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  • 20 Marks

ITF – OCT 2022 – L3 – Q7 – Role of Banks in International Trade

List the roles of banks in international trade in bullet points for SMEs under AfCFTA.

The African Continental Free Trade Area (AfCFTA) is organizing training programs to grow the Small and Medium-sized Enterprises (SMEs) and most importantly to deepen their understanding on international trade and how they can take advantage of the banking system for efficient operation and expansion of their businesses. As Head of Trade Finance of your bank, you have been engaged as a resource person by (AfCFTA) to take Chief Operating Officers of these SMEs on the following topic: “The Role of Banks in International Trade”

REQUIRED:

List these roles (in bullet points only) under the various roles for one mark each.

Note: Long and detailed descriptions are not required.

[Total marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q3 – Hedging Export Proceeds with Forward Contracts and Extension

Calculate foreign currency amounts from export contracts, applicable forward rates, GHS credited from received currencies, and close out/extend the New Zealand transaction to show total GHS received.

Agribusiness Plc. is a large corporate in the commodity industry specializing in mango production around Somanya and Afram Plains. After surviving the Covid-19 pandemic, which nearly collapsed the company, Agribusiness is on its feet firmly and now leading the export of fresh mangoes in the West African sub-region. Taking advantage of the African Continental Free Trade

Area (AfCFTA), the company is now looking beyond its European buyers to meet the demand needs of other African countries.

Last week, the Chief Executive Officer and the Chief Operating Officer invited you to their warehouse to discuss their export contracts with you. Both you and your customers were very happy because this transaction will enable them to start paying off the loan facilities your bank has extended to them. These four contracts are for the export of 20 tons of fresh mangoes to

Switzerland, New Zealand, Zambia and Botswana in the ratios of 0.35; 0.30; 0.15 and 0.20 respectively. One month after the meeting at the warehouse, Agribusiness engaged Sintim Freight Forwarders to handle the export orders to the buyers. Goods were eventually shipped and related documents submitted through your counters for payments which were expected in exactly one month’s time in Ghana Cedi for your customer’s account. On 1st September, the company entered into one-month forward exchange contract with your bank to hedge their eventual expected proceeds.

Price per ton at CIF values to their respective destinations are:

Switzerland                           New Zealand                                 Zambia                                   Botswana
CHF 3, 410                            NZD 5, 783                                  ZMW 58, 765                          BWP 44, 970

September 1st rates quoted by your bank are as follows:

Spot Rates                                                              One Month Forward

CHF/GHS 8.2350 – 8.2365                                0.047 – 0.053 Cedis dis.

NZD/GHS 4.8610 – 4.8625                                0.023 – 0.032 Cedis dis.

USD/GHS 7.8530 – 7.8545                                0.032 – 0.040 Cedis dis.

GHS/ZMW 2.1000 – 2.1015                               0.025 – 0.035 Kwa. dis.

GHS/BWP 1.5715 – 1.5725                                  0.040 – 0.053 Pula. dis.

October 1st Spot Rate One Month Forward

USD/GHS 7.8450 – 7.8465              0.35 – 0.45 Cedis dis.

NZD/GHS 4.8590 – 4.8610             0.018 – 0.022 Cedis dis

All the expected export proceeds were received by your bank on due date except the one from New Zealand where the buyer could not clear the goods due to problems at Port Nicholson, Wellington. Agribusiness has accordingly extended the forward contract by one month with your bank.

REQUIRED

a. Calculate the amount of foreign currency from each buyer. [4 marks]

b. Calculate the applicable forward rates. [8 marks]

c. Calculate the amount credited to your customer’s GHS account from the foreign currencies received on their behalf. [4 marks]

d. Close out and extend the New Zealand transaction and show the total GHS your customer received under the four export contracts. [4 marks]

[Total Marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q1 – Financing Export Transaction with Bill of Exchange and FX Risk Protection

Advise on methods to protect from FX risks for an export to South Africa using bill of exchange, outline contractual obligations, calculate proceeds and cedis from forward and currency borrowing, and formula to compare borrowing costs.

