Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

Question

The Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, is concerned about the lack of a “standardised risk management system” and “good corporate governance” at Bazar. Following Continuous Professional Development (CPD) training organised recently by the Institute of Chartered Accountants, Ghana (ICAG), on this subject and attended by you as a member of the Finance Team, duly paid for from Bazar’s training budget:

Required:
You have been asked by management to brief your finance team members on the following:

i) The International Standardisation for Organisation (ISO 31000) framework for risk management using the three (3) main elements. (5 marks)
ii) TWO (2) out of the Six OECD principles of Corporate Governance. (5 marks)

Answer

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Tags: Corporate Governance, ISO 31000, OECD principles, Risk Management
Level: Level 3

Topic: Controlling Risk
Series: AUG 2022

SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

Question

Remuneration packages should attract individuals to a company and persuade them to work for the company. Ghana’s Code of Best Practices makes three statements about remuneration policy. The Code adds that the remuneration level for individual directors should reflect their experiences and the level of responsibilities they undertake.

Required:
i) Explain the three statements about remuneration as stated in the Ghana’s Code of Best Practices policy to support Bazar management engagement with the General Welfare Committee (GWC). (6 marks)

ii) Explain to the management of Bazar why executive remuneration is a governance issue. (4 marks)

Answer

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Tags: Director Compensation, Executive Remuneration, Governance, Remuneration Policy
Level: Level 3

Topic: Ethics and social responsibility
Series: AUG 2022

SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

Question

The management style of Bazar is in transition from a somehow authoritarian style described by some managers as almost autocratic and militaristic to a more ‘open’ style that encourages managers and supervisors to seek ideas from staff and to operate in an informal manner.

Required:
Using Lewin’s Model for Managing Change, (unfreeze, change, re-freeze) suggest an approach to introducing planned transformational change in the management style of Bazar.

Answer

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Tags: Change Management, Lewin's Model, Re-freezing, Transformation, Unfreezing
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

Question

Using the additional information presented by AB Consult & Associate to the Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, on 4 August, prepare the following:

i) Little Bee new forecasted Statement of financial performance after the changes that will be discussed at the board meeting on the 5 August 2022. (4 marks)
ii) Calculate the operating gearing, measured as the ratio of the percentage increase in profit before interest and tax divided by the percentage increase in sales. (2 marks)
iii) Calculate the financial gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in profit before interest and tax. (2 marks)
iv) Calculate the Combined gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in sales. (2 marks)
v) Explain the significance of operating gearing and financial gearing to the management of Bazar. (10 marks)

Answer

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Tags: Business Valuation, Combined Gearing, Financial Forecast, Financial Gearing, Operating Gearing
Level: Level 3

Topic: Financial management
Series: AUG 2022

SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

Question

Within an entity, there is a primary value chain and there are support activities (also called secondary value chain). Porter identified five primary value chain activities which can be applied to a retailing company such as Bazar.

Required:
Using the concept of the value chain, explain using a diagram the FIVE (5) primary value chain as explained by Porter to the management of Bazar highlighting their relevance. (10 marks)

Answer

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Tags: Business operations, Porter, Retail Industry, Strategic Success, Value Chain
Level: Level 3

Topic: Competitive Advantage
Series: AUG 2022

SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

Question

“Whistleblowing” means reporting suspicions of illegal or improper behaviour to a person in authority.

Required:
In relation to the comments above, explain to the Director of Human Resources and Organisational Culture, Mrs. Raju Asha, the consequences of comments recorded by an employee. Additionally, advise the employee on what he/she should consider before deciding on “blowing the whistle” and the potential difficulties that the staff might encounter.

Answer

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Tags: Corporate Governance, Ethics, Reporting, Unethical Behavior, Whistleblowing
Level: Level 3

Topic: Conflicts of Interest and Ethical Conflict Resolution
Series: AUG 2022

SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

Question

In discussing the report presented by AB Consult & Associate, the Director of Finance and Operations made a strong point for acquisition and mergers as a growth strategy instead of internal development. She gave her full support to the decision to acquire the 20 stores.

Required:
Write a report detailing the advantages of an acquisition and mergers method of growth instead of an internal development. Conclude your report by explaining why the financial position and financial performance of Bazar will support or not support the decision to acquire the 20 stores.

Answer

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Tags: Acquisitions, Financial strategy, Growth Strategy, Internal Development, Mergers
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

Question

Mintzberg identified six different organizational configurations. Explain to Bazar management FOUR (4) of these organizational configurations suitable to support the change management process highlighting the differences.

