Topic: Introduction to Corporate Reporting

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  • 15 Marks

CR – May 2015 – L3 – Q5 – Introduction to Corporate Reporting

Discuss the need for IFRS for SMEs and evaluate simplified recognition principles for reducing reporting burdens on Jossy Limited.

International Financial Reporting Standards (IFRS) for Small and Medium-Sized Entities (SMEs)

International Financial Reporting Standards (IFRS) for small and medium size entities (SMEs) was mandatorily adopted in Nigeria as at January 1, 2014. Entities that do not meet the IFRS for SME criteria shall report using Small and Medium Size Entities Guidelines on Accounting (SMEGA).

Jossy Limited has total costs excluding land of two-hundred million naira. Being a family business, the labor force totaled 150 workers with an annual turnover of N18 million. The management of this company sought your advice to have better understanding of some of the recognition and measurement principles of SMEs.

Required:
(a) Justify the need for IFRS for SMEs financial statements. (6 Marks)
(b) Assess the circumstances of Jossy Limited and advise on the principal recognition and measurement principles that will reduce the company’s reporting burden. (9 Marks)

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  • 20 Marks

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Ehis Marvel, a public company, is a high street retailer that sells clothing and food. The managing director is very disappointed with the current year’s result. The company expanded its operations and commissioned a famous designer to restyle its clothing products. This has led to increased sales in both retail lines, yet overall profits are down.

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Required:
Write a report analysing the financials of Ehis Marvel Plc, utilising the above ratios and the information in the statement of cash flows for the two years ended March 31, 2016. Your report should refer to the relative performance of the clothing and food sales and be supported by any further ratios you consider appropriate.

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  • 9 Marks

CR – Nov 2014 – L3 – SC – Q6b – Introduction to Corporate Reporting

Evaluate Luck & Co's financial position and recommend restructuring options to address going concern threats.

Scenario:
Luck & Co. has been making losses over the last few years. Its statement of financial position at 31 December, 2013, showed the following:

Statement of Financial Position as at 31 December, 2013

Assets N
Property, plant, and equipment 80,000
Inventory 20,000
Receivables 40,000
Total Assets 140,000
Equity and Liabilities N
Ordinary Capital 100,000
Retained Earnings (140,000)
Secured Loan Stock 100,000
Payables 80,000
Total Equity & Liabilities 140,000

On liquidation, the assets would realise the following:

Assets N
Property, plant, and equipment 30,000
Inventory 12,000
Receivables 36,000
Total Realisable Value 78,000

If the company continues to trade for the next four years, profit after charging N20,000 per annum as depreciation on the property, plant and equipment would be as follows:

Year Profit (N)
2014 4,000
2015 20,000
2016 26,000
2017 28,000
Total 78,000

Assume that there would be no surplus cash to settle the payables and loan stock holders until after four years when inventory and receivables could be realised at their book values.

Required:

Evaluate the financials and advise the management of Luck & Co on the options available to them and redraft the statement of financial position of Luck & Co after the exercise. (9 Marks)

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  • 6 Marks

CR – Nov 2014 – L3 – SC – Q6a – Introduction to Corporate Reporting

Evaluate factors indicating going concern threats and propose financial restructuring solutions.

An entity is normally viewed as a going concern. It is assumed that the entity has neither the intention nor the desire of liquidation or of curtailing materially the scale of its operations.

However, if the going concern is threatened, the financial statements would be prepared on a different basis.

Required:

State the factors that indicate an organisation may no longer be a going concern under the following categories:
(i) Financial (ii) Operational (iii) Legal or regulatory (6 Marks)

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  • 15 Marks

CR – Nov 2014 – L3 – SC – Q5 – Introduction to Corporate Reporting

Evaluate IFRS management commentary requirements and their relevance in financial reporting.

Critics of traditional corporate financial reporting under Generally Acceptable Accounting Practice (GAAP) argue that financial statements alone are not considered sufficient without a narrative that provides a context within which to interpret the financial position, financial performance, and cash flows of an entity.

A financial expert within the board of Abcon Kombe Plc, aware of the above criticism, has proposed that Abcon Kombe Plc should include in its financial statements, management commentary to satisfy the numerous analysts that use its annual reports.

