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Phato Ltd, is a Public Limited Liability Company which operates in the service sector in Ghana. Phato Ltd has a business relationship with two other Ghanaian companies, Sakara Ltd and Saadi Ltd, which are public limited liability companies too. The draft statements of financial position of these three companies are as below as at 30 September 2019.
| Phato Ltd GH¢ million | Sakara Ltd GH¢ million | Saadi Ltd GH¢ million |
|---|---|---|
| Assets: | ||
| Non-current assets | ||
| Property, plant, and equipment | 460.0 | 150.0 |
| Investment in subsidiaries | ||
| Sakara Ltd | 365.0 | |
| Saadi Ltd | 160.0 | |
| Investment in Azuri Ltd | 24.0 | |
| Intangible assets | 99.0 | 15.0 |
| Total Non-current assets | 948.0 | 325.0 |
| Current assets | 447.5 | 240.0 |
| Total assets | 1,395.5 | 565.0 |
| Equity and liabilities: | ||
| Equity: | ||
| Share capital | 460.0 | 200.0 |
| Other components of equity | 36.5 | 18.5 |
| Retained earnings | 447.5 | 221.0 |
| Total equity | 944.0 | 439.5 |
| Non-current liabilities | 247.5 | 61.5 |
| Current liabilities | 204.0 | 64.0 |
| Total liabilities | 451.5 | 125.5 |
| Total equity and liabilities | 1,395.5 | 565.0 |
Additional relevant information:
Required:
Prepare the consolidated statement of financial position for the Phato Ltd Group as at 30 September 2019.
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On 1 January 2018, Asankragua Ltd (Asankragua) applied to a government agency for a grant to assist with the construction of a factory in Enchi. The proposed construction cost of the factory was GH¢52 million and the company projected that 350 people would be employed after completion. The land was already owned by Asankragua.
On 1 March 2018, the government agency offered to grant a sum amounting to 25% of the factory’s construction cost to a maximum of GH¢13 million. The grant aid was to be advanced on completion and would be repayable on demand if total employment at the factory fell below 300 people within 5 years of completion.
At the financial year end, 31 March 2018, Asankragua had accepted the offer of grant aid and had signed contracts for the construction of the factory at a total cost of GH¢52 million. Construction work was due to commence on 1 April 2018.
By 31 March 2019, the factory had been completed on budget, 400 people were employed ready to commence manufacturing activities, and the government agency agreed that the conditions necessary for the drawdown of the grant had been met.
On 1 April 2019, the factory was brought into use. It was estimated that it would have a ten-year useful economic life. On 1 June 2019, the government agency paid over the agreed GH¢13 million. In addition, the company sought and was paid an employment grant of GH¢1.2 million as employment exceeded original projections. This is expected to be payable annually for 5 years in total, at a rate of GH¢12,000 per additional person employed over 300 in each year. There are no repayment provisions attached to the employment grant.
The directors of Asankragua expect employment levels to exceed 350 people for at least 4 further years from 31 March 2020.
Required:
Demonstrate, showing calculations and relevant entries, how Asankragua Ltd should record the above transactions and events in its financial statements for years ended 31 March 2018, 2019, and 2020.
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Dompoase Ltd incurred the following borrowing costs during the financial year 2018:
| GH¢’000 | |
|---|---|
| Overdraft interest | 12 |
| Foreign currency loan interest (correctly translated into GH¢) | 84 |
| Foreign currency loan exchange differences on capital | 140 |
In addition, a three-year fixed-rate GH¢2 million loan was taken out on 1 January 2018 at 6.5%. A loan set-up fee was charged at GH¢20,000. This increased the effective interest rate on the loan to 6.88%.
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Nzema prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) with a financial year end of 31 December 2018. On 1 January 2018, Nzema commenced a defined benefit pension plan for a number of head office employees. Under the pension scheme, Nzema has an obligation to provide these staff with agreed post-employment benefits. Nzema carries the actuarial and investment risk associated with the pension scheme.
The following information has been compiled from workings by Nzema’s accounting staff and actuarial reports for the 2018 financial year:
| GH¢ | |
|---|---|
| Interest income on plan assets | 16,500 |
| Employer contributions to plan | 550,000 |
| Current service cost | 600,000 |
| Interest on plan liability | 18,000 |
| Fair value of plan assets at 31/12/2018 | 580,000 |
| Present value of plan obligation at 31/12/2018 | 620,000 |
The Accountant was not sure which accounting standard to apply when accounting for the pension scheme. The only adjustment made to account for the scheme was to expense the company’s contributions of GH¢550,000 for the 2018 financial year in the Statement of Profit or Loss and Other Comprehensive Income and to credit the ‘Cash’ account.