Answer

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Tags: Change Management, Mintzberg, Organizational Configurations
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

Question

The organisational structure of Bazar is ‘family centric management’ while not interested
in changing the structure any time soon. It is important to recognise that the most suitable
organisation structure depends partly on circumstances and partly on management
preference. An organisation structure can therefore be changed.
Required:
Using the Mintzberg’s five building blocks for organizational configurations, explain and illustrate with a diagram to the management of Bazar, why management needs to review its current organization structure in order to coordinate its business activities and work processes effectively.

Answer

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Tags: Business Processes, Mintzberg, Organizational Coordination, Organizational Structure, Strategic Apex
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: AUG 2022

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

Question

ISA 706 (Revised): Emphasis of Matter Paragraphs and Other Matter(s) paragraphs in the Independent Auditor’s Report requires that an auditor’s report may include an “emphasis of matter” paragraph and/or an “other matter” paragraph.

Required:
Distinguish between Emphasis of Matter and Other Matter paragraphs, showing clearly requirements of Audit Report and communication with those charged with governance.

Answer

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Tags: Audit report, Communication with Governance, Emphasis of Matter, ISA 706, Other Matter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

PT – Aug 2022 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Advise Ekumfi Fruit Processing on the conditions required for a VAT refund under the Value Added Tax Act, 2013.

Question

You are a student of taxation at Ebeyeyie Tax Education Institute. You have been contacted for tax advice by Ekumfi Fruit Processing Ghana Ltd. The company produces various kinds of fruit juices for both local and foreign markets. The Finance Director recently learned that the company can apply for VAT refund from the Ghana Revenue Authority (GRA) and has approached you for advice.
Required:
Advise the company on SIX (6) conditions that must be satisfied before the GRA may refund the excess VAT Input Tax to the company under the Value Added Tax Act, 2013 (Act 870), as amended. (9 marks)

Answer

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Tags: GRA, Input VAT, Tax Administration, Tax Refund Conditions, VAT Refund
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: AUG 2022

PT – Aug 2022 – L2 – Q1c – Income Tax Liabilities

Calculate interest for underestimation of tax for Vito Ltd for the 2019 year of assessment.

Question

The estimated chargeable income for Vito Ltd for the 2019 year of assessment was GH¢50,000,000, but its actual chargeable income declared at the end of the year was GH¢80,000,000. The company prepares accounts to 31 December each year. The company submitted its returns on 30 April, 2020. The BOG prevailing discount rate is 25%.

Required:
Calculate the interest for underestimation of tax.

Answer

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Tags: chargeable income, Income Tax, Interest calculation, Underestimation of Tax
Level: Level 2

Topic: Income Tax Liabilities
Series: AUG 2022

PT – Aug 2022 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

State five conditions that justify deficit financing by the government.

Question

Deficit financing is the budgetary situation where government expenditure is higher than government revenue. It is a practice adopted for financing the excess expenditure with external funding. Most governments both in the developed and developing world are having deficit budgets, and these deficits are often financed through borrowing.

Required:
State FIVE (5) conditions that would make it necessary for a government to support its budget through deficit financing. (5 marks)

Answer

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Tags: Budget Deficit, Deficit Financing, Fiscal Policy, Government Borrowing
Level: Level 2

Topic: Overview of the Ghanaian Tax System and Fiscal Policy
Series: AUG 2022

PT – Aug 2022 – L2 – Q1a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the "Benchmark Value Discount" policy in Customs Administration and how its withdrawal benefits local rice producers.

Question

The Finance Minister of Ghana during the 2022 budget presentation in Parliament announced the withdrawal of the “Benchmark Value Discount” policy on some imports. The President of the Professional Local Rice Growers Association (PLRGA) is elated about the announcement and has invited you, as a student studying taxation, to explain the concept of the Benchmark Value Discount policy to him.

Required:
Explain what the “Benchmark Value Discount” policy in Custom Administration is and how its withdrawal will be of much benefit to the President of the PLRGA.

Answer

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Tags: Benchmark Value Discount, Customs Administration, Import Duties, Local Production
Level: Level 2

Topic: Value-Added Tax (VAT), Customs, and Excise Duties
Series: AUG 2022

CR – Aug 2022 – L3 – Q5 – Analysis and interpretation of financial statements

This question requires writing a report that assesses the comparative performance of a company using various financial ratios (profitability, liquidity, efficiency, and gearing).