Your customer, Adonteng Traders Limited has finished all the registration formalities to take advantage under the new continental trading booming in Africa. Specializing in export of food throughout the continent, Adonteng Traders have negotiated with South African buyers for supply of assorted foodstuff. The arrangement allows them to draw bill of exchange on buyers immediately after shipment for full payment after 90 days. Because of restricted profit margins over the past few months due to the Russian-Ukraine problem, and a shortage of working capital, the customers called to see you on 30 March to seek your advice on how best they can finance this transaction worth USD250, 000 falling due on 30 June. The credibility of the South African buyers is highly undoubted. Adonteng Traders are seeking funding from your bank for three months in either Ghana Cedi equivalent or USD250, 000 and would pay off when final proceeds are due from the buyers. Additional information available on 30 March is as follows:

(i) USD/GHS

Spot    7.7120        7.7160

1 month forward      0.035       0.043       Cedis disc

2 months forward    0.051       0.063      Cedis disc

3 months forward    0.060      0.065      Cedis disc

(ii) Base rate is 19.0%

(iii) US 3 month LIBOR rate is 5.25%

(iv) Adonteng Traders is borrowing dollars from your US correspondent bank at 1.5% over US LIBOR rate.

(v) For interest on USD borrowing, kindly use mid-rate to convert.

(vi) Your customers do not purchase goods for which they have to pay in foreign currency.

REQUIRED:

(a) By what methods can your customers be protected from foreign exchange risks whilst preserving their profit margins? [2 marks]

(b) Outline any contractual obligations in respect of foreign exchange that your customers would have to undertake. [2 marks]

(c) Show by calculation the proceeds of each method proposed in the answer to

(a) above, and the cedis proceeds which each method would produce, stating which of the two options is better for Adonteng Traders. [10 marks]

(d) Set out a formula which your customers would use to compare cedis and foreign

currency borrowing costs, taking into account, where appropriate, the advantages or disadvantages of forward cover. [6 marks]

Notes: (2) Base your calculations on a 30 day month and a 360 day year.

[Total Marks 20]

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  • 20 Marks

SMM – APR 2023 – L4 – Q2 – Standardization of International Promotional Campaigns

Explain three objectives for standardizing a bank's international promotional campaign and three reasons against standardization in the context of expanding to an African country under AfCFTA.

Promotion strategies communicate to the market the potential benefits of the product accruing from its design, distribution and price attributes. In international marketing, a complete standardization of all aspects of a promotional campaign is rarely possible. In your role as Head of Marketing and Corporate Affairs of a Bank planning to expand to an African country to take an advantage of The African Continental Free Trade Area (AfCFTA) initiative, your Managing Director has asked you to submit a paper explaining three main objectives for standardizing the Bank’s international promotional campaign, and three reasons why the promotional campaign should not be standardized. (20 marks)

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  • 20 Marks

ATAX – May 2021 – L3 – Q3 – Taxation of Mergers and Acquisitions

Explaining acquisitions versus mergers, outlining tax implications for companies, and evaluating AfCFTA's impact on transactions.

The price of crude oil had fallen from over US$100 per barrel in the past few years to under US$40 per barrel recently in the international market. This has resulted in squeezed margins despite efforts to cut costs.

Krude Explora Nigeria Limited, an indigenous oil servicing company operating in the oil and gas sector for 23 years, faces a going concern risk due to falling profitability and liquidity challenges. It is probable that the company will default on its loan facility of US$122.5 million from B2B Energy Bank Plc. If this happens, the company will likely be taken over by Asset Management Corporation of Nigeria (AMCON).

Coincidentally, Wakanda Oil Exploration Limited, a multinational oil servicing company operating across Africa and the Middle East, has just sent an offer to acquire Krude Explora Nigeria Limited. The proposed acquisition will solve the liquidity problems in the short term, while efficiency and scale from the acquisition will hopefully return the company to profitability.

As the lead tax advisor for the proposed transaction, you are required to:

a. Explain the term “acquisition” as compared to a “merger” and give one example each of a recent merger and acquisition in the Nigerian petroleum industry. (4 Marks)

b. Outline and explain briefly the areas that may have tax implications for:
i. Krude Explora Nigeria Limited (4 Marks)
ii. Wakanda Oil Exploration Limited (4 Marks)

c. Discuss the likely impact of the African Continental Free Trade Area agreement and the local economy on a proposed acquisition or merger. (7 Marks)

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  • 10 Marks

SCS – Dec 2022 – L3 – Q4a – Strategy implementation

Evaluate non-financial factors affecting TCWL’s strategic expansion using Johnson and Scholes’ model.

TCWL plans to expand to Kenya and South Africa to produce for Eastern and Southern Africa markets respectively. This move is largely influenced by the Africa Continental Free Trade Agreement (AfCFTA) which was launched in July 2020. This strategic direction would require substantial investments to upgrade production facilities to meet the new market demand.

Required:

Using Johnson and Scholes suitability/feasibility/acceptability model, evaluate the non-financial factors that could influence the success of this strategic decision. (10 marks)

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  • 20 Marks

ITF – OCT 2022 – L3 – Q7 – Role of Banks in International Trade

List the roles of banks in international trade in bullet points for SMEs under AfCFTA.

