Series: MAR 2023

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Has Case Study
  • 8 Marks

SCS – March 2023 – L3 – Q8 – International financial management

Discusses governance structure in terms of the separation of roles between the chairman and the CEO in line with the UK and Ghana Codes of Best Practices.

Dr. Kingsley Tettey is the Chairman of the 4-member board of directors, and Dr. Joy Tettey is the Medical Director. Clearly, the Chairman is not the Chief Executive Officer (CEO) or Medical Director of LCH.

Required:
Discuss what the Ghana Code of Best Practices and the UK Corporate Governance Code state about this governance structure.
(8 marks)

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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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Has Case Study
  • 20 Marks

SCS – March 2023 – L3 – Q6 – International financial management

Explains the financial reporting implications of debt exchange and compares investing in bonds versus shares

LCH has invested GH¢1,000,000 in a 5-year Government of Ghana Bond with a coupon rate of 20%. As a result of the Government of Ghana DDE programme, LCH has no option but to exchange the old bond with the new bond.

Required:
a) Explain FIVE (5) financial reporting implications of the debt exchange on the financial statements of LCH as at 31 December 2022.
(10 marks)

b) Discuss FOUR (4) advantages and TWO (2) main disadvantages of investing in bonds rather than shares.
(10 marks)

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Has Case Study
  • 10 Marks

SCS – March 2023 – L3 – Q5 – Strategy implementation

Uses Fitzgerald and Moon’s performance measurement dimensions to link LCH’s performance assessment to corporate strategy.

Fitzgerald and Moon (1996) provided a framework for analysing performance management systems in service industries like a hospital. They suggested that a performance management system in a service organisation can be analysed as a combination of three building blocks, namely:
i) Dimensions
ii) Standards
iii) Rewards.

Required:
Using Dimensions as a tool for performance measurement, discuss how LCH could link performance assessment to corporate strategy.
(10 marks)

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Has Case Study
  • 10 Marks

SCS – March 2023 – L3 – Q4 – Strategy, stakeholders, and mission

Compares mechanistic and organic structures and recommends which is more suitable for LCH.

An appropriate organizational structure should reflect the size and complexity of an entity.

Required:
Using the management study of Burns and Stalker that identified two categories of organization structure—a mechanistic structure and an organic structure—explain the differences between the two types of structures and determine which of the two is suitable for LCH.
(10 marks)

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  • 20 Marks

SCS – March 2023 – L3 – Q3 – Competitive advantage

Discusses the pros and cons of mergers and acquisitions and uses SWOT analysis to evaluate the business strategy

LCH is facing very stiff competition from both public and private health facilities. You have suggested that LCH consider either acquisition or mergers or both as a strategic move to survive in the industry.

a) Discuss FIVE (5) advantages and FIVE (5) disadvantages of a decision to consider acquisition and merger as a survival strategy.
(10 marks)

b) Using SWOT analysis, identify and discuss key factors that might affect LCH’s business strategy.
(10 marks)

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Has Case Study
  • 10 Marks

SCS – March 2023 – L3 – Q2 – Strategy, stakeholders, and mission

Uses the 4Ps of marketing mix and competitive environment to evaluate the feasibility of adopting telemedicine.

According to the Technical Advisor of the Board of Directors, Telemedicine, the remote diagnosis and treatment of patients by means of telecommunications technology is the way to go. This proposal has been subjected to a basic marketing feasibility analysis.

Required:
Using 4Ps of the marketing mix and the competitive environment that LCH operates, explain the factors to be taken into consideration when deciding on whether to adopt the proposal to move into Telemedicine.
(10 marks)

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Has Case Study
  • 10 Marks

SCS – March 2023 – L3 – Q1 – Ethics and social responsibility

Explains the importance of good ethical behavior for accountants and reasons for the public’s high expectations from the accountancy profession.

a) At LCH, the Financial Accountant and the Internal Auditor have been designated as Ethics Focal Persons (EFP) to raise awareness of good ethical behavior among the staff.
As a student of ethics, explain FIVE (5) reasons why good ethical behavior (study and application of ethics) is important to today’s Accountant.
(5 marks)

b) The general public has high expectations of the accountancy profession and the idea of an ethical profession should be reinforced in their minds.
State THREE (3) reasons why the general public has high expectations of the accountancy profession to ensure good corporate governance practices.
(5 marks)