Question

Wadie Ltd has been in operation for the past ten years. The company started operations in Kumasi with just three employees, but currently operates in all regions of Ghana, with over five hundred employees.

The final meeting for the year of the Board of Directors of the company is to be convened, and as a tradition, the Finance Manager presented an analysis of the financial performance of the company for the financial year ended 31 December 2021. Below are the financial statements for the year ended 31 December 2021:

Statement of Comprehensive Income for the year 31 December

Additional Information:

i) Finance income relates to interest earned on the company’s investment in Government of Ghana loan notes.

ii) Dividend payable represents the dividend declared or approved by shareholders at the last Annual General Meeting.

Required:

As the Finance Manager of the company, write a report to the Board of Directors, assessing the comparative performance of the company for the year ended 31 December 2021. Your report should use THREE (3) profitability ratios, TWO (2) liquidity ratios, THREE (3) efficiency ratios, and TWO (2) gearing ratios.

Answer

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Tags: Efficiency, Financial Ratios, Gearing, Liquidity, Performance Analysis, Profitability
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: AUG 2022

CR – Aug 2022 – L3 – Q4c – Consolidated Financial Statements

This question discusses the consolidation implications of changes in group structure that do not result in a loss of control.

Question

Explain the consolidation implication of a change in group structure that does not result in a loss of control.

Answer

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Tags: Consolidation, Group Accounting, Group Structure, Non-Controlling Interest
Level: Level 3

Topic: Consolidated Financial Statements
Series: AUG 2022

CR – Aug 2022 – L3 – Q4b – Business Valuation

This question requires computing the valuation of Tinto Ltd using three different methods: the net assets method, the price-earnings ratio method, and the dividend growth method.

Question

Tinto Ltd produces handicrafts for both local and foreign markets. The company was incorporated several years ago. The shareholders of Tinto Ltd would now like to realize their investment. In order to arrive at an estimate of what they believe the business is worth, they have identified a long-established quoted company, Dingo Ltd, which has a similar business but produces for the European market only.

Summarized financial statistics for the two companies for the most recent financial year are as follows:

	Tinto Ltd	Dingo Ltd
Issued shares (million)	8	20
Net assets value (GH¢ ’million)	14.4	30
Earnings per share (GH¢)	0.35	0.28
Dividend per share (GH¢)	0.20	0.24
Debt: Equity ratio	1:7	1:6.5
Share price (as quoted on the stock market) – GH¢	–	1.60
Expected rate of growth in earnings/dividends	5%	5%

Additional Information:

The net assets of Tinto Ltd are the net book values of tangible non-current assets, including working capital. However:
- A recent valuation of the buildings was GH¢1,500,000 above book value.
- An investment held, which is designated as Equity Financial Asset at Fair Value through Profit or Loss with a carrying value of GH¢1,000,000, is fair valued at GH¢1,100,000.
- Due to a dispute with one of their clients, an additional allowance for bad debts of GH¢750,000 could prudently be made.
- An item of plant with a carrying value of GH¢800,000 is assessed to have a value-in-use of GH¢760,000 and fair value less cost to sell of GH¢780,000.
Growth rate should be assumed to be constant per annum. Tinto Ltd’s earnings growth rate estimate was provided by the marketing manager, based on expected growth in sales adjusted by normal profit margins. Dingo Ltd’s growth rates are gleaned from press reports.
The dividend yield of Dingo Ltd approximates its cost of equity.

Required:

Compute a range of valuations for the business of Tinto Ltd, using the information available and stating any assumptions made. Use the following methods for the valuation:

i) Net assets method (5 marks)
ii) Price-earnings method (3 marks)
iii) Dividend growth method (4 marks)

(Note: Ignore tax implications.)

Answer

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Tags: Business Valuation, Dividend Growth, Net Assets, Price/Earnings
Level: Level 3

Topic: Business valuations
Series: AUG 2022

CR – Aug 2022 – L3 – Q4a – Business Valuation

This question requires identifying three factors that influence the value of the Price-Earnings (P/E) ratio in business valuation.

Question

When acquiring an unquoted company in a takeover bid, the final price will be agreed by negotiation. However, the crucial role of the price-earnings ratio in arriving at the final price cannot be overemphasized.

Required:
State THREE (3) factors that are likely to influence the value of the price-earnings ratio.

