Professional Body: ICA (Ghana)

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  • 5 Marks

SCS – Nov 2024 – L3 – Q5c – Board Independence and Accountability in Corporate Governance

Evaluation of how the governance structure at BOGML affects board independence and accountability.

There are a number of concepts of good corporate governance that every entity, including BOGML, must strive to adhere to.

Required:
Provide an evaluation of how the existing corporate governance structure at BOGML may undermine or compromise the following key concepts of good corporate governance, with particular reference to the current composition and organisation of the board.

i) Independence
ii) Responsibility and accountability

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  • 10 Marks

SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Evaluate the role of the board in corporate governance, focusing on responsibilities for strategy, oversight, and ethical leadership.

The role of the board of directors is critical in corporate governance. The National Corporate Governance Code for Ghana (the National Code) issued in November 2022 outlines the board’s core responsibilities.

Required:

Advise the board of BOGML on the FIVE key responsibilities of the board of directors as outlined in the National Code.

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  • 10 Marks

SCS – Nov 2024 – L3 – Q5b – Board Responsibilities in Corporate Governance

Identify and explain the five governance pillars in the National Corporate Governance Code for Ghana 2022.

It is evident that all is not well with the current corporate governance at BOGML. However, for the company to achieve sustainable growth and remain competitive, it must adhere to sound corporate governance principles.

Required:

Using the FIVE governance pillars identified in the National Corporate Governance Code for Ghana 2022 (the National Code), issued in November 2022 by the Institute of Directors-Ghana, advise the company on how to improve upon its current governance structure.

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  • 10 Marks

SCS – Nov 2024 – L3 – Q4c – Forward Rate Agreement for Interest Rate Risk Management

Calculation of settlement amount for FRA under different Ghana Reference Rate (GRR) scenarios.

The company has decided to use a Forward Rate Agreement (FRA) to manage its interest rate risk likely to arise from the short-term loan of GH¢15 million it intends to borrow in three months for a period of six months.

Required:

i) What is the purpose for a company to enter into an FRA arrangement? (2 marks)

ii) Calculate the amount of money that will be paid to settle the FRA at the beginning of the FRA period if, at the end of month 3, when the FRA becomes effective, the six-month Ghana Reference Rate (GRR) is as follows:

a) 37.50%
b) 28.50%

In each case, clearly state the party (i.e. FRA buyer or FRA seller) responsible for making the payment.

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  • 5 Marks

SCS – Nov 2024 – L3 – Q4b – International Tax Considerations

Key tax issues for BOGML’s planned international expansion to minimize total group tax payable.

The company is planning to expand its operations to Tanzania and South Africa in 2026. As a result, transactions between the head office in Ghana and the prospective foreign subsidiaries will likely take place, leading to potential international tax implications.

Required:

Briefly identify and explain TWO key issues to consider for the company to minimise total tax payable on the group profits.

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  • 5 Marks

SCS – Nov 2024 – L3 – Q4a – Capital Budgeting Framework

Explanation of the five key elements in the capital budgeting framework for investment appraisal.

One of the Board members, Dr. Halimatu Sadia, has expressed concerns regarding Dr. Ayimadu Baffour’s consistent failure to conduct investment appraisals and capital budgeting when making long-term investment decisions.

Required:

Advise Dr. Ayimadu Baffour on the capital budgeting and strategic planning framework used for conducting investment appraisals by briefly outlining the FIVE key elements of the framework.

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  • 20 Marks

SCS – Nov 2024 – L3 – Q3a-b – SBUs and Growth Phases

Evaluate BOGML’s SBUs using Ashridge Matrix and analyse growth phases with Greiner’s Model.

a) The company has presented information on the various products and services (i.e. the strategic business units (SBUs)) within the company’s portfolio.

Required:
Using Ashridge Portfolio Display Matrix and based on the performance of each SBU, clearly classify and explain the products and services under appropriate categories identified by the matrix. Support your answer with Ashridge Portfolio Display Matrix.

b) Since its inception, BOGML has grown organically and has gone through different stages of development in response to the challenges of growth and changes in both its internal and external environments. The company is currently under pressure to continue evolving.

