Question Tag: Financial Performance

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  • 8 Marks

PSAF – Nov 2024 – L2 – Q4a – Financial Ratio Analysis

Compute financial ratios for Ghana Wind Farms LTD to analyze performance trends.

Ghana Wind Farms LTD, a State-Owned Enterprise (SOE), has appointed a new Board of Directors in January 2023. The new Board, after settling for a year, is interested in assessing their performance for the year 2023 against the performance of the previous Board in the year 2022 through ratio analysis. Below is the financial statement of Ghana Wind Farms LTD for the two years.

Ghana Wind Farms LTD

Statement of Profit or Loss for the Year Ended 31 December 2023

2023 (GH¢) 2022 (GH¢)
Revenue 9,860,000 6,218,000
Direct Cost (5,905,000) (5,822,000)
Gross Profit 3,955,000 396,000
Distribution Costs (297,000) (264,000)
Administrative Expenses (505,000) (455,000)
Other Income 236,000 13,000
Other Gains – 1,482,000
Operating Profit 3,389,000 1,172,000
Finance Cost (1,000,000) (334,000)
Profit Before Tax Expense 2,389,000 838,000
Tax Expense (500,000) (144,000)
Profit After Tax 1,889,000 694,000

Ghana Wind Farms LTD

Statement of Financial Position as at 31 December 2023

2023 (GH¢) 2022 (GH¢)
ASSETS
Non-Current Assets
Property, Plant & Equipment 17,000,000 15,000,000
Investment 5,000 2,000
Advances & Loans – 30,000
Total Non-Current Assets 17,005,000 15,032,000
Current Assets
Inventories 687,000 546,000
Trade and Other Receivables 2,829,000 1,978,000
Prepayments 87,000 42,000
Cash and Cash Equivalents 383,000 434,000
Total Current Assets 3,986,000 3,000,000
TOTAL ASSETS 20,991,000 18,032,000
EQUITY & LIABILITIES
Equity
Government Equity 8,000 8,000
Other Government Equity 613,000 306,000
Capital Surplus 8,471,000 7,599,000
Income Surplus (1,434,000) 478,000
Total Equity 7,970,000 8,697,000
Non-Current Liabilities
Deferred Credit 6,692,000 670,000
Deferred Tax Liabilities 2,498,000 2,572,000
Borrowings (Due After One Year) 1,297,000 950,000
Total Non-Current Liabilities 10,487,000 4,192,000
Current Liabilities
Bank Overdraft 166,000 180,000
Provision for Company Tax 109,000 109,000
Trade and Other Payables 1,820,000 4,516,000
Borrowings (Due Within One Year) 439,000 338,000
Total Current Liabilities 2,534,000 5,143,000
Total Liabilities 13,021,000 9,335,000
TOTAL EQUITY AND LIABILITIES 20,991,000 18,032,000

Required:

a) Compute the following ratios:

i) Current Ratio
ii) Quick Ratio
iii) Inventory Turnover (Days)
iv) Trade Receivable Collection Period (Days)
v) Trade Payables Period (Days)
vi) Working Capital Cycle
vii) Interest Cover Ratio
viii) Total Debt – Total Asset Ratio

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  • 10 Marks

MA – Nov 2024 – L2- Q1b – Return on Investment (ROI)

Computation of ROI for different one-off transactions and advice on whether they should be undertaken.

Dondo LTD is a manufacturing company based in Nsawam. The following data represents the budgeted performance of Dondo LTD for the year 2025:

Amount (GH¢’000)
Profit 660
Plant and equipment (net of depreciation) 1,560
Working capital 750

Dondo LTD is considering undertaking the following separate one-off transactions:

  1. A cash discount of GH¢16,000 will be offered to its customers annually. This will, on average, reduce the trade receivables figure by GH¢60,000.
  2. An increase in average inventories by GH¢80,000 throughout the year. The increased inventory level is expected to increase sales, resulting in GH¢30,000 increased contribution per annum.
  3. At the beginning of the year, the company will buy a plant worth GH¢360,000. This is expected to reduce operating costs by GH¢105,000. The plant has a five-year useful life with nil residual value.