Required:

(a) Advise the Board on FIVE elements of information which IFRS Practice Statement expects to be included in management commentaries to meet its objectives. (5 Marks)

(b) Relate the FIVE elements of information above to the needs of the various primary users. (7 Marks)

(c) Justify why management commentaries should be made compulsory in Nigeria’s financial reporting environment. (3 Marks)

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  • 15 Marks

CR – Nov 2021 – L3 – Q7 – Introduction to Corporate Reporting

Evaluate prudence reintroduction, revised asset and liability definitions in the Conceptual Framework.

The Conceptual Framework 2010 was criticized for its lack of clarity, the exclusion of certain important concepts, and for being outdated in terms of the IASB’s current thinking. The revised Conceptual Framework 2018 includes some new concepts such as prudence, provides updated definitions and recognition criteria for assets and liabilities, and clarifies some important concepts in a well-arranged eight chapters. Chapter four of the revised Conceptual Framework 2018 on elements of financial statements redefined some basic elements and concepts.

Required:

a. Evaluate the arguments for and against re-introduction of prudence into the Conceptual Framework.
(7 Marks)

b. Identify TWO of the concepts (Asset and Liability) which definitions were revised and justify the reasons for revised definitions.
(8 Marks)

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  • 15 Marks

CR – Nov 2023 – L3 – SC – Q5 – Introduction to Corporate Reporting

Explain digital transformation in finance and the inclusion of social responsibility reporting requirements and benefits.

a. Digital transformation in the finance and accounting industry was accelerated by the technological development following the COVID-19 pandemic, which reshaped business models and organizations globally. For many organizations, the impetus to full digital adoption and transformation was a major enabler for survival and growth.

Required:
Identify and explain various ways in which finance executives can embrace digital transformation in accounting, financial, and corporate reporting.
(10 Marks)

b. Westham PLC is a multinational energy group recently quoted on the Nigerian Exchange Limited (NGX) and the London Stock Exchange (LSE). Among its many activities, the group operates an oil refinery in Nigeria, a nuclear waste disposal facility in South Africa, and a coal extraction facility in Kenya.

The finance director of Westham PLC is aware that other companies in similar sectors are including social responsibility and environmental reports as part of their corporate annual reports.

Required:
i. Identify and explain the requirements for including this type of information in corporate annual reports in Nigeria.
(2 Marks)

ii. Discuss the benefits of publishing social and environmental reports.
(3 Marks)

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  • 15 Marks

CR – May 2015 – L3 – Q5 – Introduction to Corporate Reporting

Discuss the need for IFRS for SMEs and evaluate simplified recognition principles for reducing reporting burdens on Jossy Limited.

International Financial Reporting Standards (IFRS) for Small and Medium-Sized Entities (SMEs)

International Financial Reporting Standards (IFRS) for small and medium size entities (SMEs) was mandatorily adopted in Nigeria as at January 1, 2014. Entities that do not meet the IFRS for SME criteria shall report using Small and Medium Size Entities Guidelines on Accounting (SMEGA).

Jossy Limited has total costs excluding land of two-hundred million naira. Being a family business, the labor force totaled 150 workers with an annual turnover of N18 million. The management of this company sought your advice to have better understanding of some of the recognition and measurement principles of SMEs.

Required:
(a) Justify the need for IFRS for SMEs financial statements. (6 Marks)
(b) Assess the circumstances of Jossy Limited and advise on the principal recognition and measurement principles that will reduce the company’s reporting burden. (9 Marks)

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  • 20 Marks

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Ehis Marvel, a public company, is a high street retailer that sells clothing and food. The managing director is very disappointed with the current year’s result. The company expanded its operations and commissioned a famous designer to restyle its clothing products. This has led to increased sales in both retail lines, yet overall profits are down.

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Required:
Write a report analysing the financials of Ehis Marvel Plc, utilising the above ratios and the information in the statement of cash flows for the two years ended March 31, 2016. Your report should refer to the relative performance of the clothing and food sales and be supported by any further ratios you consider appropriate.

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  • 9 Marks

CR – Nov 2014 – L3 – SC – Q6b – Introduction to Corporate Reporting

Evaluate Luck & Co's financial position and recommend restructuring options to address going concern threats.