Required:

i) Identify and describe the first two phases of growth applicable to BOGML based on Greiner’s Growth Model. In your explanation, include the type of crisis the company faced at each phase.

ii) The board has proposed appointing Regional Managers who will be responsible for the sales performance of the company’s filling and gas stations in their regions. If this proposal is implemented, it will move the company to the next phase in Greiner’s Growth Model. Identify and explain what this next phase is, and describe the potential crisis that may arise at this stage.

C 

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  • 5 Marks

SCS – Nov 2024 – L3 – Q2b – Integration/Responsiveness Matrix and Cost Reduction

Advising BOGML’s MD on the best international strategies under the IR Matrix to achieve cost reduction in expansion.

The Board of BOGML has approved the Managing Director’s proposal to expand operations into Tanzania and South Africa by 2026. A key strategic focus of the company has been cost reduction, due to the narrow profit margins prevalent in the industry.

Required:
Using the Integration/Responsiveness (IR) Matrix, advise Dr. Ayimadu Baffour on the two most suitable international strategies/choices that have a low requirement for local responsiveness but can effectively support his cost reduction objectives. Clearly identify and explain the two strategies within the IR Matrix that prioritize cost reduction.

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  • 5 Marks

SCS – Nov 2024 – L3 – Q2a – Approaches to Risk Management

Discusses risk management approaches to address identified risks in BOGML.

Approaches to risk management in BOGML – Advice to the board of directors

The following are the risk management approaches that the board of BOGML can adopt to manage the following risks identified in the company:

Risk A

  • Description: Low probability but high impact, e.g., pandemics, natural disasters.
  • Approach: Risk Transfer or Risk Sharing
  • Since this risk has a low likelihood of occurring but can result in severe financial losses, the company should consider transferring this risk or sharing risk. This can be done through the company taking full or partial (i.e. sharing of risk) insurance policies specifically designed for catastrophic events, such as business interruption insurance, pandemic insurance, or property insurance that covers natural disasters. Since the impact will be high when the risk occurs, the company can take insurance to pass on the high impact on the company to the insurance company which has to compensate BOGML in the event that the risk does occur.
  • The risk could also be shared through BOGML forming partnerships and collaborating with other OMCs to undertake investment in their oil stations.
  • The company should also develop a disaster recovery and business continuity plan to manage potential impacts effectively.

Risk B

  • Description: High likelihood but low financial impact, e.g., labor turnover and software downtime due to internet instability.

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  • 8 Marks

SCS – Nov 2024 – L3 – Q1b – Digital Challenges in Accounting

Discuss the challenges of digital transformation in accounting, covering cybersecurity, compliance, and ethical concerns.

In the contemporary business landscape, the integration of digital technologies presents multifaceted challenges for accounting professionals, particularly in the areas of digital transition, cybersecurity, regulatory compliance, and ethical decision-making. Explain each of these challenges.

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  • 7 Marks

PSAF – Nov 2024 – L2 – Q2a – Valuation of Legacy Fixed Assets

Valuation and accounting treatment of legacy fixed assets in compliance with IPSAS.

The Ministry of Indigenous Enterprises has been charged to collect legacy fixed assets data and value them in accordance with International Public Sector Accounting Standards (IPSAS). The Fixed Assets Coordinating Unit (FACU) of the Ministry has collected for valuation the following data for your action:

The Ministry owns a four (4) storey Office Administration block. The average cost per floor is GH¢4,741,256.25. The building was constructed on a land size of 20 plots of land owned by the Ministry. Currently, a plot of land in that area costs GH¢2,500,000. The FACU has measured the sizes of the building as follows:

  • Length: 87.5 meters
  • Width: 42.65 meters
  • Reference Price per Square Meter: GH¢4,432

However, a professional body, the Institute of Architects and Engineers, has given the reference price for the cost of such an office building at an estimated price of GH¢87,965,025. The building has not seen any further facelift ever since. However, a fence wall with a gate to enforce security and secure the land has just been completed in the current year at a cost of GH¢8,970,000 with a lifespan of 50 years.