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  • 5 Marks

FR – Mar 2023 – L2 – Q5d – Business combinations and consolidation

Explains fair value in IFRS 13 and its application to assets and liabilities in business combinations.

d) IFRS 3: Business Combinations defines fair value consistently with IFRS 13: Fair Value Measurement. IFRS 3 requires the acquiree’s assets and liabilities to be incorporated into the consolidated financial statements at their fair values rather than at their carrying amounts.

Required:
i) Explain the meaning of fair value in accordance with IFRS 13. (2 marks)
ii) Explain the reasons why the acquiree’s assets and liabilities are measured and recognised at their fair value within the consolidated financial statements. (3 marks)

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  • 5 Marks

FR – March 2023 – L2 – Q5c – Preparation of Financial Statements

Determining the initial cost, depreciation charge, and carrying amount of the head office construction under IFRSs.

Lana Ltd is a public listed company in Ghana, located in the Northern Region. The company operates in the manufacturing sector and prepares its accounts to 31 December each year. During the year ended 31 December 2021, Lana Ltd built a head office. The costs associated with the construction of the head office are as follows:

GH¢ million
Fees for environmental certifications and building permits 0.5
Leasehold Land acquisition 10.0
Architect and engineer fees 1.0
Construction material and labor costs (including unused materials) 6.5

At 31 October 2021, when the head office extension became available for use, the cost of unused materials on site amounted to GH¢0.5 million. The total borrowing costs incurred on a loan specifically used to finance the head office extension amounted to GH¢0.8 million. The estimated useful life of the building was 40 years.

Required:
With reference to IFRSs, determine:
i) The initial cost to be capitalized.
ii) The depreciation charge for the year ended 31 December 2021.
iii) The carrying amount as of 31 December 2021.

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  • 4 Marks

PT – March 2023 – L2 – Q5b – Withholding Tax Administration

State the payments which are exempt from withholding tax.

A resident person shall withhold tax on payments of any dividends, interests, rent, royalties, natural resources, and payments with a source in the country.

Required:

State FOUR (4) payments to which withholding tax does not apply.
(4 marks)

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  • 6 Marks

PT – March 2023 – L2 – Q5a – Tax Administration

State the transactions that require the use of a Tax Clearance Certificate (TCC).

In 2021, the Ghana Revenue Authority migrated fully to an online portal for the filing and payment of taxes. One process included in this migration was the obtainment of a Tax Clearance Certificate (TCC), which plays an important role in tax compliance.

Required:

State SIX (6) transactions that require the use of a TCC.

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  • 20 Marks

PT – March 2023 – L2 – Q4 – Income Tax Liabilities

Compute the chargeable income and capital allowance for Adwoa Mansa based on her accounts.

Adwoa Mansa is self-employed and has not filed her tax returns to the Ghana Revenue Authority. She applied for a tax clearance certificate in February 2023, and the head of her Tax Office insisted that she submit her accounts for the 2022 year of assessment. Below are the details from her auditors for the year ended 31 December 2022.

Details Amount (GH¢)
Gross Profit 5,200,000
Expenses:
Utilities 70,000
Travelling expenses 43,000
Depreciation 30,500
Rent 21,200
Maintenance 25,260
Donations 60,250
Bad debts 52,000
Sanitation 20,000
Business promotion 25,620
Salaries 86,000
Net profit 4,766,170

Additional Information from Adwoa Mansa in response to queries raised by the tax official:

  1. Utilities and Rent:
    Adwoa Mansa and her husband occupy the apartment next to the shop. 25% of the expenditure on utilities and rent relates to her home.
  2. Travelling Expenses:
    28% of the travelling expenses were for private journeys.
  3. Maintenance:
    The maintenance figure includes GH¢11,500 for furniture and fittings bought for the shop and GH¢10,000 for painting her apartment.
  4. Donations:
    • Donation to Covid-19 fund: GH¢32,250
    • Donation to Mallam Atta Women’s Association: GH¢19,500
    • Donation to Farmers Day celebration: GH¢8,500
  5. Bad Debts:
    • General provision: GH¢26,000
    • Specific provision: GH¢10,000
    • Loan to husband written off: GH¢16,000
  6. Sanitation:
    GH¢1,000 was spent on acquiring equipment for cleaning the office premises.
  7. Business Promotion:
    • Permanent billboard: GH¢8,000
    • Television advertisement: GH¢6,620
    • Entertainment of customers: GH¢11,000
  8. Dividend and Interest:
    Adwoa Mansa received a dividend of GH¢18,800 (net) from her investment with Tarzan Ltd and interest of GH¢15,600 from Government Treasury bills. These amounts were included in her gross profit.
  9. Assets Purchased in 2022:
    • Computers: GH¢300,000
    • Warehouse: GH¢330,000
    • Air conditioners: GH¢100,700
      All assets are depreciable for capital allowance purposes.

Required:

a) State the circumstances under which bad debt will be allowable.
(4 marks)

b) Calculate the chargeable income of Adwoa Mansa for the 2022 year of assessment.
(16 marks)

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  • 8 Marks

PT – March 2023 – L2 – Q3b – Income Tax Liabilities

Explain how part-time, temporary, and casual employment is taxed under the Income Tax Act.

You are required to explain how the following are taxed in accordance with the Income Tax Act, 2016 (Act 896):

i) Part-time teaching/lecturing
ii) Part-time employment
iii) Temporary employment
iv) Casual worker

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  • 12 Marks

PT – March 2023 – L2 – Q3a – Income Tax Liabilities

Explain the principles and computation of overtime tax under the Income Tax Act.

Kaakyire, the Finance Director of Dwarf Ltd, is on a monthly basic salary of GH¢1,400. She was paid overtime amounting to GH¢500 during the month of April 2022.

Required:

i) State the principles underpinning the computation of overtime in accordance with the Income Tax Act, 2016 (Act 896).
(6 marks)

ii) State how her overtime will be taxed and compute the tax for the month of April 2022.
(6 marks)

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  • 5 Marks

PT – March 2023 – L2 – Q2d – Tax Administration

Explain the three-tier pension scheme under the National Pensions Act.

Explain the three-tier pension scheme under the National Pensions Act, 2008 (Act 766).

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  • 5 Marks

PT – March 2023 – L2 – Q2c – Value-Added Tax (VAT), Customs, and Excise Duties

Advise on deductibility rules of input VAT incurred before registration.

Atakora Manufacturing Ltd is a company at Winneba that manufactures roofing sheets. The company has recently registered for VAT and is not sure about the treatment of its input VAT paid prior to VAT registration. The company has sought your guidance on how to treat input taxes paid prior to registration.

Required:

Advise the company on the deductibility rules of input VAT incurred by a company prior to VAT registration.

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  • 4 Marks

PT – March 2023 – L2 – Q2b – Value-Added Tax (VAT), Customs, and Excise Duties

State the conditions under which voluntary VAT registration may be denied.

An application for a voluntary VAT registration may be denied the opportunity to register for VAT although the Value Added Tax Act, 2013 (Act 870) makes provision for voluntary VAT registration.

Required:

State the conditions under which an application for voluntary VAT registration may be denied.

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  • 6 Marks

PT – March 2023 – L2 – Q2a – Value-Added Tax (VAT), Customs, and Excise Duties

Explain the exceptions to the turnover rules under section 11 of the VAT Act.

Despite the turnover rules stated under section 6 of the Value Added Tax Act, 2013 (Act 870), there are certain exceptions to the turnover rules under section 11 of the same Act.

Required:

Explain the exceptions to the turnover rules under section 11 of the Value Added Tax Act 2013 (Act 870).

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  • 10 Marks

PT – March 2023 – L2 – Q1c – Tax Administration

Explain the process for objecting to the Commissioner-General’s tax decision.

A taxpayer is not satisfied with the Commissioner-General’s tax decision.

Required:

Explain the procedure to be followed in objecting to the Commissioner-General’s tax decision.
(10 marks)

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