Required:
Recommend, with appropriate calculations, the necessary accounting treatment for this accounting issue.
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Medina Power Ltd has carried out certain transactions denominated in foreign currency during its financial year ended 31 October 2019 and has also conducted foreign operations through a foreign entity. Medina Power Ltd.’s functional and presentation currency is the cedi.
On 31 July 2019, Medina Power Ltd purchased goods from a foreign supplier for 16 million dinars. At 31 October 2019, the supplier had not yet been paid and the goods were still held in inventory by Medina Power Ltd.
On 31 July, Medina Power Ltd sold goods to a foreign customer for 8 million dinars, and it received payment for the goods in dinars on 31 October 2019.
Medina Power Ltd had also purchased an investment property on 1 November 2018 for 56 million dinars. At 31 October 2019, the investment property had a fair value of 48 million dinars. The company uses the fair value model in accounting for investment properties.
Medina Power Ltd wants advice on how to treat these transactions in the financial statements for the year ended 31 October 2019.
Required:
Discuss the accounting treatment of the above transactions in accordance with the advice required by the directors. (You should show detailed workings as well as a discussion of the accounting treatment used.)
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You have just obtained your full membership with the Institute of Chartered Accountants (Ghana). Following this successful achievement, you have been appointed as the Head of Finance at Asasiyemedeh Company Limited, a Ghanaian company, which provides catering services. Your former employer, Akwaba Limited, is a large public sector organization operating in Accra, where, as the Financial Accountant, you had the opportunity to work on areas relating to financial accounting, procurement, contracts, and bids. One of Asasiyemedeh Company Limited’s major contracts is with Akwaba Limited, your former employer. The contract is now due for renewal, and Asasiyemedeh Company Limited is preparing a competitive bid for this contract.
You have been tasked to lead the team responsible for bidding for this contract, but you are concerned as a professional that you might breach confidentiality if you accept this role. You also suspect that your knowledge and experience of Akwaba Limited were seen as good reasons for appointing you to the position of Head of Finance at Asasiyemedeh Company Limited. You do not in any way want to let your new employer down as you are aware that the loss of such a major contract would have a significant effect on the financial performance of Asasiyemedeh Company Limited, and its performance-related bonus scheme for management members.
Required:
Discuss the ethical issues raised in the above scenario.
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Sasasila Ltd has been operating profitably for a number of years. However, in recent times, the company has been making losses. Below is the statement of financial position as at 30 June 2019:
| Assets | GH¢000 |
|---|---|
| Non-Current Assets | |
| Patents and copyrights | 75,000 |
| Land and buildings (net) | 200,000 |
| Plant and machinery (net) | 150,000 |
| Current Assets | |
| Inventories | 125,000 |
| Trade receivables | 125,000 |
| Bank | 37,500 |
| Investments (cost) | 100,000 |
| Total Assets | 812,500 |
| Equity and liabilities: | |
| Equity | |
| Ordinary share capital (issued at GH¢10 each) | 375,000 |
| 20% cumulative preference shares (issued at GH¢10 each) | 175,000 |
| Retained earnings | (75,000) |
| Non-current Liabilities | |
| 15% Debentures | 125,000 |
| Current Liabilities | |
| Interest on debentures | 18,750 |
| Trade payables | 93,750 |
| Provision for business restructuring | 50,000 |
| Provision for legal damages & claims | 12,500 |
| Provision for warranties | 37,500 |
| Total Equity and Liabilities | 812,500 |
Additional relevant information: The following scheme of reconstruction was approved by all parties as well as the High Court with the exception of only one ordinary shareholder:
Prepare the Capital Reduction Account as at 30 June 2019.
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The Controller and Accountant General, who is appointed by the President in accordance with Article 195 of the constitution and recognized as the Chief Advisor to the Minister of Finance and government in matters relating to accountancy, has urged all Metropolitan, Municipal, and District Assemblies (MMDAs) to strictly comply with a directive to use the Ghana Integrated Financial Management Information Systems (GIFMIS) platform for all government businesses. In effect, the budgeted funds for these MMDAs would be blocked or not released to any State Agency that refuses to enroll and go live on the GIFMIS Platform.
Required:
i) Explain FIVE (5) other responsibilities of the Controller and Accountant General in accordance with section 8(4) of the Public Financial Management Act, 2016 (PFMA) Act 921.
(5 marks)
ii) Identify FIVE (5) objectives for the adoption of GIFMIS.