The year of construction of the office building could not be determined, yet an old watchman who had been there for ages remembers that the building was constructed some 42 years ago, a time when his seventh child was born. It is the decision of the Government of Ghana on the adoption of IPSAS not to take advantage of the three-year exemption period but to account for legacy fixed assets by taking 60% of the reference cost of the legacy assets as the deemed cost, with a reduced lifespan of 30 years.

Required:

i) Calculate the cost of the land and buildings with structures to be brought into the books on the adoption of IPSAS and determine the depreciation chargeable in the first year in respect of these assets.                                                                                              ii) Show the extract of Statement of Financial Position of the Ministry of Indigenous
Enterprises as at that date

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  • 9 Marks

PSAF – Nov 2024 – L2 – Q1b – Statement of Financial Position for Paja Teaching Hospital

Prepare a Statement of Financial Position for Paja Teaching Hospital as at 31 December 2023 in compliance with IPSAS and government regulations.

Prepare a Statement of Financial Position of Paja Teaching Hospital as at 31 December 2023 in compliance with IPSAS, the PFM Act, and the Chart of Accounts of the Government of Ghana.

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  • 8 Marks

PSAF – Nov 2024 – L2 – Q1a – Financial Statements Preparation

Prepare the Statement of Financial Performance for Paja Teaching Hospital following IPSAS guidelines.

Below is a Trial Balance of Paja Teaching Hospital (PTH) under the Ministry of Health for the year ended 31 December 2023.

Debit (GH¢000) Credit (GH¢000)
Cash and Bank – GoG 3,400
Cash and Bank – IGF 72,200
Cash and Bank – Donor Funds 210,400
Undeposited Cash – IGF 4,000
Petty Cash 100
Investments 2,000
Debtors 661,400
Other Receivables 17,700
Withholding Tax
Trust Funds
Trade Payables
GoG Subsidy – Employee Compensation
GoG Subsidy – Goods & Services
Development Partners Programmes Receipt
Other Non-Operating Income
Medicines & Pharmaceuticals 433,900
Surgical 50,800
Medical 111,400
Investigation 140,900
OPD 238,400
Obstetrics and Gynaecology 135,300
Dental 8,300
Pediatrics 40,300
Ear, Nose & Throat 5,300
Eye Care 7,300
Mortuary 30,000
Ambulance Fees 300
Ophthalmology 3,000
Physiotherapy 3,300
Examination Fees 200
Dialysis 400
Feeding 30,400
Employee Compensation – GoG 3,912,500
Goods & Services – GoG 20,800
Employee Compensation – IGF 148,000
Goods & Services – IGF 978,500
Capital Expenditure – IGF 27,500
Goods & Services – Partners Fund 472,400
Accumulated Fund
Total 6,530,900

Additional Information:

  1. The hospital previously used modified accrual accounting but switched to IPSAS accrual basis in 2023.
  2. The hospital revalued legacy assets as follows:
    • Motor Vehicles: GH¢50,250,000
    • Buildings: GH¢120,540,000
    • Medical Equipment & Other Equipment: GH¢31,500,000
    • Land: GH¢15,000,000
  3. Gavi supported the hospital with GH¢200,000,000 in 2023, but 20% was allocated for Q1 of 2024. The Global Fund committed GH¢250,000,000, but only GH¢200,000,000 was received.
  4. NHIA rejected 10% of the hospital’s total claims of GH¢100,300,000.
  5. Parliament approved a write-off of GH¢20,225,000 for unpaid hospital services.
  6. The capital expenditure consists of:
    • Medical Equipment: GH¢19,236,000
    • Furniture & Fittings: GH¢8,264,000
  7. Depreciation Policy (Straight-Line Basis):
    • Building: 5%
    • Motor Vehicle: 20%
    • Medical Equipment: 10%
    • Furniture & Fitting: 25%
  8. Year-end inventory values:
Inventory Type Cost (GH¢000) Replacement Cost (GH¢000) Net Realisable Value (GH¢000)
Medicines (for resale) 146,800 176,100 132,100
Medical Consumables (For use on clients) 29,400 33,800 30,800
Office Consumables 19,600 29,400 18,600

Required:

In compliance with IPSAS, the PFM Act, and the Government of Ghana Chart of Accounts, prepare:
a) A Statement of Financial Performance for Paja Teaching Hospital for the year ended 31 December 2023.