Required:

i) Compute the ROI for each of the one-off transactions above. 
ii) Advise Dondo LTD on whether the above one-off transactions should be carried out.

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  • 20 Marks

FM – Nov 2016 – L3 -SB – Q3 – Capital Gains Tax

Calculate EVA for Jack Limited and determine its market value added (MVA) based on provided assumptions.

Jack Limited is a family-owned business that has grown strongly in the last 50 years. The key objective of the company is to maximise the family’s wealth through their shareholdings. Recently, the directors introduced value-based management, using Economic Value Added (EVA) as the index for measuring performance.

You are provided with the following financial information:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2015:

₦’million 2015
Operating profit 340.0
Finance charges (115.0)
Profit before tax 225.0
Tax at 25% (56.3)
Profit after tax 168.7

Notes

Notes 2015 (₦’m) 2014 (₦’m)
(i) Capital employed – from the Statement of Financial Position 6,285 6,185
(ii) Operating costs:
Depreciation 295 285
Provision for doubtful debts 10 2.5
Research and development 60 –
Other non-cash expenses 35 30
Marketing expenses 50 45
(iii) Economic depreciation is assessed to be ₦415 in 2015. Economic depreciation includes any appropriate amortisation adjustments. In previous years, it can be assumed that economic and accounting depreciation were the same.
(iv) Tax is the cash paid in the current year (₦45million) and an adjustment of ₦2.5million for deferred tax provisions. There was no deferred tax balance prior to 2015.
(v) The provision for doubtful debts was ₦22.5million on the 2015 Statement of Financial Position.
(vi) Research and development cost is not capitalised in the accounts. It relates to a new project that will be developed over five years and is expected to be of long-term benefit to the company. The first year of this project is 2015.
(vii) The company has been spending heavily on marketing each year to build its brand long term.
(viii) Estimated cost of capital of the company:
Equity 16%
Debt (pre-tax) 5%
(ix) Gearing (Debt/Equity) Ratio 1.5: 1

Required:
a. Calculate, showing all relevant workings, the Economic Value Added (EVA) for the year ended December 31, 2015. Make use of the adjusted opening capital employed. Comment on your result and make appropriate recommendations. (15 Marks)

b. Irrespective of your answer in (a) above, assume the company’s current EVA is ₦120million and that this will decline annually by 2% for the next ten years and then increase by 4% per annum in perpetuity. Assume the following for this part only:

  • Cost of equity 14%
  • WACC 10%

Calculate the market value added (MVA) by the company. Show all workings. (5 Marks)

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  • 6 Marks

CR – May 2017 – L3 – Q7b – Integrated Reporting

Discuss the usefulness of cash flow statements and the potential benefits of integrated reporting.

The directors of Duranga Plc. have learned that corporate reporting could be improved by adopting the International Integrated Reporting Council’s Framework for Integrated Reporting. The directors believe that International Financial Reporting Standards (IFRS), which the company has recently adopted following the decision of the Federal Executive Council, are already extensive and provide stakeholders with a comprehensive understanding of its financial position and performance for the year. They believe that with over 100 countries adopting IFRS, their financial statements speak the international financial reporting language and practice. In particular, statements of cash flows, which the company prepares in accordance with IAS 7, enable stakeholders to assess the liquidity, solvency, and financial adaptability of a business. They are concerned that any additional disclosures could be excessive and obscure the most useful information within a set of financial statements. This is against the backdrop of a recent effort by the IASB on excessive disclosures in financial statements. They are therefore unsure of the rationale for the implementation of a separate or combined integrated report.

Required:
Discuss the extent to which statements of cash flow provide stakeholders with useful information about an entity and whether this information would be improved by the entity introducing an Integrated Report. (6 Marks)

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  • 10 Marks

CR – May 2017 – L3 – Q5 – Integrated Reporting

Identify voluntary disclosures in annual reports and discuss reasons for and limitations of such disclosures.