Scenario:
Luck & Co. has been making losses over the last few years. Its statement of financial position at 31 December, 2013, showed the following:

Statement of Financial Position as at 31 December, 2013

Assets N
Property, plant, and equipment 80,000
Inventory 20,000
Receivables 40,000
Total Assets 140,000
Equity and Liabilities N
Ordinary Capital 100,000
Retained Earnings (140,000)
Secured Loan Stock 100,000
Payables 80,000
Total Equity & Liabilities 140,000

On liquidation, the assets would realise the following:

Assets N
Property, plant, and equipment 30,000
Inventory 12,000
Receivables 36,000
Total Realisable Value 78,000

If the company continues to trade for the next four years, profit after charging N20,000 per annum as depreciation on the property, plant and equipment would be as follows:

Year Profit (N)
2014 4,000
2015 20,000
2016 26,000
2017 28,000
Total 78,000

Assume that there would be no surplus cash to settle the payables and loan stock holders until after four years when inventory and receivables could be realised at their book values.

Required:

Evaluate the financials and advise the management of Luck & Co on the options available to them and redraft the statement of financial position of Luck & Co after the exercise. (9 Marks)

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  • 6 Marks

CR – Nov 2014 – L3 – SC – Q6a – Introduction to Corporate Reporting

Evaluate factors indicating going concern threats and propose financial restructuring solutions.

An entity is normally viewed as a going concern. It is assumed that the entity has neither the intention nor the desire of liquidation or of curtailing materially the scale of its operations.

However, if the going concern is threatened, the financial statements would be prepared on a different basis.

Required:

State the factors that indicate an organisation may no longer be a going concern under the following categories:
(i) Financial (ii) Operational (iii) Legal or regulatory (6 Marks)

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  • 15 Marks

CR – Nov 2014 – L3 – SC – Q5 – Introduction to Corporate Reporting

Evaluate IFRS management commentary requirements and their relevance in financial reporting.

Critics of traditional corporate financial reporting under Generally Acceptable Accounting Practice (GAAP) argue that financial statements alone are not considered sufficient without a narrative that provides a context within which to interpret the financial position, financial performance, and cash flows of an entity.

A financial expert within the board of Abcon Kombe Plc, aware of the above criticism, has proposed that Abcon Kombe Plc should include in its financial statements, management commentary to satisfy the numerous analysts that use its annual reports.

Required:

(a) Advise the Board on FIVE elements of information which IFRS Practice Statement expects to be included in management commentaries to meet its objectives. (5 Marks)

(b) Relate the FIVE elements of information above to the needs of the various primary users. (7 Marks)

(c) Justify why management commentaries should be made compulsory in Nigeria’s financial reporting environment. (3 Marks)

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  • 15 Marks

CR – Nov 2021 – L3 – Q7 – Introduction to Corporate Reporting

Evaluate prudence reintroduction, revised asset and liability definitions in the Conceptual Framework.

The Conceptual Framework 2010 was criticized for its lack of clarity, the exclusion of certain important concepts, and for being outdated in terms of the IASB’s current thinking. The revised Conceptual Framework 2018 includes some new concepts such as prudence, provides updated definitions and recognition criteria for assets and liabilities, and clarifies some important concepts in a well-arranged eight chapters. Chapter four of the revised Conceptual Framework 2018 on elements of financial statements redefined some basic elements and concepts.

Required:

a. Evaluate the arguments for and against re-introduction of prudence into the Conceptual Framework.
(7 Marks)

b. Identify TWO of the concepts (Asset and Liability) which definitions were revised and justify the reasons for revised definitions.
(8 Marks)

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  • 15 Marks

CR – Nov 2023 – L3 – SC – Q5 – Introduction to Corporate Reporting

Explain digital transformation in finance and the inclusion of social responsibility reporting requirements and benefits.

a. Digital transformation in the finance and accounting industry was accelerated by the technological development following the COVID-19 pandemic, which reshaped business models and organizations globally. For many organizations, the impetus to full digital adoption and transformation was a major enabler for survival and growth.

Required:
Identify and explain various ways in which finance executives can embrace digital transformation in accounting, financial, and corporate reporting.
(10 Marks)

b. Westham PLC is a multinational energy group recently quoted on the Nigerian Exchange Limited (NGX) and the London Stock Exchange (LSE). Among its many activities, the group operates an oil refinery in Nigeria, a nuclear waste disposal facility in South Africa, and a coal extraction facility in Kenya.

The finance director of Westham PLC is aware that other companies in similar sectors are including social responsibility and environmental reports as part of their corporate annual reports.

Required:
i. Identify and explain the requirements for including this type of information in corporate annual reports in Nigeria.
(2 Marks)

ii. Discuss the benefits of publishing social and environmental reports.
(3 Marks)

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