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  • 5 Marks

PT- Nov 2024 – L2 – Q5d – Data Analytics in Taxation

Explain how data analytics can be used to detect tax evasion and provide examples of how GRA might use data analytics to enhance tax compliance.

GRA’s use of data analytics has become increasingly important in identifying tax evasion and improving compliance.

Required:
i) Explain how data analytics can be used to detect tax evasion. 
ii) Provide TWO examples of how GRA might use data analytics to enhance tax compliance.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5c – E-Auditing and Tax Compliance

Explain e-auditing, its differences from traditional tax audits, and discuss advantages for taxpayers and tax authorities.

The integration of Information Technology in tax administration has enabled the Ghana Revenue Authority (GRA) to adopt e-auditing processes, allowing for the remote examination of taxpayers’ records.                                                                                                      Required:
i) Describe the process of e-auditing and how it differs from traditional tax audits. 
ii) Discuss TWO advantages of e-auditing for both the taxpayer and the tax authority.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5b – Withholding Tax & VAT Calculation

Compute VAT and direct tax withheld on a taxable supply of medical consumables to a tax withholding agent.

Charley Chemist LTD made a taxable supply of medical consumables amounting to GH¢750,000 exclusive of VAT and levies on 23 November 2023 to the University of Ghana Medical Centre. The University of Ghana Medical Centre is a withholding tax agent for both VAT withholding and Direct Tax withholding.

Required:
i) Compute the amount of VAT withheld by the University of Ghana Medical Center. 
ii) Compute the amount of direct tax withheld by the University of Ghana Medical Centre.

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  • 5 Marks

PT – Nov 2024 – L2 – Q5a – Notification to Commissioner-General for Non-Resident Contracts

Requirements for notifying the Commissioner-General when a resident contracts a non-resident.

For the purpose of withholding tax, the Income Tax Act, 2016 (Act 896) requires a resident person who enters into a contract with a non-resident person which gives rise to income from Ghana to notify the Commissioner-General within thirty (30) days.

Required:

State the items that must be detailed in the notification to the Commissioner-General.

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  • 2 Marks

PT – Nov 2024 – L2 – Q4c – Tax Treatment of Repairs and Renovations

Explains the tax treatment of repairs and renovations for businesses.

Question:
Repairs are essential for maintaining the safety of a property, and renovation improves the overall functionality of a property.

Required:
What is the tax treatment of repairs and renovations?

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  • 3 Marks

PT – Nov 2024 – L2 – Q4b – Tax Implication of Gift under Income Tax Act

Advise on the tax implications of receiving a gift from a spouse under the Income Tax Act.

Madam Tanaa is an employee of Tapoli Brewery Ghana LTD. Her husband, who is a retired staff of Tapoli Brewery LTD, gifted her a brand-new Toyota Camry costing GH¢270,000 on their 20th wedding anniversary. Madam Tanaa is worried about the tax implication of the gift and has approached you as a student learning tax at the Institute of Chartered Accountants, Ghana.

Required:
Advise Madam Tanaa on the tax implications of the gift of a Toyota Camry she received from her husband on their wedding anniversary, including the various options available to her.

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  • 10 Marks

PT – Nov 2024 – L2 – Q4a – Chargeable Income Computation

Compute the chargeable income and tax payable for Amasa Architecture and Building LTD for the 2022 and 2023 years of assessment.

Amasa Architecture and Building LTD has been in business for the past seven years. The following information relates to the company’s operations for the years ending 31 December 2022 and 2023.

DETAILS 2022 (GH¢) 2023 (GH¢)
Profit before tax 795,000 2,110,000
Provision for Depreciation 230,000 115,000
Donation to Manhyia Children Home (Approved by Social Welfare Department) 350,000 210,000
Donation towards 2023 Adae Kese Festival 105,000 150,000
Capital allowance agreed with the Ghana Revenue Authority 1,500,000 1,700,000
Withholding tax paid as contained in certificates received 10,000 25,000

Required:
Using the information provided above, compute the chargeable income and tax payable by Amasa Architecture and Building LTD for the years of assessment 2022 and 2023.

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