Answer

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Tags: Investment decisions, Market Sentiment, Price-Earnings ratio, Valuation
Level: Level 3

Topic: Business valuations
Series: AUG 2022

CR – Aug 2022 – L3 – Q3c – Regulatory framework and ethics

This question discusses ethical breaches committed by staff members and the finance director related to cash management and accountability in Gogo Ltd.

Question

Mr. Ben Terkper, the Finance Director of Gogo Ltd, is known to be very strict in managing his staff and his dealings with other employees. A new product introduced by the company is yielding high sales. This has led to increases in cash shortages. In order to reduce the cash shortages, Management employed Hannah, a cousin of the Managing Director, Mr. Okantey.

It is the policy of the company to recover cash shortages made by cashiers by the end of the next working day. Over the years, Mr. Terkper has applied this policy without fear or favor. However, since her employment as a cashier, Hannah has made several cash shortages that have come to the attention of Mr. Terkper and Mr. Okantey. However, Hannah has never been asked to refund any of the cash shortages made so far. The financial statements for the year ended 31 December 2021 are being prepared, and Mr. Okantey has instructed Mr. Terkper to write off the losses made by Hannah.

Required:

i) Assess the possible ethical breaches committed by Hannah, Mr. Terkper, and Mr. Okantey. (4 marks)

ii) Recommend FOUR (4) possible actions that should be taken in dealing with the ethical breaches raised above. (6 marks)

Answer

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Tags: Ethical Breaches, Integrity, Objectivity, Professional competence
Level: Level 3

Topic: Regulatory Framework and Ethics
Series: AUG 2022

CR – Aug 2022 – L3 – Q3b – IFRS 15: Revenue from contracts with customers

This question focuses on the recognition of revenue from advance payments in line with IFRS 15 and explains the treatment for advance payment financing.

Question

Tieku Technologies (Tieku) imports customized equipment from Europe and China for onward delivery in Ghana. It is the policy of Tieku that customers make payment for their supplies one year before delivery. Tieku does not offer discounts for advance payments. The advance payment allows Tieku to manage its import levels and to communicate delivery of supply to its customers. On 1 April 2021, Tieku received GH¢5 million from a customer to supply a customized equipment, and on 31 March 2022, Tieku delivered the equipment. Tieku’s incremental borrowing rate on 1 April 2021 was 10%.

Required:

In line with IFRS 15: Revenue from Contracts with Customers, provide an explanation (with calculations and entries, if necessary) as to how the above scenario would be treated by Tieku during the year ended 31 March 2022. (5 marks)

Answer

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Tags: Advance Payments, Financial Liabilities, Revenue Recognition
Level: Level 3

Topic: IFRS 15: Revenue from contracts with customers
Series: AUG 2022

Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

PT – Aug 2022 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Advise Ekumfi Fruit Processing on the conditions required for a VAT refund under the Value Added Tax Act, 2013.

PT – Aug 2022 – L2 – Q1c – Income Tax Liabilities

Calculate interest for underestimation of tax for Vito Ltd for the 2019 year of assessment.

PT – Aug 2022 – L2 – Q1b – Overview of the Ghanaian Tax System and Fiscal Policy

State five conditions that justify deficit financing by the government.

PT – Aug 2022 – L2 – Q1a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the "Benchmark Value Discount" policy in Customs Administration and how its withdrawal benefits local rice producers.

CR – Aug 2022 – L3 – Q5 – Analysis and interpretation of financial statements

This question requires writing a report that assesses the comparative performance of a company using various financial ratios (profitability, liquidity, efficiency, and gearing).

CR – Aug 2022 – L3 – Q4c – Consolidated Financial Statements

This question discusses the consolidation implications of changes in group structure that do not result in a loss of control.

CR – Aug 2022 – L3 – Q4b – Business Valuation

This question requires computing the valuation of Tinto Ltd using three different methods: the net assets method, the price-earnings ratio method, and the dividend growth method.

CR – Aug 2022 – L3 – Q4a – Business Valuation

This question requires identifying three factors that influence the value of the Price-Earnings (P/E) ratio in business valuation.

CR – Aug 2022 – L3 – Q3c – Regulatory framework and ethics

This question discusses ethical breaches committed by staff members and the finance director related to cash management and accountability in Gogo Ltd.

CR – Aug 2022 – L3 – Q3b – IFRS 15: Revenue from contracts with customers

This question focuses on the recognition of revenue from advance payments in line with IFRS 15 and explains the treatment for advance payment financing.

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