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CR – Nov 2018 – L3 – SB – Q4 – Statement of Cash Flows (IAS 7)

Preparation of Happy Plc’s statement of cash flows and analysis of revaluation and financing adjustments.

Happy is a publicly listed company. Its financial statements for the year ended July 31, 2017, including comparatives, are shown below:

Notes:

  1. On November 1, 2016, Happy acquired an additional plant under a finance lease with a fair value of ₦3 million. The property was also revalued upward by ₦4 million, with ₦1.3 million of the revaluation reserve transferred to deferred tax. No disposals occurred during the period.
  2. Depreciation on property, plant, and equipment amounted to ₦1.8 million, and amortization of deferred development expenditure was ₦0.4 million.

Required:

Prepare the statement of cash flows of Happy Plc for the year ended July 31, 2017, in accordance with IAS 7, using the indirect method. (20 Marks)

 

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CR – Nov 2018 – L3 – SA – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Adegaga Laboratories Plc., including the effects of an acquisition and goodwill impairment.

Adegaga Laboratories Plc (“AdeLabs”) is one of the largest companies in Nigeria engaged in cosmetic development and manufacturing. Its largest customer base is in the healthcare sector for post-surgery patients and the Nigeria movie industry (aka Nollywood). In the prior financial period, AdeLabs’ expansion strategy has been largely focused on growth by acquisition and joint ventures.

Additional Information:

  1. As part of this, AdeLabs acquired 80% of the equity share capital of Bodegas Limited (“Bodegas”) on January 1, 2015, when the retained earnings of Bodegas was N93.75 million. Following the share acquisition, AdeLabs had control over Bodegas – no shares have been issued by Bodegas following the acquisition. The non-controlling interest in Bodegas was measured at its fair value of N20 million at the date of acquisition.
  2. On January 1, 2016, AdeLabs acquired 50% of the equity share capital of ChidePlastics Limited (“ChidePlast”) when the retained earnings of ChidePlast was N41.25 million. This acquisition was classified as a joint venture in accordance with IFRS 11 Joint Arrangements. ChidePlast has not issued any shares since the acquisition date.
  3. The balance on “other reserves” relates to movements in the values of investments in Bodegas and ChidePlast in the books of AdeLabs. N18.75 million relates to Bodegas, and the remainder to ChidePlast.
  4. AdeLabs’ non-current liabilities relate to a borrowing (long-term) taken out on January 1, 2017. This borrowing has an agreed coupon rate of 4% p.a., and the interest expense due in respect of 2017 has been paid and accounted for in profit for the year. The effective interest rate estimated with this financial liability is 8% p.a.
  5. As part of its annual impairment review, AdeLabs concluded that the goodwill on the acquisition of Bodegas was impaired by 20% at December 31, 2017. No other impairments of goodwill have arisen.
  6. AdeLabs sold goods to ChidePlast with a value of N75 million and a selling margin of 40% in November 2017. As at year-end December 31, 2017, 75% of these items are unsold.

Accounts for all companies are made up to December 31 annually.

Required:

Prepare for Adegaga Laboratories Plc:

  1. A consolidated statement of financial position as at December 31, 2017. (20 Marks)
  2. On January 1, 2018, AdeLabs acquired an additional 10% of the equity shares of Bodegas. The purchase consideration for this additional acquisition was N52,500,000.

    i. Briefly explain how this additional acquisition will impact the preparation of AdeLabs’ consolidated financial statements for the year ended December 31, 2017. (4 Marks)

    ii. Calculate the adjustment that will be required to be made to AdeLabs’ statement of financial position as a result of this acquisition. (6 Marks)

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TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Raposa Nigeria Limited, a company located in Sambisa Forest, Kutunwegi State of Nigeria, commenced operations on November 1, 2017. The accounting year-end was September 30. Due to government policy restricting rice importation, the business’s going concern was threatened, leading the Board of Directors to decide to cease operations on December 31, 2022.

