Long-Term Contracts – NBC Institute

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

Question

a. Agbero plc is a public company rendering services to the Lagos State Government, primarily in public transport. Listed on the Lagos Stock Exchange, Agbero plc identified three operating segments in its annual financial statements for the year ended March 31, 2018:

Segment 1: Local bus operations
Segment 2: Inter-city bus operations
Segment 3: Road constructions

The company disclosed two reportable segments. Segments 1 and 2 were aggregated into a single reportable operating segment, based on similar business characteristics, and the nature of their products and services. In the local bus operations market, the Lagos State Transport Authority awards the contract and pays Agbero for its services. Contracts for local bus operations are awarded via a competitive tender process, and ticket prices are set and paid to the Lagos State Transport Authority. In the inter-city bus operation market, Agbero sets the ticket prices, and passengers pay Agbero directly for the service.

Required:

i. Advise Agbero plc on how the above accounting issues should be dealt with in its financial statements. (6 Marks)

ii. Although the company is satisfied with IFRS 8 – Operating Segment, it is unclear who to designate as the chief operating decision maker (CODM) under the standard. Define the chief operating decision maker in line with IFRS 8 – Operating Segment and identify who this should be in Agbero plc. (2 Marks)

b. Agbero Plc entered a contract with the Lagos State Government on April 1, 2016, to construct a new light railway line. The contract total revenue is N5 billion over a three-year period. The contract specifies that N1 billion will be paid at the start of the contract, but subsequent payments will be settled only upon completion of the project. Invoices have been sent as follows:

Year ended March 31, 2017: N2.8 billion
Year ended March 31, 2018: N1.2 billion
Remaining balance to be invoiced on March 31, 2019

To date, Agbero Plc has only recognized the initial payment in the financial statements up to March 31, 2017, as no subsequent payments are due until March 31, 2019. The invoiced amounts reflect the work completed in each period.

Required:

Agbero Plc. wishes to know how to account for the revenue on the contract in the financial statements to date. Advise Agbero Plc. Market interest rates are currently at 6%. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Chief Operating Decision Maker, Government Contracts, Long-Term Contracts, Revenue Recognition, Segment Reporting
Level: Level 3

Topic: Segment Reporting (IFRS 8)

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

Question

a) Long-term contracts span over a long period of time and have tax implications.
Required:
i) What is long-term contract as defined in the Income Tax Act, 2015 (Act 896)? (1 mark)
ii) What are the tax rules on long-term contracts? (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Completion, Income Tax Act, Long-Term Contracts, Tax Rules
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

Question

Finstruct Ltd has been awarded an airport terminal project. The project started on 1 January 2022 for a contract sum of GH¢60,000,000. The construction of the airport is to be completed on 31 December 2023.

Finstruct Ltd has a financial year ending on 31 December each year. On 31 December 2022, the accounts appropriate to the airport contract contained the following:

Cost Item	GH¢
Cost of construction materials	25,500,000
Direct wages of construction staff	22,100,000
Hire of special equipment	300,000
Cost of soil test	100,000
Purchase of fuel and lubricants	750,000
Consultancy services	135,000

Additional information:
i) Materials costing GH¢340,000 sent to the site were returned to the company’s warehouse.
ii) Materials sent to the site worth GH¢675,000 were still unused at the construction site as of 31 December 2022.
iii) Finstruct Ltd pays some of its workers the first week of the ensuing month after the end of the current month. GH¢57,000 is still owed for wages as of the close of the year 2022, and this was not included in the accounts.
iv) A bill amounting to GH¢45,000 was submitted late by Finstruct Ltd, and as of 31 December 2022, the bill had not yet been paid. This was not included in the accounts.
v) It is estimated that the cost to complete the project as of 31 December 2022 should be GH¢8,265,180.
vi) The following details are available on assets of Finstruct Ltd:

Required:
a) Compute the capital allowance for Finstruct Ltd for the year 2022. (6 marks)
b) Explain the tax rules on long-term contracts and compute the percentage of contract completion of the project. (4 marks)
c) Compute the chargeable income of Finstruct Ltd for the year ended 31 December 2022. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, chargeable income, Construction Contracts, Corporate Taxation, Long-Term Contracts, Tax computation
Level: Level 3

Topic: Business income - Corporate income tax, Capital allowance
Series: MAR 2024

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

Question

Segment 1: Local bus operations
Segment 2: Inter-city bus operations
Segment 3: Road constructions

Required:

i. Advise Agbero plc on how the above accounting issues should be dealt with in its financial statements. (6 Marks)

Year ended March 31, 2017: N2.8 billion
Year ended March 31, 2018: N1.2 billion
Remaining balance to be invoiced on March 31, 2019

Required:

Agbero Plc. wishes to know how to account for the revenue on the contract in the financial statements to date. Advise Agbero Plc. Market interest rates are currently at 6%. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Chief Operating Decision Maker, Government Contracts, Long-Term Contracts, Revenue Recognition, Segment Reporting
Level: Level 3

Topic: Segment Reporting (IFRS 8)

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contract Completion, Income Tax Act, Long-Term Contracts, Tax Rules
Level: Level 3

Topic: Tax administration in Ghana
Series: NOV 2018

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

Question

Finstruct Ltd has a financial year ending on 31 December each year. On 31 December 2022, the accounts appropriate to the airport contract contained the following:

Cost Item	GH¢
Cost of construction materials	25,500,000
Direct wages of construction staff	22,100,000
Hire of special equipment	300,000
Cost of soil test	100,000
Purchase of fuel and lubricants	750,000
Consultancy services	135,000

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital allowances, chargeable income, Construction Contracts, Corporate Taxation, Long-Term Contracts, Tax computation
Level: Level 3

Topic: Business income - Corporate income tax, Capital allowance
Series: MAR 2024

Question Tag: Long-Term Contracts

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Long-Term Contracts

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

You're reporting an error for "CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)"

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

You're reporting an error for "AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana"

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

You're reporting an error for "AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance"

CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)

Guidance on segment reporting and revenue recognition for long-term contracts for Agbero Plc’s operating and contract revenue.

You're reporting an error for "CR – Nov 2018 – L3 – SC – Q7 – Segment Reporting (IFRS 8)"

AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana

Defining long-term contracts and outlining the tax rules under the Income Tax Act.

You're reporting an error for "AT – Nov 2018 – L3 – Q2a – Tax administration in Ghana"

AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance

Covers capital allowance computation, tax rules on long-term contracts, and chargeable income calculation.

You're reporting an error for "AT – MAR 2024 – L3 – Q4 – Business Income – Corporate Income Tax | Capital Allowance"

Our offerings

Contact Info

Customer

Get In Touch

admin