,880 (£446,500 x 7/47 x 72%) in the year ending 31 March 2009.
The capital goods scheme will apply to the purchase of the building because it is to cost more than £250,000. Under the
scheme, the total amount of input tax recovered reflects the use of the building over the period of ownership, up to a maximum
of ten years, rather than merely the year of purchase.
Further input tax will be recovered in future years as the percentage of exempt supplies falls. (If the percentage of exempt
supplies were to rise, Vostok Ltd would have to repay input tax to HMRC.)
The additional recoverable input tax will be computed by reference to the percentage of taxable supplies in each year including
the year of sale. For example, if the percentage of taxable supplies in a particular subsequent year were to be 80%, the
additional recoverable input tax would be computed as follows.
£446,500 x 7/47 x 1/10 x (80% – 72%) = £532.
Further input tax will be recovered in the year of sale as if Vostok Ltd’s supplies in the remaining years of the ten-year period
are fully vatable. For example, if the building is sold in year seven, the additional recoverable amount for the remaining three
years will be calculated as follows.
£446,500 x 7/47 x 1/10 x (100% – 72%) x 3 = £5,586.