Series: NOV 2020

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  • 20 Marks

AT- Nov 2022 – L3 – Q4 – Regulatory Environment for Corporate Reporting

Discuss the significance, guiding actions, inconsistencies, compliance areas, and dispute resolution in transfer pricing under Nigeria’s 2018 regulations.

Transfer pricing has become a topical issue in the world of taxation in recent years. This trend is partly driven by the need to prevent fiscal evasion and avoid economic double taxation. Various governments, both in developed and emerging countries, have continued to issue regulations to guide the operations of transfer pricing systems within their jurisdictions.

In Nigeria, the first step toward establishing a legal framework for regulating transfer pricing took place in August 2012, with the enactment of Income Tax (Transfer Pricing) Regulations Number 1, 2012. Due to shortcomings in the implementation of this regulation, it was revoked, and the Income Tax (Transfer Pricing) Regulations 2018 was subsequently enacted.

One critical principle, enshrined in various transfer pricing regulations, that every taxpayer must comply with when dealing with transactions between related entities is the arm’s length principle. This principle has gained significant attention among academics, regulatory institutions, and professionals, with ongoing debate surrounding its application.

Required:

a. Explain the significance of transfer pricing to both the taxpayers and tax authorities. (2 Marks)

b. In complying with the arm’s length principle, discuss two guiding actions which enterprises and multinationals must follow in their intercompany dealings. (3 Marks)

c. Identify and explain four methods multinational companies might use in financial dealings with associated or subsidiary entities that deviate from the arm’s length principle. (6 Marks)

d. In the administration of the Transfer Pricing Regulations 2018, highlight and discuss three fundamental compliance areas for taxpayers and tax practitioners. (6 Marks)

e. Explain the resolution process for disputes that arise between a taxpayer and tax authorities under the Transfer Pricing Regulations 2018. (3 Marks)

(Total: 20 Marks)

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  • 20 Marks

CR – Nov 2017 – L3 – Q3 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Evaluate Funda Plc's accounting policies for specific transactions, recommending adjustments as per IFRS where appropriate.

Funda Plc. is a listed utility service company in Nigeria providing water, electricity, and cable services. The directors prepared draft financial statements for the year ended June 30, 2017, following IFRS guidelines to support a loan application. Employees, owning 5% of ordinary shares, raised concerns about certain accounting policies applied by Funda Plc.

The draft income statement for the year ended June 30, 2017, is as follows:

N’m
Revenue 410.0
Cost of Sales (275.0)
Gross Profit 135.0
Other Operating Costs (65.0)
Profit Before Taxation 70.0

Employee Representatives’ Queries on Accounting Policies:

  1. Sale of Water Filters
    Funda Plc. sold 30 industrial water filters to a steelmaker, offering a 20% discount and granting the steelmaker a put option to repurchase the filters at 35% of the purchase price after six years, despite the filters’ expected ten-year life. Funda Plc. has recognized the entire revenue upfront.
  2. Connection Fees
    A refundable connection fee is charged for electricity connections, to be returned upon customer disconnection. No minimum notice is required, and costs can be deducted from refunds. The fee was fully recognized in the year as revenue.
  3. Activation Fees
    Non-refundable activation fees for digital cable services were fully recognized in revenue.
  4. Deposits for Domestic Electrical Goods
    Customers place a 25% deposit on orders, with the balance payable on delivery. Deposits are retained if orders are canceled but refunded if Funda Plc. fails to deliver. Revenue includes N10 million from deposits, with 90% of orders fulfilled.

Required:
Prepare a report explaining the suitability of Funda Plc.’s accounting policies for each transaction and recommend the appropriate IFRS treatment where necessary.

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  • 6 Marks

BL – Nov 2020 – L1 – SB – Q1d – Company Law

List powers exercised by the Annual General Meeting (AGM) of a company.

One of the two organs of a company is the general meeting of members.

Required:
State FOUR powers of the Annual General Meeting.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q6c – Partnership Law

Assess the legality of different partnership arrangements.

Comment on the legality of the following relationships operating as partnerships:

i. A partnership of 16 persons established for charitable purposes
ii. Adex cooperative society consisting of 500 members
iii. Black and Blue law firm consisting of 31 lawyers
iv. Stone Partnership firm comprising Segun aged 28, Tunde aged 17
v. A partnership of volunteers for the purpose of helping persons displaced by flood.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q6b – Law of Contract

Define express terms, implied terms, conditions, and warranties in a contract.