The adjusted profits for the relevant periods are as follows:

Period Adjusted Profit (N)
Period to September 30, 2019 2,100,000
Year ended September 30, 2020 2,400,000
Year ended September 30, 2021 3,640,000
Year ended September 30, 2022 6,300,000
Period to December 31, 2022 500,000

Additional Information:

  1. A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
  2. N20,000 was spent to recover this debt.
  3. An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Upon cessation, the revenue authority planned a back-duty investigation and informed the taxpayer accordingly. As a tax consultant, you are invited to determine the assessable profits for the relevant periods from the commencement of trade to business cessation.

Required: a. State THREE reasons why a business may cease trading. (3 Marks)
b. Compute net terminal adjusted profit. (6 Marks)
c. Compute assessable profits for all the relevant years of assessment. (6 Marks)

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TAX – Nov 2023 – L2 – Q6b – Tax Administration and Enforcement

Explain five key contents required in a Withholding Tax returns/payment schedule.

It is expected that a schedule of Withholding Tax (WHT) payable should be prepared by applying the correct WHT rate on each transaction/payment made during the month. Thereafter, a cheque for the amount due to the Federal Inland Revenue Service is raised and forwarded together with the WHT schedule to one of the approved collecting banks for processing.

Required:
Explain FIVE contents of a WHT returns/payment schedule. (10 Marks)

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TAX – Nov 2023 – L2 – Q6a – Tax Administration and Enforcement

Explain the functions and powers of the Nigerian Customs Service Board.

The Nigeria Customs Service (NCS) is one of the major revenue-generating agencies for the Federal Government of Nigeria. The establishment of the Nigerian Customs Service Board, which is under the control of the Federal Ministry of Finance, is contained in section 1 of the Nigerian Customs Service Board Act Cap.C45 LFN 2004 (as amended). The Board is responsible for the administration of the Customs and Excise Management Act.

Required:
Explain the functions and powers of the Board. (5 Marks)

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TAX – Nov 2023 – L2 – Q5 – Tax Administration and Enforcement

Explain stamp duty exemptions, electronic document receipt, duties on contracts, and electronic money transfer levies.

Stamp duties are duties basically on instruments (defined to include written document). Stamp duties are governed by Stamp Duties Act Cap. S8 LFN 2004 (as amended), which provides for the levying of duties on certain matters specified in the Act, effective April 1, 1993.

a. Explain THREE instruments exempted from stamp duties. (3 Marks)
b. Describe when electronic documents are considered received in Nigeria. (3 Marks)
c. Discuss duty on contracts. (3 Marks)
d. Explain the electronic money transfer levy. (6 Marks)

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TAX – Nov 2023 – L2 – Q4 – Taxation of Trusts and Estates

Compute the net income assessable in the hands of trustees and assessable income of each beneficiary.

The records of the two trustees of Olalomi Children Settlement created in favor of the three children—Olami, Olambe, and Olaide—revealed the following as of December 31, 2020:

Income Type Amount (N)
Rental income (gross) 398,900
Trading income 210,000
Dividend (gross) 196,000
Profit on sale of non-current assets 600,000

Additional Information:

  1. The interest received was from Gbogbo-Ero Commercial Bank Limited.
  2. Other allowable expenses amounted to N23,000.
  3. Each beneficiary was entitled to a quarter of the net distributable income.
  4. Fixed annuity to the beneficiaries was N42,000 (gross) to be shared equally.
  5. Trustee’s remuneration per trust deed was fixed at N25,000 each, plus 2.5% of the total computed income.
  6. Discretionary payments were made to Olami (N10,000), Olambe (N34,000), and Olaide (N29,000).
  7. Agreed capital allowance was N87,600.
  8. Administrative and other expenses amounted to N106,000.

Required: a. Compute the net income assessable in the hands of the trustees. (14 Marks)
b. Compute the assessable income in the hands of each beneficiary. (6 Marks)

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TAX – Nov 2023 – L2 – Q3b – Tax Administration and Enforcement

Explain the roles and responsibilities of government, taxpayers, and revenue agencies in Nigeria’s National Tax Policy.