An annual report is a comprehensive report on a company’s activities intended to give information about the company’s activities and financial performance. In addition to the audited financial statements, annual reports contain a great deal of extra information which could be financial and non-financial. The extra information provided may be required by law, hence, it is mandatory. However, many companies provide additional information not required by law, on a voluntary basis.

Required:

(a) Identify THREE of such reports that are voluntarily disclosed in annual reports of Nigerian companies. (3 Marks)

(b) Why would a company disclose information not required by law in its annual report? Propose FOUR reasons for and give any TWO limitations of such disclosures. (7 Marks)

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  • 20 Marks

CR – Nov 2016 – L1 – SB – Q2 – Earnings Per Share (IAS 33)

Evaluate the significance, shortcomings, and calculations of EPS for Soar Plc.

The objective of IAS 33 – Earnings Per Share is to improve the comparability of the performance of different entities in the same period and of the same entity in different accounting periods. This is done by prescribing the methods for determining the numbers of shares to be included in the calculation of earnings per share. The management of Soar Plc had sought your professional advice on the application of IAS 33.

a. You are required to advise the management of Soar Plc on the:
i. Significance of earnings per share. (5 marks)
ii. Shortcomings of earnings per share. (5 marks)

b. The directors of Soar Plc have decided to replace most of the existing plant and machinery which are now obsolete during the year ended September 30, 2015, to enhance earnings. The costs of removing existing plant and acquiring and installing new plant have been estimated at N750,000.

In order to improve liquidity, the directors decided to make a new issue of 800,000 ordinary shares at N2 per share fully paid on January 1, 2015, and a further N600,000 4% convertible loan notes on June 1, 2015. The terms of issue would provide for conversion into ordinary shares as stated below:

On September 30 Number of shares per N100 of loan stock
2015 120
2016 125
2017 118
2018 122

The ordinary shares issued would rank for dividend in the current year. The following relates to the company for the period ended September 30, 2015:

  • Profit before interest and tax is N850,000.
  • Effective rate of company tax on profit is 30% and the basic EPS for the year ended September 30, 2014, was 48 kobo.
  • The company had issued as at September 30, 2014, the following:
    • 2,000,000 ordinary shares of 50 kobo each fully paid.
    • 400,000 12% irredeemable preference shares of N1 each fully paid.
    • 300,000 10% redeemable preference shares of N1 each fully paid.
    • N700,000 8% redeemable debenture (non-convertible).

Required:
Calculate for Soar Plc for the year ended September 30, 2015:
i. Basic earnings per share (5 marks).
ii. Fully diluted earnings per share (5 marks).

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  • 20 Marks

CR – Nov 2014 – L3 – SB – Q3 – Presentation of Financial Statements (IAS 1)

Analyze Prochain Plc’s financial performance and calculate key ratios for loan covenants.

Prochain Plc

The Directors of Prochain Plc have pursued an aggressive policy of expansion in the last two years. They have developed several new products and market share has increased.

The financial statements for the year ended 31 December 2013, which will be presented to the Board of Directors at its next meeting, are being finalised. The financial statements at the year-end are presented below:

Statement of profit or loss and other comprehensive income for the year ended 31 December

The results of the company as well as certain key ratios that will form part of the covenants in respect of the loan facilities will be discussed at the Board of Directors meeting.

Notes:

  1. The movement on the revaluation reserve relates to property, plant, and equipment revalued in the year.
  2. The movement on other reserves relates to the gains on the investments available for sale.
  3. The bonds are repayable on 1 July 2015.

Required:

(a) Based on the results of Prochain Plc for the year ended 31 December 2013, calculate the key ratios for the loan.
(8 Marks)

(b) Prepare a report commenting on the financial performance for the year in relation to the key ratios for the loan.
(12 Marks)

(Total 20 Marks)

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  • 20 Marks

FM – Nov 2016 – L3 – Q3 – Strategic Performance Measurement

Calculation of EVA for Jack Limited using adjusted financial data and WACC to assess value creation.