The African Continental Free Trade Area (AfCFTA) is organizing training programs to grow the Small and Medium-sized Enterprises (SMEs) and most importantly to deepen their understanding on international trade and how they can take advantage of the banking system for efficient operation and expansion of their businesses. As Head of Trade Finance of your bank, you have been engaged as a resource person by (AfCFTA) to take Chief Operating Officers of these SMEs on the following topic: “The Role of Banks in International Trade”

REQUIRED:

List these roles (in bullet points only) under the various roles for one mark each.

Note: Long and detailed descriptions are not required.

[Total marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q3 – Hedging Export Proceeds with Forward Contracts and Extension

Calculate foreign currency amounts from export contracts, applicable forward rates, GHS credited from received currencies, and close out/extend the New Zealand transaction to show total GHS received.

Agribusiness Plc. is a large corporate in the commodity industry specializing in mango production around Somanya and Afram Plains. After surviving the Covid-19 pandemic, which nearly collapsed the company, Agribusiness is on its feet firmly and now leading the export of fresh mangoes in the West African sub-region. Taking advantage of the African Continental Free Trade

Area (AfCFTA), the company is now looking beyond its European buyers to meet the demand needs of other African countries.

Last week, the Chief Executive Officer and the Chief Operating Officer invited you to their warehouse to discuss their export contracts with you. Both you and your customers were very happy because this transaction will enable them to start paying off the loan facilities your bank has extended to them. These four contracts are for the export of 20 tons of fresh mangoes to

Switzerland, New Zealand, Zambia and Botswana in the ratios of 0.35; 0.30; 0.15 and 0.20 respectively. One month after the meeting at the warehouse, Agribusiness engaged Sintim Freight Forwarders to handle the export orders to the buyers. Goods were eventually shipped and related documents submitted through your counters for payments which were expected in exactly one month’s time in Ghana Cedi for your customer’s account. On 1st September, the company entered into one-month forward exchange contract with your bank to hedge their eventual expected proceeds.

Price per ton at CIF values to their respective destinations are:

Switzerland                           New Zealand                                 Zambia                                   Botswana
CHF 3, 410                            NZD 5, 783                                  ZMW 58, 765                          BWP 44, 970

September 1st rates quoted by your bank are as follows:

Spot Rates                                                              One Month Forward

CHF/GHS 8.2350 – 8.2365                                0.047 – 0.053 Cedis dis.

NZD/GHS 4.8610 – 4.8625                                0.023 – 0.032 Cedis dis.

USD/GHS 7.8530 – 7.8545                                0.032 – 0.040 Cedis dis.

GHS/ZMW 2.1000 – 2.1015                               0.025 – 0.035 Kwa. dis.

GHS/BWP 1.5715 – 1.5725                                  0.040 – 0.053 Pula. dis.

October 1st Spot Rate One Month Forward

USD/GHS 7.8450 – 7.8465              0.35 – 0.45 Cedis dis.

NZD/GHS 4.8590 – 4.8610             0.018 – 0.022 Cedis dis

All the expected export proceeds were received by your bank on due date except the one from New Zealand where the buyer could not clear the goods due to problems at Port Nicholson, Wellington. Agribusiness has accordingly extended the forward contract by one month with your bank.

REQUIRED

a. Calculate the amount of foreign currency from each buyer. [4 marks]

b. Calculate the applicable forward rates. [8 marks]

c. Calculate the amount credited to your customer’s GHS account from the foreign currencies received on their behalf. [4 marks]

d. Close out and extend the New Zealand transaction and show the total GHS your customer received under the four export contracts. [4 marks]

[Total Marks 20]

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  • 20 Marks

ITF – OCT 2022 – L3 – Q1 – Financing Export Transaction with Bill of Exchange and FX Risk Protection

Advise on methods to protect from FX risks for an export to South Africa using bill of exchange, outline contractual obligations, calculate proceeds and cedis from forward and currency borrowing, and formula to compare borrowing costs.