In line with the provisions of the revised National Tax Policy (NTP) in 2017, explain the roles and responsibilities of the following stakeholders:

i. The government (3 Marks)
ii. The taxpayers (3 Marks)
iii. Revenue agencies (3 Marks)

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TAX – Nov 2023 – L2 – Q3a – Tax Administration and Enforcement

Describe the composition and functions of Nigeria’s tax administration bodies, including the Joint Tax Board and State Board of Internal Revenue.

a. Tax administration in Nigeria involves the practical interpretations and application of the tax laws. The bodies charged with the administration of tax in Nigeria are the Federal, State, and Local Governments. The tax authorities of these tiers of government derive their power from Federal laws.

i. State the composition of the Joint Tax Board. (3 Marks)

ii. Outline FOUR functions of the State Board of Internal Revenue. (3 Marks)

iii. State FIVE levies and taxes collectible by the Local Government Revenue Committee. (5 Marks)

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TAX – Nov 2023 – L2 – Q2 – Tax Administration and Enforcement

Discuss the tax law provisions for a change in accounting year end, revenue practice, and compute assessable profits.

Forward Nigeria Limited, a Nigerian manufacturing company, has been operating for several years with an accounting year-end on June 30. The company recently decided to change its year-end to September 30. The adjusted profits for the relevant periods are as follows:

Period Adjusted Profit (N)
Year ended June 30, 2014 2,700,000
Year ended June 30, 2015 3,300,000
Period ended September 30, 2015 1,500,000
Year ended September 30, 2016 4,200,000
Year ended September 30, 2017 3,600,000

Additional Information:

  1. Income overstated:
    • June 30, 2015: N250,000
    • September 30, 2016: N280,000
  2. Expenditure understated:
    • June 30, 2014: N160,000
    • September 30, 2017: N150,000

Required: a. Explain the tax law provisions for a business changing its accounting year-end. (5 Marks)

b. Describe the Revenue practice related to these provisions. (3 Marks)

c. Compute the assessable profits for all affected years of assessment, considering the tax law and Revenue practice. (12 Marks)

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FR – May 2015 – L2 – SB – Q2 – Property Plant and Equipment

Determine disclosure requirements for separate financial statements and calculate equity, non-controlling interests, goodwill, and property valuation adjustments.

(a) When a parent company elects not to prepare consolidated financial statements and instead prepares separate financial statements, what are the disclosure requirements stipulated in IAS 27 on Separate Financial Statements? (6 Marks)

(b) Kerewanta Plc acquired 60% of the equity shares of Orijinmi Plc through a share exchange (three shares in Kerewanta Plc for four shares in Orijinmi Plc). The share value of Kerewanta Plc at the acquisition date (April 1, 2013) was N10 per share. Additionally, Kerewanta Plc would make a deferred cash payment of 70k per acquired share on April 1, 2014. Kerewanta Plc’s cost of capital is 12% per annum, with the following information extracted as of March 31, 2014:

Additional Information:

  1. An equipment in Orijinmi Plc had a fair value of N360,000,000 above its carrying amount with a four-year remaining life. The group uses straight-line depreciation.
  2. Orijinmi Plc had an unrecorded deferred tax liability of N10,000,000 as of March 31, 2014, with no goodwill impairment.
  3. Non-controlling interests are valued at fair value at acquisition. Fair value of Orijinmi Plc’s non-controlling interests at acquisition was N6 per share.

Required: Calculate the following as at March 31, 2014:

  1. Equity
  2. Non-controlling Interests
  3. Consolidated Goodwill
  4. Property, Plant, and Equipment (14 Marks)

 

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FR – May 2015 – L2 – SA – Q1 – Consolidated Financial Statements

Prepare consolidated financial statements for Unitarisation Plc and compute Gain on Bargain Purchase.

Unitarisation Plc is a successful Nigerian Company that recently amended its objects clause to promote national unity and encourage anti-terrorism compliance. The company acquired 60% of the equity share capital of Famous Plc to further this mission. Summarised draft financial statements of the two companies are as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 October 2014

Unitarisation Plc (N’m) Famous Plc (N’m)
Revenue 51,000 25,200
Cost of Sales (37,800) (19,200)
Gross Profit 13,200 6,000
Distribution Costs (1,200) (1,200)
Administrative Expenses (3,600) (1,920)
Finance Costs (180) (240)
Profit before Tax 8,220 2,640
Income Tax Expense (2,820) (840)
Profit for the Year 5,400 1,800