Contractual agreements usually contain terms that are different in nature and importance.

Required:
Define the following terms:
i. Express terms
ii. Implied terms
iii. Conditions
iv. Warranties

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q6a – The Nigerian Legal System

List tests to determine intent to steal during taking or conversion.

Taking or conversion with intent to defraud is an element of stealing.

Required:
State FIVE tests of determining whether or not an accused has an intention to steal at the time of taking or converting a thing.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q5d – Negotiable Instruments

Explain different cheque crossing types and define negotiable instruments.

Crossing of cheques has legal implications in banking transactions, and a cheque is a type of negotiable instrument.

Required:
i. A cheque instruction to “pay Ronke the sum of N50,000.00” without crossing the face of the cheque with two parallel lines.
ii. “Pay Andrew N100,000” with two parallel lines traversing the face of the cheque.
iii. “Pay Mary N150,000” with two parallel lines with Congo Bank written in between the two parallel lines on the face of the cheque.
iv. “Pay Ngozi N200,000” and by cheque with two parallel lines and the words “account payee only” written in between the two parallel lines.
v. Define negotiable instruments.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q5c – Agency Law

List the duties of an agent in an agency contract.

Parties under a contract of agency have certain rights and duties.

Required:
State FIVE duties of an agent under a contract of agency.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q5b – Employment Law

Define an employment contract and list grounds for dismissal by an employer.

Contracts of employment may be created and brought to an end in different ways.

Required:
i. Explain contract of employment.
ii. State THREE reasons for which an employer could dismiss an employee.

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  • 5 Marks

BL – Nov 2020 – L1 – SB – Q5a – Alternative Dispute Resolution

Define arbitration and describe an arbitral award.

Arbitration is a type of alternative dispute resolution mechanism.

Required:
Explain arbitration and arbitral award.

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  • 1 Marks

CSME – Nov 2020 – L2 – Q6a – Ethics in Business

Explain the term "act professionally" in accordance with the ICAN code.

The ICAN Professional Code of Conduct and Guide for Members requires every member or student of the Institute to always “act professionally” and in “the public interest” in the discharge of their responsibilities.

Required:
a. Explain “act professionally” in relation to the ICAN code. (1 Mark)

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  • 10 Marks

CSME – Nov 2020 – L2 – Q5b – Corporate Governance

Discuss sustainability policies required by the Nigerian Code of Corporate Governance.

The Chairman of Imperial Oil Services Limited, a company which prides itself as a leader in corporate social responsibility, has just returned from a training programme on ‘Efficient Board Management’. He stated that during the programme, Sustainability Reporting was identified as one of the key responsibilities of the Board of Directors by the Nigerian Code of Corporate Governance, 2018.

As the Chief Compliance Officer of the company, the Chairman requests for a paper discussing the relevant principles and issues to be covered by the company’s policies on sustainability as required by the code.

Required:
Present a paper discussing the relevant principles and issues to be covered by the company’s policies on sustainability as required by the code. (10 Marks)

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  • 10 Marks

CSME – Nov 2020 – L2 – Q5a – Risk Management and Corporate Strategy

Explain the concept of risk and differentiate between the two broad categories of risk, with examples.

In an effort to increase shareholders’ value, companies are often faced with risks.

Required:
i. Explain the term ‘risk’. (2 Marks)
ii. Differentiate between the two broad categories of risk, with examples. (8 Marks)

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  • 20 Marks

CSME – Nov 2020 – L2 – Q4 – Ethics in Business

Clarify the relationship between ethics and law, explain moral dilemmas, and critique consequentialist theories of ethics.

As a professional accountant, it is important that you are ethical in carrying out your professional responsibilities. This requires, among other qualities, a good ethical foundation consisting of a clear understanding of what ethics is all about.

You are required to:
a. Clarify the relationship between ethics and law. (3 Marks)
b. With the aid of an appropriate example, explain the nature of a moral dilemma. (5 Marks)
c. Present a critique of consequentialist theories of ethics in relation to TWO of its general criticisms and the profit-making objective in business. (12 Marks)

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  • 20 Marks

CSME – Nov 2020 – L2 – Q3 – Corporate Governance

Discuss five theories of corporate governance to assist a newly appointed director.

Effective corporate governance requires adequate understanding of the basic concepts and theories of corporate governance.

Required:
Discuss five theories of corporate governance in a way that will assist a newly appointed director to understand and apply them.