Your customer, Adonteng Traders Limited has finished all the registration formalities to take advantage under the new continental trading booming in Africa. Specializing in export of food throughout the continent, Adonteng Traders have negotiated with South African buyers for supply of assorted foodstuff. The arrangement allows them to draw bill of exchange on buyers immediately after shipment for full payment after 90 days. Because of restricted profit margins over the past few months due to the Russian-Ukraine problem, and a shortage of working capital, the customers called to see you on 30 March to seek your advice on how best they can finance this transaction worth USD250, 000 falling due on 30 June. The credibility of the South African buyers is highly undoubted. Adonteng Traders are seeking funding from your bank for three months in either Ghana Cedi equivalent or USD250, 000 and would pay off when final proceeds are due from the buyers. Additional information available on 30 March is as follows:

(i) USD/GHS

Spot    7.7120        7.7160

1 month forward      0.035       0.043       Cedis disc

2 months forward    0.051       0.063      Cedis disc

3 months forward    0.060      0.065      Cedis disc

(ii) Base rate is 19.0%

(iii) US 3 month LIBOR rate is 5.25%

(iv) Adonteng Traders is borrowing dollars from your US correspondent bank at 1.5% over US LIBOR rate.

(v) For interest on USD borrowing, kindly use mid-rate to convert.

(vi) Your customers do not purchase goods for which they have to pay in foreign currency.

REQUIRED:

(a) By what methods can your customers be protected from foreign exchange risks whilst preserving their profit margins? [2 marks]

(b) Outline any contractual obligations in respect of foreign exchange that your customers would have to undertake. [2 marks]

(c) Show by calculation the proceeds of each method proposed in the answer to

(a) above, and the cedis proceeds which each method would produce, stating which of the two options is better for Adonteng Traders. [10 marks]

(d) Set out a formula which your customers would use to compare cedis and foreign

currency borrowing costs, taking into account, where appropriate, the advantages or disadvantages of forward cover. [6 marks]

Notes: (2) Base your calculations on a 30 day month and a 360 day year.

[Total Marks 20]

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  • 20 Marks

SMM – APR 2023 – L4 – Q2 – Standardization of International Promotional Campaigns

Explain three objectives for standardizing a bank's international promotional campaign and three reasons against standardization in the context of expanding to an African country under AfCFTA.

Promotion strategies communicate to the market the potential benefits of the product accruing from its design, distribution and price attributes. In international marketing, a complete standardization of all aspects of a promotional campaign is rarely possible. In your role as Head of Marketing and Corporate Affairs of a Bank planning to expand to an African country to take an advantage of The African Continental Free Trade Area (AfCFTA) initiative, your Managing Director has asked you to submit a paper explaining three main objectives for standardizing the Bank’s international promotional campaign, and three reasons why the promotional campaign should not be standardized. (20 marks)

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  • 20 Marks

ATAX – May 2021 – L3 – Q3 – Taxation of Mergers and Acquisitions

Explaining acquisitions versus mergers, outlining tax implications for companies, and evaluating AfCFTA's impact on transactions.

The price of crude oil had fallen from over US$100 per barrel in the past few years to under US$40 per barrel recently in the international market. This has resulted in squeezed margins despite efforts to cut costs.

Krude Explora Nigeria Limited, an indigenous oil servicing company operating in the oil and gas sector for 23 years, faces a going concern risk due to falling profitability and liquidity challenges. It is probable that the company will default on its loan facility of US$122.5 million from B2B Energy Bank Plc. If this happens, the company will likely be taken over by Asset Management Corporation of Nigeria (AMCON).

Coincidentally, Wakanda Oil Exploration Limited, a multinational oil servicing company operating across Africa and the Middle East, has just sent an offer to acquire Krude Explora Nigeria Limited. The proposed acquisition will solve the liquidity problems in the short term, while efficiency and scale from the acquisition will hopefully return the company to profitability.

As the lead tax advisor for the proposed transaction, you are required to:

a. Explain the term “acquisition” as compared to a “merger” and give one example each of a recent merger and acquisition in the Nigerian petroleum industry. (4 Marks)

b. Outline and explain briefly the areas that may have tax implications for:
i. Krude Explora Nigeria Limited (4 Marks)
ii. Wakanda Oil Exploration Limited (4 Marks)

c. Discuss the likely impact of the African Continental Free Trade Area agreement and the local economy on a proposed acquisition or merger. (7 Marks)

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Has Case Study
  • 10 Marks

SCS – Dec 2022 – L3 – Q4a – Strategy implementation

Evaluate non-financial factors affecting TCWL’s strategic expansion using Johnson and Scholes’ model.

TCWL plans to expand to Kenya and South Africa to produce for Eastern and Southern Africa markets respectively. This move is largely influenced by the Africa Continental Free Trade Agreement (AfCFTA) which was launched in July 2020. This strategic direction would require substantial investments to upgrade production facilities to meet the new market demand.

Required:

Using Johnson and Scholes suitability/feasibility/acceptability model, evaluate the non-financial factors that could influence the success of this strategic decision. (10 marks)

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