Statement of Financial Position as at 31 October 2014

Unitarisation Plc (N’m) Famous Plc (N’m)
Non-current assets:
Property, Plant & Equipment 24,360 7,560
Current Assets 9,600 3,960
Total Assets 33,960 11,520
Equity & Liabilities:
Equity Shares of N1 each 6,000 2,400
Retained Earnings 21,240 3,900
Total Equity 27,240 6,300
Non-current Liabilities:
12% Loan Notes 1,800 2,400
Current Liabilities 4,920 2,820
Total Equity & Liabilities 33,960 11,520

Additional Information:

  1. Shares of Famous Plc were acquired on 1 May 2014, and the issue of shares was not recorded by Unitarisation Plc.
  2. There is cash in transit of N120,000,000 due from Unitarisation Plc to Famous Plc.
  3. Non-controlling interests are valued at full fair value; at acquisition, the fair value of non-controlling interests in Famous Plc was N3,540,000,000.
  4. Famous Plc’s assets’ fair value equaled carrying amounts at acquisition except for one equipment valued N1,200,000,000 above its carrying amount with a 5-year remaining life, using straight-line depreciation.
  5. The acquisition of 60% of Famous Plc’s shares was settled via a share exchange of two shares in Unitarisation Plc for three shares in Famous Plc, valued at N6 per share.
  6. Post-acquisition, Unitarisation Plc bought goods from Famous Plc for N4,800,000,000 with a 40% markup; N3,120,000,000 of these goods were unsold by year-end.
  7. Famous Plc’s trade receivables included N360,000,000 from Unitarisation Plc, with a discrepancy in Unitarisation’s payable ledger.
  8. Profits or losses are assumed to accrue evenly.

Required:

  1. Prepare Unitarisation Plc Consolidated Profit or Loss and Other Comprehensive Income for the year ended 31 October 2014. (10 Marks)
  2. Prepare Unitarisation Plc Consolidated Statement of Financial Position as at 31 October 2014. (10 Marks)
  3. Prepare the Consolidated Statement of Changes in Equity for the year ended 31 October 2014. (6 Marks)
  4. Explain “Gain on Bargain Purchase” according to IFRS 3 on Business Combinations. (4 Marks)

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CSME – May 2021 – L2 – Q4 – Corporate Social Responsibility (CSR)

Explanation of social responsibility levels by Gray, Owen, and Adams, and ethical stances by Johnson and Scholes.

Gray, Owen, and Adams (1996) provided a framework for classifying different groups of people and their views of the relationship between business organizations and society.

Required:

a. State and explain SEVEN levels or positions on social responsibility by Gray, Owen, and Adams (1996). (15 Marks)
b. State Johnson and Scholes FOUR possible ethical stances for a business entity. (5 Marks)

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CSME – May 2021 – L2 – Q3b – Corporate Governance

Explanation of board responsibilities per ICSA guidelines that cannot be delegated.

Using the Institute of Chartered Secretaries and Administrators (ICSA) guidance note, explain responsibilities of board of directors that should not be delegated.

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CSME – May 2021 – L2 – Q3a – Corporate Governance

Advising on voting rights to protect a shareholder's investment in a struggling company.

A friend of yours, who invested heavily in the ordinary shares of a company that has been struggling in recent years, came to you for advice. He is confused as to what he can do to protect his investment.

Advise him on:
i. How he can use his voting rights as a shareholder to secure his investment. (6 Marks)
ii. Limitations to the use of his voting rights. (4 Marks)

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CSME – May 2021 – L2 – Q2 – Risk Management and Corporate Strategy

Examination of a risk manager’s role, specific risks managed, and purposes of risk monitoring.

“A risk manager is not a line manager and is not directly responsible for risk management but might help with the management of specific risks.”

Required:

a.
i. Review the statement above within the context of the role of a risk manager. (7 Marks)
ii. Evaluate THREE specific risks that can be managed. (3 Marks)

b. Discuss the purposes of risk monitoring. (10 Marks)

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CSME – May 2021 – L2 – Q1 – Strategic Implementation

Assessing Davidson Ltd's key resources, strategic choices, and restructuring to address international opportunities.

