Property Valuation

TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

Question

Mr. James Ado who is a successful businessman built a house for commercial purposes at Surulere, Lagos, in 2018.
You are given the following information:
(i) The area of the land parcel is 3,600 square metres.
(ii) The average market value of a land parcel in the neighbourhood, on a per square metre basis is N17,000 as determined by the professional valuers appointed by the Commissioner.
(iii) The total developed floor area of the building on the plot of land is 2,000 square metres.
(iv) The average construction value of medium quality buildings and improvements in the neighbourhood, on a square metre basis, is put at N200, based on the market value of the property as determined by professional valuers.
(v) The depreciation rate for the buildings and improvements of land based on the age of the building is put at 1%.
(vi) The annual relief rate is 40%.
(vii) The annual charge rate expressed as a percentage of the assessed market value of the property is 0.76% of the assessed value.
Required:
Compute the land use charge payable by Mr. James Ado.

Answer

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Tags: Commercial Property, Lagos State, Land Use Charge, Property Valuation, Tax computation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

Question

Which of the following is NOT assessed on ad-valorem basis?
A. Share capital of companies
B. Mortgage and debenture loans
C. Property valuation
D. Promissory notes
E. Admission as solicitor or notary public

Answer

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Tags: Ad-Valorem, Assessment, Mortgage, Property Valuation, Stamp Duty
Level: Level 1

Topic: Stamp Duties
Series: MAY 2021

FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

Question

RoyCo acquired a brand new property (land and buildings) on 1 January 2016 for GH¢40 million (including GH¢15 million for the land). The asset was revalued on 31 December 2017 to GH¢43 million (including GH¢16.6 million for the land). The buildings element was depreciated over a 50-year useful life to a zero residual value. The useful life and residual value did not subsequently need revision. On 31 December 2018, the property was revalued downwards to GH¢35 million (including GH¢14 million for the land) due to a recession.
The company makes a transfer from revaluation surplus to retained earnings in respect of realised profit.

Required:
Calculate the amounts recognised in profit or loss and in other comprehensive income for the years ended 31 December 2017 and 31 December 2018. (6 marks)

Answer

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Tags: Depreciation, Financial Reporting, IFRS, Property Valuation, Revaluation

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2019

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

Question

You are the Manager responsible for the audit of Rail Expert Plc, a listed entity whose principal activity is the operation of a regional railway network. The audit for the year ended 28 February 2021 is the first year your firm is auditing Rail Expert Plc. The draft financial statements received from your client indicated a total asset of GH¢58 million and a profit before tax of GH¢7.4 million. The detailed audit fieldwork has started, and the audit supervisor has brought the following matters to your attention in relation to the testing of key accounting estimates:

a) Cash-settled share-based payment scheme
On 1 March 2020, Rail Expert Plc granted 550,000 share appreciation rights to 55 executives and senior employees of the company, with each eligible member of staff receiving 10,000 of the rights. The fair value of the rights was estimated on 28 February 2020 by an external expert using an options pricing model at GH¢4.50 each. Rail Expert Plc prides itself on good employee relations, and the senior management team has estimated that all 55 staff will qualify for the rights when they vest three years after the granting of the rights on 1 March 2020. The company recognized an expense of GH¢825,000 with its associated liability in the draft accounts. (7 marks)

b) Regulatory penalties
Rail Expert Plc has been subject to a review by the national railways regulator following a complaint from a member of staff with safety concerns. The regulator identified breaches in safety regulations and issued a penalty notice on 30 September 2020. Rail Expert Plc has appealed against the initial penalty payable. Negotiations with the regulator are still ongoing, and the amount payable has not yet been finalized. Rail Expert Plc currently estimates that the total penalty payable as a result of the breach will be GH¢1.3 million, which it expects to repay in equal annual installments over the next ten years, with the first payment falling due on 1 March 2021. The company’s draft statement of profit or loss for the current year recognizes an expense of GH¢1.3 million, and the draft statement of financial position includes a liability for the same amount. (7 marks)

c) Property development
Rail Expert Plc owns an industrial property which it has historically used as a maintenance depot for its engines and carriages. The company has an accounting policy of revaluing its properties to fair value, and at the interim audit, it was noted that the depot was recorded at a carrying amount of GH¢2.5 million in the non-current asset register. During the first week of the audit fieldwork, the audit supervisor identified a year-end journal which has uplifted the depot to a fair value of GH¢4.9 million in this year’s statement of financial position as at 28 February 2021. Management has advised that this represents the estimated sales value of the building following Rail Expert Plc’s plan to develop the building as a residential property. The client has confirmed that the property is suitable for conversion into residential apartments at an estimated cost of GH¢1.2 million and has negotiated secured finance for the development with their bank. The development will be subject to the payment of fees to the local council’s building regulator of GH¢173,000. (6 marks)

Required:
Evaluate the client’s accounting treatments above and state THREE (3) audit procedures you will undertake when auditing each of the transactions.

Answer

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Tags: Audit Procedures, Cash-Settled Share-Based Payment, IAS 37, IFRS 13, IFRS 2, Property Valuation, Regulatory Penalties
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: DEC 2023

TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Commercial Property, Lagos State, Land Use Charge, Property Valuation, Tax computation
Level: Level 1

Topic: Tax Administration and Enforcement
Series: MAY 2021

TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Ad-Valorem, Assessment, Mortgage, Property Valuation, Stamp Duty
Level: Level 1

Topic: Stamp Duties
Series: MAY 2021

FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

Question

Required:
Calculate the amounts recognised in profit or loss and in other comprehensive income for the years ended 31 December 2017 and 31 December 2018. (6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Depreciation, Financial Reporting, IFRS, Property Valuation, Revaluation

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2019

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

Question

Required:
Evaluate the client’s accounting treatments above and state THREE (3) audit procedures you will undertake when auditing each of the transactions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Cash-Settled Share-Based Payment, IAS 37, IFRS 13, IFRS 2, Property Valuation, Regulatory Penalties
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: DEC 2023

Question Tag: Property Valuation

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TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

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TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

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TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

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FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

You're reporting an error for "FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications"

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

You're reporting an error for "AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review"

TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement

Calculate the land use charge payable by Mr. James Ado based on given parameters.

You're reporting an error for "TAX – May 2021 – L1 – SB – Q5b – Tax Administration and Enforcement"

TAX – May 2021 – L1 – SA – Q12 – Stamp Duties

Objective question to identify what is not assessed on an ad-valorem basis.

You're reporting an error for "TAX – May 2021 – L1 – SA – Q12 – Stamp Duties"

FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications

Calculation of amounts recognized in profit or loss and other comprehensive income related to property revaluation and depreciation.

You're reporting an error for "FR – Nov 2019 – L2 – Q2b – Financial Reporting Standards and Their Applications"

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

You're reporting an error for "AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review"

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