Jack Limited is a family-owned business which has grown strongly in the last 50 years. The key objective of the company is to maximize the family’s wealth through their shareholdings. Recently, the directors introduced value-based management, using Economic Value Added (EVA) as the index for measuring performance.

You are provided with the following financial information:

Statement of Profit or Loss and Other Comprehensive Income for the Year Ended December 31, 2015

Item Amount (₦’million)
Operating profit 340.0
Finance charges (115.0)
Profit before tax 225.0
Tax at 25% (56.3)
Profit after tax 168.7

Notes

Description 2015 (₦’m) 2014 (₦’m)
(i) Capital employed – from the Statement of Financial Position 6,285 6,185
(ii) Operating costs: Depreciation 295 285
Provision for doubtful debts 10 2.5
Research and development 60 –
Other non-cash expenses 35 30
Marketing expenses 50 45
  1. Economic depreciation is assessed to be ₦415 in 2015. Economic depreciation includes any appropriate amortization adjustments. In previous years, it can be assumed that economic and accounting depreciation were the same.
  2. Tax: The cash paid in the current year is ₦45 million, with an adjustment of ₦2.5 million for deferred tax provisions. There was no deferred tax balance prior to 2015.
  3. The provision for doubtful debts was ₦22.5 million on the 2015 Statement of Financial Position.
  4. Research and development cost is not capitalized in the accounts. It relates to a new project that will be developed over five years and is expected to be of long-term benefit to the company. The first year of this project is 2015.
  5. The company has been spending heavily on marketing each year to build its brand long-term.
  6. Estimated cost of capital for the company:
    • Equity: 16%
    • Debt (pre-tax): 5%
  7. Gearing (Debt/Equity) Ratio: 1.5:1

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  • 10 Marks

CR – Nov 2016 – L3 – Q2a – Earnings Per Share (IAS 33)

Explanation of the significance and shortcomings of Earnings Per Share (EPS) for Soar Plc’s management.

The objective of IAS 33 – Earnings Per Share is to improve the comparability of the performance of different entities in the same period and of the same entity in different accounting periods. This is done by prescribing the methods for determining the numbers of shares to be included in the calculation of earnings per share. The management of Soar Plc has sought your professional advice on the application of IAS 33.

Required: Advise the management of Soar Plc on the following:

i. Significance of Earnings Per Share (EPS). (5 marks)
ii. Shortcomings of Earnings Per Share (EPS). (5 marks)

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  • 20 Marks

FR – May 2017 – L2 – SB – Q4 – Earnings Per Share (IAS 33)

Explain EPS and PE ratio, and calculate EPS and DPS for Almond Nigeria Limited, also discussing EPS limitations.

a. Explain the following, stating their importance to investors in evaluating financial performance:
i. Earnings per share (EPS)
ii. Price earnings ratio (PE ratio)
(6 Marks)

b. The issued and fully paid share capital of Almond Nigeria Limited, which has remained unchanged since the date of incorporation until the financial year ended March 31, 2015, includes the following:

  • 2,400,000,000 ordinary shares
  • 600,000,000 6% participating preference shares of N1 each

The company has been operating at a profit for a number of years. As a result of a very conservative dividend policy in previous years, there is a large accumulated profit balance on the statement of financial position.

On July 1, 2015, the directors decided to issue two bonus shares to all ordinary shareholders for every one previously held.

The following is an extract of the group statement of profit or loss and other comprehensive income for the year ended March 31, 2016:

Almond Nigeria Limited
Extract of Group Statement of Profit or Loss and Other Comprehensive Income for the Year Ended March 31, 2016

2016 2015
Profit for the year N740,000 N540,000
Other comprehensive income – (20,000)
Total comprehensive income N740,000 N520,000
Total comprehensive income attributable to:
Owners of parent N680,000 N480,000
Non-controlling interest N60,000 N40,000
Total comprehensive income N740,000 N520,000

The following dividends have been paid or declared at the end of the period:

Dividend Type 2016 2015
Ordinary N330,000 N240,000
Preference N69,000 N60,000

Note: The participating preference shareholders are entitled to share profits in the same ratio in which they share dividends after payment of fixed preference dividends. They will also share the same benefit as ordinary shareholders if the company is liquidated.

