Question Tag: Disclosure

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  • 3 Marks

FR – Dec 2022 – L2 – Q2d – Structured Entities

Justify whether Wesseh LTD qualifies as a structured entity under IFRS 12.

Under IFRS 12: Disclosure of Interests in Other Entities, a structured entity is defined as one designed so that voting or similar rights are not the dominant factor in deciding who controls the entity.

Wesseh LTD is an entity set up by a sponsoring bank to hold specific mortgages, securitised by that bank. The operation of Wesseh LTD is governed by an operating agreement that sets out the managerial structure and rules of operation.

Required:
Justify whether the above would meet the definition of a structured entity.

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  • 6 Marks

CR – May 2021 – L3 – Q5c – Events After the Reporting Period (IAS 10)

Advise on the accounting treatment and disclosure for a court ruling after the reporting period.

According to IAS 10 on Events After the Reporting Period, events after the reporting period are those events, favorable or unfavorable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue.

On December 31, 2014, Shawarma Limited was involved in a court case. The company is being sued by one of its major suppliers. On March 15, 2019, the court decided that Shawarma Limited should pay the supplier the sum of N90 million in settlement of the dispute.

The financial statements of Shawarma Limited for the year ended December 31, 2018, were authorized for issue on April 18, 2019.

Required:

Prepare a brief note advising on the accounting treatments and disclosure required as a result of the event(s) after the reporting date. (6 Marks)

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q1 – Ethical Issues in Auditing

This case examines ethical issues in auditing related to fraudulent practices in a company involved in human trafficking.

You have just been appointed the Auditor of Sheerahmog Manufacturing Company Limited, which manufactures 2.0 ml syringes specifically used by veterinary doctors. Recently, it was discovered that the 2.0 ml syringes are used on human beings due to the shortage of syringes for human use.

The Federal Government has decided to phase out the 2.0ml syringe in the next three years. In order to diversify into production of carbonated water, the Finance Director suggested that the company approach a bank for a complementary N1.26 billion required to finance the diversification program.

In spite of their proposal and cashflow to Bank of Akowonjo Plc, which was described as being fantastic, their loan application was not granted. As a result, the company is likely to go into liquidation with its numerous staff disengaged, if viable alternative is not provided to raise the required fund.

In carrying out the analysis of the sources of funds at the end of the year under review, you found that the company made much money from human trafficking to enable it accomplish the proposed plan of diversification.

At the next meeting with management of the company, you brought your findings to their knowledge and threatened to disclose it as an extraordinary item in the income schedule. Management frowned at it and were considering reviewing your appointment including fee which is currently 52% of your annual income.

Required:
a. Identify the ethical issues involved as they relate to the auditor. (2 Marks)
b. What are the THREE elements of fraudulent practices presented in this case? (6 Marks)
c. What are the safeguards for the ethical issues identified? (4 Marks)
d. List the issues that should be brought to the attention of the company by the auditors as regards the disclosure of the illegal act. (3 Marks)
(Total 15 Marks)

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  • 15 Marks

CR – Nov 2021 – L3 – Q5 – Revenue Recognition (IFRS 15)

Analyze the impact of early revenue recognition, responsibilities of accountants, and risks of improper disclosure in financial reporting.

Accountants in business who are responsible for the preparation of financial information must ensure that the information they prepare is technically correct, completely disclosed without any omission, and also report the substance of the transaction. However, accountants are usually faced with the danger of influence from senior managers to present figures that inflate profit or assets or understate liabilities. This always puts accountants in a difficult position. This is the situation that the Chief Accountant of Fola PLC found himself.

Fola PLC has December 31 as its year-end, and the managing director (MD) feared that the forecast of 2020 profitability goals would not be reached. Therefore, when Fola PLC received a large order on December 30, the MD immediately directed that the Chief Accountant should record it as revenue for the period. This order represents about 13% of Fola PLC’s revenue. However, the inventory control department did not separate the goods for shipment until January 1, 2021. Separated goods are usually not included in the inventory because they have been sold. Physical inventory taking under the periodic inventory system was conducted on December 31, as it is customary for the company’s external auditors to be in attendance. The Chief Accountant was confused and not willing to be involved in any unethical act.

Required:

a. Appraise the effects and implications of treating the order as revenue on 2020 and 2021 profitability.
(5 Marks)

b. In such circumstances, what should be the responsibilities of the Chief Accountant?
(5 Marks)

c. Analyze the dangers of inappropriate disclosure of information in the financial statements.
(5 Marks)

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  • 20 Marks

AA – May 2016 – L2 – Q3 – Ethical Issues in Auditing

Examination of ethical issues in client engagement, fundamental ethical principles, and lawful disclosure obligations for auditors.

You have recently been appointed the auditors of Spicer Plc, a company whose shares are traded on a stock exchange. The directors of Spicer Plc have recommended that you perform the following services:

  • The statutory audit of the annual accounts
  • Taxation services
  • Consultancy services in respect of the implementation of a new information technology system

Your firm has not acted for Spicer Plc before but does act as auditors to one of its major competitors.