(5 marks)
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A Public-Private Partnership (PPP) is a contractual arrangement between a public entity and a private sector party, with a clear agreement on shared objectives for the production of public infrastructure and services traditionally provided by the public sector. PPPs can have many different forms.
Required:
Explain the following types of Public-Private Partnership arrangements:
i) Operating and Maintenance Contract
(2.5 marks)
ii) Rehabilitate Operate and Transfer
(2.5 marks)
iii) Service Concession
(2.5 marks)
iv) Joint Venture
(2.5 marks)
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A newly appointed Chief Executive Officer (CEO) of a large Government Teaching Hospital has just resumed work. The Hospital is financed by 40% Internally Generated Funds and 60% subventions. At his first meeting with the Management Committee of the Hospital, the CEO briefed the Committee about his policies and strategies to improve efficiency in the Hospital’s operations. He identified the use of the Public Procurement Procedures as the major obstacle of the Hospital in achieving its objectives. He therefore suggested the use of established commercial procurement practices because a consultant advised him that it is very possible and permissible under the Public Procurement Act 2016 (Amendment) Act 914. He added that the head of an entity has the responsibility to decide whether to use public procurement rules or otherwise.
Required:
i) Explain to the Chief Executive Officer, the conditions under which the Public Procurement Act 2016 (Amendment) Act 914 permits the use of established commercial practices.
(3 marks)
ii) Describe the approval procedure involved prior to the use of established commercial practices of procurement.
(2 marks)
iii) In your opinion, would the Hospital meet the conditions for using the established commercial practices of procurement? Explain.
(2 marks)
iv) Explain THREE (3) functions of the Head of Procurement Entity under the Public Procurement Act 2016 (Amendment) Act 914.
(3 marks)
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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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The Public Expenditure and Financial Accountability (PEFA) framework recognizes the importance of internal control systems in achieving the desired fiscal and budgetary outcomes. Internal control systems play a vital role across every pillar of public financial management. It addresses risk and provides assurance that operations meet the control objectives of the PEFA framework. Therefore, it assesses how effectively the internal control systems operate in the country by making reference to the internal control components developed by other international organizations, specifically the Committee of Sponsoring Organizations (COSO) of the USA.
Required:
i) Explain THREE (3) control objectives in public financial management relevant to the PEFA framework of assessment.
(3 marks)
ii) Discuss FIVE (5) components of internal control in relation to the PEFA Framework.
(5 marks)
iii) Explain TWO (2) limitations of the PEFA Framework for assessing public financial management.
(2 marks)
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Some accountants hold the view that development of a Conceptual Framework for General Purpose Financial Reporting (simply, the Conceptual Framework) in the Public Sector is needless and a mere information overload on the Accountants. This argument is predicated on the fact that the Conceptual Framework does not establish authoritative requirements for financial reporting by public sector entities that adopt IPSAS, nor does it override the requirements of the International Public Sector Accounting Standards (IPSAS) or the Recommended Practice Guides (RPGs).
Required:
i) Explain the connection between the Conceptual Framework on one hand and IPSAS and RPGs on the other hand.
(2 marks)
ii) Illustrate a practical case where the Conceptual Framework would be useful to an accountant in the preparation and presentation of a General Purpose Financial Report for his organization.
(4 marks)
iii) Explain TWO (2) constraints on information included in the General Purpose Financial Reports.
(4 marks)
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Below is the extract from the records of Damsa Municipal Assembly (DMA).
Additional Information:
Required: Prepare in accordance with the IPSAS and the Public Financial Management Act, 2016 (Act 921): a) Statement of Financial Performance for the year ended 31 December 2019.
(5 marks)
b) Statement of Financial Position as at 31 December 2019.
(5 marks)
c) Statement of Budget Information in Comparison with Actuals for the year ended 31 December 2019.
(5 marks)
d) Notes to the financial statements.
(5 marks)
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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Cash accounting policies and accrual accounting policies, when applied respectively to the same transaction or events of the same entity, will produce different pictures of the financial performance, position, and cash flow information of the entity. Thus, the choice of alternative policies needs to be given much consideration. The International Public Sector Accounting Standards Board (IPSASB) permits the use of cash accounting policies whilst encouraging the application of accrual accounting policies in the preparation of financial reports for the public sector.
Required:
Discuss the difference between cash accounting policies and accrual accounting policies in terms of recognition and/or treatment of the following in the Financial Statements: i) Revenue
ii) Capital asset
iii) Allowances and provisions
iv) Contingent liability
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