Required:

  1. Calculate the earnings per share (EPS) in accordance with IAS 33 and the dividend per share (DPS) for the years ended March 31, 2015, and 2016. (10 Marks)
  2. Discuss the limitations of earnings per share (EPS) as a measure of a company’s performance. (4 Marks)

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  • 10 Marks

PSAF – July 2023 – L2 – Q3b – Financial statements discussion and analysis

Compute financial ratios and analyze the financial performance and position of Ghana's Consolidated Fund for 2022 and 2021.

The Financial Statements of the Consolidated Fund of Ghana for the year ended 31 December 2022 and 2021 are presented below:

Consolidated Fund of Ghana – Statement of Financial Performance for the year ended 31 December

Additional Information:

  1. The Statistical and economic data for the two years are as follows:
    • 2022: Population: 30.8 million, Gross Domestic Product (GH¢): 768,000,000,000
    • 2021: Population: 29.5 million, Gross Domestic Product (GH¢): 552,500,000,000
  2. Capital Assets acquired in 2022 and 2021 amounted to GH¢255,200,000,000 and GH¢141,600,000,000 respectively.

Required:

i) Compute the following accounting ratios for the two respective years (2022 and 2021):

  • Debt to Gross Domestic Product
  • Capital Spending as a percentage of Gross Domestic Product
  • Wage Bill as a percentage of Total Tax Revenue
  • Debt per Capita
    (4 marks)

ii) Based on the result in question i) above, write a report discussing and analyzing the Financial Performance and Financial Position of the nation.
(6 marks)

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  • 20 Marks

PSAF – July 2023 – L2 – Q2 – Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance and Statement of Financial Position for Ayigya Central Hospital for the year ended December 31, 2022, based on the provided trial balance and additional information.

Ayigya Central Hospital is a Public Hospital established in the Ashanti Region, which serves several communities in the Municipalities. Its Trial Balance for the year ended 31 December 2022 is provided below:

Additional information:

  1. Inventory as at 31 December 2022 consists of Drugs and Stationery amounting to GH¢50 million and GH¢20 million respectively.
  2. Four patients who paid GH¢25 million to the Hospital intending to undertake heart surgery are scheduled to have their surgery done in February 2023. This amount is included in Surgical Fees.
  3. The fixed assets in the trial balance were acquired at the beginning of the year. It is the policy of the Hospital to provide for the consumption of fixed assets using the straight-line method:
    • Asset: Laboratory Equipment, Building, Motor Vehicles, Software
    • Useful life: 5 years, 50 years, 10 years, 5 years respectively
  4. Salaries and other emoluments outstanding relating to casual labor during the year amounted to GH¢8 million.
  5. Provision for Bad Debt relates to NHIS Claims Receivables in the Trial balance. The Provision for Bad Debt is 2%.

Required:

a) Prepare a Statement of Financial Performance for Ayigya Central Hospital for the year ended December 31, 2022. (10 marks)

b) Prepare a Statement of Financial Position for Ayigya Central Hospital as at December 31, 2022. (10 marks)

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  • 20 Marks

PSAF – Nov 2020 – L2 – Q2 – Preparation and presentation of financial statements for local government

Prepare financial statements (Statement of Financial Performance and Statement of Cash Flow) and explain basic disclosure requirements for Eminaa District Assembly.

a) The following details relate to Eminaa District Assembly for the year 2018.