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  • 20 Marks

CSME – Nov 2020 – L2 – Q2 – Risk Management and Corporate Strategy

Recommend a universally accepted risk management framework and discuss its elements and techniques for Global Masters Plc.

Global Masters Plc. is a multinational corporation operating in numerous industries in many jurisdictions. The company had adopted different frameworks for managing risks in different jurisdictions over the years. This had made reporting on risk management difficult.

The board of Global Masters Plc. resolved to harmonise these various frameworks into a framework which has universal acceptance. The board therefore engaged your firm of risk experts to carry out the harmonisation process.

Required:

a. Recommend a universally acceptable framework which is also applicable in the various industries in which Global Masters Plc. operates. Justify your recommendation. (3 Marks)

b. Discuss the elements of the framework. (6 Marks)

c. Discuss the techniques to be adopted in implementing the framework. (11 Marks)

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  • 10 Marks

CSME – Nov 2020 – L2 – Q1b – Corporate Governance

Clarify the nature and objectives of a mission statement in relation to strategic management.

Clarify the nature and objectives of a mission statement.

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  • 30 Marks

CSME – Nov 2020 – L2 – Q1a – Environmental Analysis

Advise Cells Incorporated on the strategic management factors to consider when relocating its manufacturing plant to Dumbura Republic.

Dumbura Republic is reputed for its high population density and the consequent availability of cheap labour. Surprisingly, due to the high premium placed on qualitative education in science and technology-based disciplines, the country has an abundance of highly skilled workforce suited for manufacturing industries. Other features of Dumbura Republic include adequate, accessible and reliable social infrastructure such as electricity, potable water, road and rail network, and an effective security network. Besides, the country also has a variety of tax incentives designed to attract foreign investments. These positive features of the socio-economic environment in Dumbura have attracted a lot of foreign investors, including several computer and mobile phones hardware production companies.

Indeed, the socio-economic environment in Dumbura is very business-friendly. Hence, it is not surprising that a lot of foreign companies have located their industrial plants in the country. Effects of this development include increased employment opportunities, influx of people in search of employment from neighbouring countries, spiralling rent rates for all categories of accommodation, worsening environmental pollution, and a spiking population growth rate, which is beginning to take its toll on available social infrastructure. Besides, the hitherto peaceful country is beginning to experience an increased rate of crimes such as burglary, robbery, cyber theft and kidnap that target expatriates particularly. The local population is becoming increasingly hostile to the expatriates and workers from neighbouring countries, accusing them of denying the local population access to good job opportunities.

You have been employed as a consultant to a computer and mobile phone hardware company, Cells Incorporated, which is considering relocating its major manufacturing plant from an Asian country to Dumbura Republic. This is hoped to bring down the cost of production and provide a ready market for about 20% of its products.

Required:
With the aid of Johnson, Scholes, and Whittington’s position on strategic management, advise Cells Incorporated on the elements of strategic management that must be taken into consideration in deciding whether to relocate its manufacturing plants to Dumbura Republic. Ensure that you make adequate references to the scenario above as might be relevant.

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  • 10 Marks

PSAF – Nov 2020 – L2 – Q6b – Fiscal Policy and Public Finance

Explain the five phases of the economic cycle in relation to fluctuations in GDP.

Economic cycle, also known as business cycle, refers to the upward and downward movements (fluctuations) as shown in the national gross domestic product during a given period.

Required:
Explain the five phases of an economic cycle.

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  • 10 Marks

PSAF – Nov 2020 – L2 – Q6a – Public Sector Reforms

Identify five objectives each of GIFMIS and IPPIS under Nigeria's Public Financial Management reforms.

In July 2003, the Federal Government commenced the implementation of deliberate policies, programmes, and projects aimed at strengthening the economy, governance, and fighting corruption. This led to the first Economic Reform and Governance Project (ERGP) initiative, approved in December 2004, in line with FGN’s goal to strengthen governance, accountability, reduce corruption, and deliver services more effectively. This brought about reforms in the public sector of the economy. The Government Integrated Financial Management Information System (GIFMIS) and Integrated Personnel and Payroll Information System (IPPIS) are parts of the Public Financial Management (PFM) reforms approved in 2004.

Required:
Identify five objectives each of Government Integrated Financial Management Information System (GIFMIS) and Integrated Personnel and Payroll Information System (IPPIS). (10 Marks)

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