Required:
a. Identify and explain the professional and ethical issues that should have been identified by your firm in relation to the provision of the services outlined above to Spicer Plc and describe the safeguards that should be in place in order to address these issues. (11 marks)

b. What are the five fundamental principles of ethics? Briefly explain their meaning. (5 marks)

c. A client’s affairs should not be disclosed to third parties. However, where a client has been guilty of an unlawful act, to whom should the auditor disclose this information, and in what order? (4 marks)

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  • 1 Marks

TAX – Nov 2020 – L1 – SA – Q7 – Ethical Issues in Tax Practice

Identify which circumstance does not allow a tax consultant to disclose taxpayer information.

Which of the following is NOT a circumstance when a tax consultant may disclose information on a taxpayer?
A. Disclosure is permitted by law
B. Disclosure is authorised by the client, that is the taxpayer
C. Disclosure is required by law, for example, the production of documents or other provisions of evidence in the course of legal proceedings
D. There is a professional duty or right to disclose, when not prohibited by law
E. Disclosure is at the discretion of the tax practitioner

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  • 10 Marks

PSAF – Nov 2020 – L2 – Q5a – Accounting for Government Assets and Liabilities

Calculate the gain or loss on the disposal of old equipment and explain five IPSAS 17 disclosure requirements.

Odeda Agricultural Corporation, a parastatal under Waso State Ministry of Agriculture, operates its business with plant and equipment that qualifies under IPSAS 17 on property, plant, and equipment. On January 1, 2020, the cost of the corporation’s plant was N100,000,000, and the accumulated depreciation was N40,000,000. On January 2, 2020, the corporation bought new equipment at the cost of N100,000,000. The equipment supplier accepted an old piece of equipment owned by the corporation in part exchange for a value of N2,500,000. The old equipment originally cost N8,000,000 and had accumulated depreciation of N5,500,000.

Required:

i. Calculate the gain or loss on the disposal of the old equipment. (5 Marks)
ii. Explain five disclosure requirements of property, plant, and equipment stated at revalued amount in accordance with IPSAS 17. (5 Marks)

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  • 1 Marks

BL – May 2014 – L1 – SA – Q17 – Law Relating to Banking

Identifying circumstances under which a banker may disclose customer information.

A banker may disclose information of its customer’s account in the following circumstances EXCEPT where:
A. The banker is lawfully compelled to do so
B. The customer’s creditor demands it
C. It is in the banker’s interest to disclose it
D. The customer makes express or implied request for it
E. The banker is required to disclose by law

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  • 15 Marks

CSME – May 2019 – L2 – Q6 – Corporate Governance

Advise on the importance of transparency and disclosure in corporate governance and explain the principles for a new board member.

The need for transparency and disclosure in financial markets is recognised in codes and statements of principles of corporate governance.

a) Advise the Board of a company on the importance of ‘Transparency and Disclosure’ in corporate governance. (5 Marks)

b) Present the principles of disclosure and communication of information in Corporate Governance in a lucid manner that will be comprehensible to a new Board member. (10 Marks)

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  • 5 Marks

FR – May 2018 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Outline the disclosure requirements for property, plant, and equipment in financial statements according to IAS 16.

Explain the disclosure requirements in published financial statements with respect to property, plant, and equipment in accordance with IAS 16.

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Has Case Study
  • 12 Marks

SCS – March 2023 – L3 – Q7 – Professional practice and codes of ethics

Analyzes LCH board composition using governance codes and discusses OECD principles of disclosure and board responsibilities.

a) LCH’s Board of Directors is composed of four experienced professionals.

Required:
In reference to codes of corporate governance and the composition of LCH’s Board, analyze the view that the board has a suitable balance.
(5 marks)

b) The OECD Principles (2015) provide guidance through recommendations and annotations across six chapters. Principle 5 and 6 deal with disclosure and transparency and the responsibilities of the board respectively.

Required:
Provide the guidance and recommendations given on these principles and how relevant it is to LCH.
(7 marks)

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  • 6 Marks

BL – May 2021 – L1 – SB – Q6a – Law Relating to Banking

Evaluate Kash Bank’s refusal to honor Osagie’s cheque and the legal grounds for disclosure of account details.

Osagie is a customer of Kash Bank Plc. He drew a cheque for the sum of N150,000 in favour of Osula. When Osula presented the cheque for payment at the nearest branch of Kash Bank Plc., the teller returned the cheque unpaid, telling him to get back to Osagie. Osula insists that the teller must tell him the state of Osagie’s account.

Required:
i. State THREE reasons for which Kash Bank Plc. could be wrong in returning Osagie’s cheque unpaid. (3 Marks)
ii. State THREE reasons for which Kash Bank Plc. could lawfully disclose the state of Osagie’s account. (3 Marks)

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  • 1 Marks

FA – Nov 2023 – L1 – SA – Q5 – Accounting for Property, Plant, and Equipment (PPE) in Accordance with IAS 16

Identify non-disclosure requirements for property, plant, and equipment.

Which of the following is NOT a disclosure requirement for property, plant and equipment, as per IAS 16 – Property, Plant and Equipment?