Details GH¢’000
Dividend Received 93,250
Central Government Salaries 12,000,000
Basic Rates 370,900
Districts Development Facility 15,000,600
Rent from Land and Building 6,120,800
Established Posts 1,140,700
Other Expenditure 600,000
Non-Established Posts 580,000
Allowances 390,470
Court Fees 240,000
Inventory and Consumables 800,000
Sanitation Fees 370,000
General Cleaning 350,000
Common Fund 2,930,000
Social Benefit 840,300
Equity Investment Acquired 420,000
Infrastructure, Plant, and Equipment 980,000
Work-In-Progress 490,000
Loans Received 2,330,000
Interest Expense 200,000
Advances to Staff 660,000
Royalties 430,000
Consultancies cost 470,000
Training and Workshop cost 275,000
Transport and Travelling cost 620,000
Consumption of Fixed Assets 960,000
Special Services 820,000
Utilities 630,000
Market Tolls 870,000
Permit Fees 990,000
Fines and Penalties 330,000
Development Bonds Issued 1,300,000
Hostel License 630,920
Business Income 2,300,600
Chop Bar License 300,400
Proceeds from Sale of Equity 990,320
Accumulated Fund (1/1/2018) 370,600
Herbalist License 530,370
Cash and Cash Equivalent @ (1/1/2018) 12,300,240
Stool Land Revenue 600,000
Lorry Park Fees 720,400
Market Store Rent 300,750
Recoveries 194,000
Loan Repayment 143,000
Property Rate 820,900

Additional Information:

  1. Eminaa District Assembly adopts the accrual basis of accounting in the preparation of its financial statements.
  2. Established Post salaries outstanding as at 31/12/2018 were GH¢180,000,000.
  3. Inventory at 31/12/2018 was GH¢170,000,000.

Required:
Prepare for Eminaa District Assembly:

  • Statement of Financial Performance for the year ended 31/12/2018.

(7 marks)

b) Prepare a statement of cash flow for Eminaa District Assembly for the year ended 31/12/2018. (8 marks)

c) Subject to IPSAS 6: Consolidated and Separate Financial Statements, a Controlling Entity that presents Consolidated Financial Statements shall disclose certain basic information.

 

Explain FIVE (5) basic information that an institution preparing Consolidated Financial Statements needs to disclose. (5 marks)

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  • 14 Marks

PSAF- Nov 2019 – L2 – Q2a -Preparation and presentation of financial statements for covered entities

Prepare the Statement of Financial Performance and Statement of Financial Position for Bunsu Education College as of 31/12/2018.

a) The following Trial Balance relates to Bunsu Education College, a public tertiary educational institution in Ghana, as at 31/12/2018.

DR (GH¢’000) CR (GH¢’000)
Fees Income 4,575,622
Establish Post 5,312,430
Allowance 856,670
Consultancy Fees 655,600
Legal Cost 25,059
 1,540,000
Consultancy Cost 565,500
Non-Establish Post 1,253,600
Seminars cost 500,000
Sponsorship 8,100 9,066,828
Receivables 468,050
Payables 182,840
20% loan 8,600
Books and Research Allowance 150,765
Plant and Machinery 3,000,000 250,000
Motor Vehicle 2,505,000 352,000
Building 12,300,000 756,000
Software 995,500 150,000
Other Incomes 211,430
Project Work Supervisory Allowance 48,500
Cash and Bank 294,233
Training and Workshop cost 104,000
Bad debt provision (student fees) 4,940
Work In Progress 8,251,735
Other Expenses 71,000
Withholding Tax 90,500
Accumulated Fund 11,205,270
Utilities Bills 560,053
Proceeds from Sale of Admission Forms 9,196,270
Superannuation 278,500
End of Service Benefits 298,040
Stationery Stock 399,165
38,245,900 38,245,900

Additional Information: i) The college has adopted the accrual basis International Public Sector Accounting Standards (IPSAS) as the basis for the preparation of its financial statements. ii) Stationery stock as at 31/12/2018 was GH¢200,500,000 but had a Net Realisable Value of GH¢155,254,000. iii) Social benefits of GH¢1,720,000 yet to be paid during the year were included in the Work In Progress value. Consultancy cost amounting to GH¢234,500,000 was incurred but not yet paid. iv) Books and Research Allowance was received from Government during the period amounting to GH¢337,530,000 for disbursement to qualified Lecturers and Administrative staff. v) Provision is to be made for interest on loans. vi) 60% of the receivables represent an amount of students’ fees outstanding as at 31/12/2017. Provision for doubtful debt is estimated to be 5% of outstanding school fees. vii) The university uses a straight-line basis of depreciation for Capital Assets. Capital Assets and their useful lives are detailed out below:

Assets Useful Life
Plant and Machinery 8 years
Motor Vehicle 5 years
Building 50 years
Software 7 years

Required: i) Prepare a Statement of Financial Performance for Bunsu Educational College for the year ended 31/12/2018. (8 marks)

ii) Prepare a Statement of Financial Position as at 31/12/2018. (6 marks)

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  • 10 Marks

PSAF – Mar 2023 – L2 – Q3b – Financial statements discussion and analysis

Computes and discusses financial ratios to evaluate the performance of a Municipal Assembly over two years.

The Financial Information below relates to Agogo Municipal Assembly.

Agogo Municipal Assembly
Statement of Financial Performance for the year ended 31 December


Additional Information:

  1. The Statistical and economic data of the two years for the Municipal is as follows:
Description 2022 2021
Population 180,000 175,000
  1. Decentralised Transfer includes Common Fund from the Central Government of the respective years. Common Fund constitutes 60% of the Decentralised Transfer for 2022 and 50% of the Decentralised Transfer for 2021.

Required:
i) From the information provided, compute for the respective years:

  • Common Fund per Capita
  • IGF per Capita
  • Compensation of Employees to Total Revenue
  • Interest to IGF Ratio
    (4 marks)

ii) Based on the results computed in i) above, discuss the performance of the Municipal Assembly.
(6 marks)

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  • 20 Marks

PSAF – Dec 2023 – L2 – Q2a – Preparation and presentation of financial statements for covered entities

Prepare a Statement of Financial Performance and a Statement of Financial Position for Danke State University as at 31 December 2021, along with the accounting policies.

The following Trial Balance relates to Danke State University, a public tertiary educational institution in Ghana, as at 31 December 2021:

Additional Information:

  1. It is the policy of the University to prepare Financial Statements on an accrual basis in compliance with Public Financial Management Act, 2016 (Act 921), Public Financial Management Regulation 2019 (L.I 2378), and the International Public Sector Accounting Standards (IPSAS).
  2. Utility Bills outstanding during the year amounted to GH¢15,500,000 whilst that of Established Post Salaries amounted to GH¢120,000,000. These have been omitted from the trial balance.
  3. Loans and Advances represent Salary Loans given to some Staff of the University. These loans were granted at a concessionary interest rate of 2%. Provision is to be made for interest on Loans and Advances.
  4. The Fees Receivables represent outstanding school fees for 870 students. Out of this, 90 students were expelled from the school for poor academic performance. As a result, it is very unlikely the University would recover the amount of School Fees owed by the expelled students. This amount constitutes 5% of Fees Receivables. The University from experience also considers that it is very unlikely to recover all the outstanding fees and they intend to set a provision of unrecoverable debt against the remaining school fees at the rate of 7%.
  5. Included in the Other Facility User Fees is hostel fees amounting to GH¢1,050,000 paid in respect of the 2022/2023 Academic year.
  6. Inventory of Textbooks as at 31 December 2021 amounted to GH¢ 142,500,000 at cost and having a Net Realisable Value of GH¢165,000,000, but its Replacement Cost is GH¢78,000,000. In addition, stationery inventory as at 31 December 2021 amounted to GH¢17,000,000 and having a Replacement Cost of GH¢18,000,000 with an estimated Net Realisable Value of GH¢25,000,000.
  7. The University uses the Straight Line method of depreciation for Non-Current Assets. Details of Non-Current Assets and their respective useful lives are stated below:
Non-Current Assets Useful Life
Property, Plant, and Machinery 20 years
Investment Property 10 years
Software 10 years

Required: a) Prepare a Statement of Financial Performance for Danke State University for the year ended 31 December 2021. (8 marks)
b) Prepare a Statement of Financial Position for Danke State University as at 31 December 2021. (8 marks)
c) State FOUR (4) accounting policies applied in preparing the financial statement. (4 marks)

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  • 10 Marks

PSAF – Nov 2021 – L2 – Q3b – Financial Statements Discussion and Analysis

Prepare a Common Size Statement of Financial Performance and analyze the financial performance of Okagya Municipal Assembly for 2020.