Davidson Ltd is an automobile company based in Aba, Nigeria. It has been in
existence for nearly eighty years. The company originally began by supplying
components for small vehicles and was producing equipment during the Second
World War. However, in the nineties, it underwent rapid transformation under
the founder‟s son, Tony. Tony has diversified the company into supplying tricycle
components and spare parts to the Nigerian market. The company now employs
some 500 staff around the country and is well known for the quality of its
workmanship. The company operates under three divisions. One division is
concerned with the manufacture of tricycle components, a second division with
spare parts and the third division undertakes specific one–off work in automobile
and automobile design. The tricycle component division is by far the biggest and
accounts for seventy per cent of the total turnover. The smaller specialist
automobile design division is by far the most profitable in terms of return on
capital employed and it relies a great deal on a senior engineer, Emmanuel, who
has been with the company for more than twenty years.
Recently, the company was invited to send sample components to a Japanese car
manufacturer who is keen to commence operations in Nigeria. These components
are needed within eight months. However, Mr. Tony is concerned that his
company may not be able to meet the strict standard imposed by the Japanese
manufacturer. The deal, if it is sealed, would establish Davidson Ltd as an
important auto component supplier in South East Asia, thus, opening up the
potential for exports. Tony realises that the export potential is great and that any
initiative towards exports would get full backing from the government. While,
this is happening, the spare parts division is also showing signs of growth.
Recent reforms in part of North Africa has made companies in that region to be
very keen to modernise and innovate their old manufacturing processes and
Davidson had received business enquiries from the region.
Tony faces a dilemma. He knows that the opportunities that have presented
themselves would give the company a global presence. At the same time, he
knows that the company is solely under his management as chief executive.
Tony holds eighty percent of the shares. The other two directors hold ten percent
each. Although the other divisions have managing directors, they rely on him for
decision making. The current managing directors are family members. One is a brother in-law and the other a cousin. Their knowledge of the industry and its
workings is generally poor. He made these appointments to please his father so
that he could be left to run the company as he deems fit. Tony knows that to
satisfy the Japanese auto manufacturer, he needs to reorganise the automobile
design division and consider issues of Total Quality Management (TQM). This will
take time and requires that he delegates responsibilities to other divisions.
However, he feels uncomfortable doing this.
The company is at crossroads. The three divisions are doing well, but could do
even better, if their old, bureaucratic and hierarchical systems are reviewed.
Indeed, some of the younger managers and engineers would prefer a more open,
flexible management structure. Some of them have studied both engineering and
management in Holland and the United States, and are keen to see key
innovations in place. While Tony knows that these opportunities highlighted
above should not be missed, he has to ensure that they are handled successfully
so that the future is secured for Davidson Ltd. This requires that he takes some
tough decisions in restructuring the company within a few months.

Required:

Write a report to the Chief Executive of Davidson Ltd addressing the following issues:

a.
i. The key resources and implementation issues facing Davidson Ltd in the scenario above. (15 Marks)
ii. How the key resources will affect strategic choices. (7 Marks)
iii. How implementation issues will affect strategic choices. (8 Marks)

b. How should Tony restructure the company? (10 Marks)

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CSME – May 2017 – L2 – SC – Q7 – Corporate Governance

Explain the Nolan principles guiding public life and discuss standards for ethical conduct in the public sector.

Nolan Committee on standards in public life was set up to report on standards of behaviour amongst politicians, civil servants and public bodies. Provide an analysis of Nolan‟s‟ SEVEN Principles of Public Life. (15 Marks)

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CSME – May 2017 – L2 – SC – Q6 – Ethics in Business

Explain agency problems and Tucker's model to guide ethical decisions for accountants.

a. Agency problems and conflicts are common in all organisations.
Required:
Explain the concept of agency problems and discuss FIVE types of agency conflicts that might exist in an organisation. (8 Marks)

b. Tucker‟s Five Question Model can be employed in training new professional accountants in ethics.
Required:
Explain the issues covered by the Tucker‟s Five Question Model. (7 Marks)

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CSME – May 2017 – L2 – SC – Q5 – Risk Management and Corporate Strategy

Show how organizations can address risk management challenges using ISO 31000.

a. Using the ISO 31000 framework, show what an organization might do to address risk management challenges. (9 Marks)

b. Explain THREE main elements of risk management contained in the ISO 31000 framework. (6 Marks)

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