  • A. The measurement bases used for determining the gross carry amount of property, plant and equipment
  • B. The number of inspections carried out on items of property, plant and equipment
  • C. The depreciation methods used for each major class of property, plant and equipment
  • D. The impairment losses recognised during the period
  • E. The total cost of property, plant and equipment acquired through business combinations

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  • 1 Marks

BMF – Mar July 2020 – L1 – SA – Q1 – Nature of Business, Types, and Objectives

Identifying the correct statement about financial reports prepared by business entities.

All business entities prepare financial statements at the end of each accounting period, usually every year. Which of the following statements in respect of the financial reports prepared by business entities is correct?
A. Limited liability companies are compelled by law to disclose their financial statements to the public.
B. Publicly quoted companies are compelled by law to disclose their financial statements to the public.
C. The financial statements of a sole trader are private and should be disclosed.
D. The financial statements of a business partnership are private and should be disclosed.
E. The financial statements of a business partnership are private and should be filed with a government agency.

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  • 3 Marks

FR – July 2023 – L2 – Q2d – Contingent Liabilities and Assets (IAS 37)

Explanation of contingent liabilities and contingent assets according to IAS 37.

The objective of IAS 37: Provisions, Contingent Liabilities, and Contingent Assets is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities, and contingent assets, and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing, and amount.

Required:
Explain Contingent Liability and Contingent Asset as used in the statement above.
(Total: 3 marks)

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  • 5 Marks

FR – Nov 2021 – L2 – Q5c – Financial Reporting Standards and Their Applications

Distinguishing between government grants and government assistance with examples of each in accordance with IAS 20.

In accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance, distinguish between government grants and government assistance, giving two examples each. (5 marks)

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  • 5 Marks

CR – May 2019 – L3 – Q2e – Presentation of financial statements (IAS 1, IAS 34, IFRS 8, IAS 24, IAS 10)

The question requires the identification of related parties for Bongo Designs and an explanation of why each is a related party, according to IAS 24.

Bongo Designs is the parent company of a small group. Its shares are stock market quoted, with many shareholders. Only one shareholder, Akwasi Boakye, has a holding over 5%. Akwasi Boakye holds 20% of the shares and was the founder of the company. He still retains a seat on the board which is made up of four executive directors (including himself) and two non-executive directors.

Akwasi Boakye’s domestic live-in partner of ten years, Abena Lamptey, recently set up a company, Gushegu Ltd, in the textile industry with a friend, Akosua Pokuaa. Abena Lamptey and Akosua Pokuaa each own 50% of the shares of Gushegu Ltd, and decisions are made jointly under a contract that both parties signed.

Bongo Designs has two subsidiaries, Zabzugu Fabrics which is 100% owned and Binduri Textiles which is 60% owned. The other 40% of Binduri Textiles is owned by a single shareholder, Innovative Sissala, which has two seats on Binduri Textiles’s five-member board. Yaw Abdulai is the Finance Director of Zabzugu Fabrics. He is also the person responsible for finance at the group level but is not a member of the group’s board.

Required:
In accordance with IAS 24: Related Party Disclosures, identify the related parties of Bongo Designs in the above scenario, explaining why each is a related party. (5 marks)

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  • 4 Marks

CR – Nov 2017 – L3 – Q2b – IAS 24: Related Party Disclosures

Explain the importance of disclosing related party relationships and transactions in financial statements.

Related party relationships are a common feature of commercial life. The objective of IAS 24: Related Party Disclosures is to ensure that financial statements contain the necessary disclosures to make users aware of the possibility that financial statements may have been affected by the existence of related parties.

Required:
Explain TWO importance of disclosing related party relationships and transactions in financial statements.

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  • 4 Marks

CR – Nov 2016 – L3 – Q2e – Other information in the annual report

Determine the classification and disclosure of related party transactions for Mane Ltd in accordance with IAS 24

Mane Ltd is an entity specializing in importing a wide range of non-food items and selling them to retailers. Aqeel is Mane’s CEO and founder and owns 40% of Mane’s equity shares:

i) Mane’s largest customer, Zico, accounts for 35% of Mane’s revenue. Zico has just completed negotiations with Mane for a special 5% discount on all sales.
ii) During the accounting period, Aqeel purchased a property from Mane for GH¢500,000. Mane had previously declared the property surplus to its requirements and had valued it at GH¢750,000.
iii) Aqeel’s son, Sherif, is a director in a financial institution, Cheap Capital. During the accounting period, Cheap Capital advanced GH¢2 million to Mane as an unsecured loan at a favorable rate of interest.

Required:
Explain, with reasons, the extent to which each of the above transactions should be classified and disclosed in accordance with IAS 24 Related Party Disclosures in Mane’s financial statements for the period.
(4 marks)

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  • 4 Marks

PSAF – Nov 2016 – L2 – Q3e – Preparation and presentation of financial statements for central government.

Identify eight key financial disclosures required when accounting for government stores

In accounting for Government Stores, the head of department shall report annually on the value of stocks held by his department.

Required:

Identify EIGHT financial information that must be disclosed by a head of government department when accounting for government stores.

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