Presented below is the Statement of Financial Performance of Okagya Municipal Assembly for the year ended 31 December 2020.

GH¢’million 2020 Actual 2019 Actual 2020 Budget
Revenues
Decentralized Transfer 16,450 12,400 20,200
IGF 22,200 25,600 34,100
Donation and Grants 1,300 1,900 2,000
Total Revenue 39,950 39,900 56,300
Expenditure
Compensation for employees 29,800 24,300 25,900
Use of goods and services 10,300 9,860 18,000
Consumption of fixed Asset 240 220 0
Interest 19,660 14,550 16,780
Grants 510 430 1,920
Other expenses 1,600 1,430 2,450
Total Expenditure 62,110 50,790 65,050
Net Operation Result (22,160) (10,890) (8,750)

Required:

i) Prepare a Common Size Statement of Financial Performance for the year ended 31 December 2020.
(6 marks)

ii) Based on the Common Size Statement of Financial Performance prepared in (i) above, write a report analyzing the financial performance of Okagya Municipal Assembly in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis.

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  • 20 Marks

PSAF – May 2019 – L2 – Q4a – Preparation and presentation of financial statements for central government

Prepare the Statement of Financial Performance for the Consolidated Fund for the year ended 31 December 2018.

Additional Information:
i) The Controller and Accountant General uses the modified accrual accounting concept in the preparation of its accounts.
ii) Established Post salaries of GH¢2,937,000 were outstanding as of 31/12/2018.
iii) Interest on domestic and external loans is provided for at 20% and 15%, respectively.
iv) The Central Government depreciates assets on a cost basis using the schedule below:

Class of Assets Number of Years
Building 50 years
Plant, Machinery, Furniture, and Fittings 20 years
Transport Equipment 7 years
Computer Software and License 5 years

v) Provisions:
Specific provision for bad debt is made for loans receivables and investments as and when their non-recoverability is determined, and where a request is made for write-off to parliament. This provision is set at 3% and 5%, respectively.

Required:
a) Prepare the Statement of Financial Performance of the Consolidated Fund for the year ended 31/12/2018.
(10 marks)

b) Prepare the Statement of Financial Position for the Consolidated Fund as at 31/12/2018.
(7 marks)

c) State and explain THREE (3) Accounting Policies that usually accompany Consolidated Fund Financial Statements.
(3 marks)

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  • 10 Marks

PSAF – May 2020 – L1 – Q3b – Financial Statements Discussion and Analysis

Analyze the financial performance of the Consolidated Fund based on a Common Size Statement of Financial Performance.

Presented below is the Statement of Financial Performance of the Consolidated Fund of Ghana.

Revenue and Expenditure Statement of the Consolidated Fund for the year ended 31 December, 2018

Required:
Based on a Common Size Statement of Financial Performance, write a report discussing and analyzing the financial performance of the Consolidated Fund in line with the Recommended Practice Guide 2, Financial Statement Discussion and Analysis.

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  • 6 Marks

FM – NOV 2015 – L2 – Q1b – Business valuations

Compute and comment on common size ratios for Suncity Limited for the years 2013 and 2014.

The Board of Directors of Suncity Limited are reviewing the performance of their business for the year 2014 and are considering using ratio analysis for this purpose. You have been presented with the following statement of comprehensive income for the years 2013 and 2014:

2014 (GH₵’000) 2013 (GH₵’000)
Sales 42,000 30,000
Less: cost of sales 33,200 21,500
Gross profit 8,800 8,500
Operating expenses 2,750 2,120
Profit before finance charges 6,050 6,380
Finance charges 500 700
Profit before tax 5,550 5,680
Taxation 1,110 1,136
Profit after tax transferred to income surplus 4,440 4,544

Required:
i. Compute common size ratios for Suncity Limited for 2013 and 2014 (4 marks)
ii. Comment on any four of the ratios computed (2 marks)

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