(i) Funded scheme is a pension scheme in which the contributor (employer) has
transferred irrecoverably some assets to an entity (a fund) separate from the employer’s enterprise, to meet future obligations for the payment of retirement benefits.
(ii) Experience adjustments: Are alterations to retirement benefit costs arising from the difference between previous actuarial assumptions as to the future events and what actually occurred.
marto answered the question on February 14, 2019 at 08:25
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The following relates to Waastaafu Retirement Benefits Scheme, a defined benefit plan, for the years ended 31 December 2005, 2006, and 2007:
(Solved)
The following relates to Waastaafu Retirement Benefits Scheme, a defined benefit plan, for the years ended 31 December 2005, 2006, and 2007:
Additional information:
1. As at 1 January 2005, the present value of plan obligations and fair value of plan assets were both sh. 1000 million.
2. Net cumulative unrecognized actuarial gains as at 1 January 2005 were sh. 140 million.
3. Assume all transactions occurred at the year end.
Required:
i) Actuarial gains or losses on the present value of plan obligations.
ii) Actuarial gains or losses on fair value of plan assets.
iii) Net pension cost to be charged in the income statement.
iv) Scheme balances to be reflected in the balance sheet
Date posted:
February 14, 2019
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Answers (1)
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Zedkey Ltd. operates a defined benefit pension plan The following financial data relates to the scheme for the past three years ended 30 April 2012:
(Solved)
Zedkey Ltd. operates a defined benefit pension plan The following financial data relates to the scheme for the past three years ended 30 April 2012:
Date posted:
February 14, 2019
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Answers (1)
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In the context of IAS 19 (Employee Benefits), evaluate:
(i) When an amount should be recognized as a defined benefit liability.
(ii) The treatment of actuarial gains...
(Solved)
In the context of IAS 19 (Employee Benefits), evaluate:
(i) When an amount should be recognized as a defined benefit liability.
(ii) The treatment of actuarial gains or losses.
(iii) The items that should be recognized in the income statement.
Date posted:
February 14, 2019
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Answers (1)
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With reference to IFRS 2 'Share Based Payments', outline three types of share based payment transactions.
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With reference to IFRS 2 'Share Based Payments', outline three types of share based payment transactions.
Date posted:
February 14, 2019
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Answers (1)
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Jallam Co. Ltd. had been preparing its financial statements using actual taxes payable method for computing tax expense. In the year ended 30 June 2000,...
(Solved)
Jallam Co. Ltd. had been preparing its financial statements using actual taxes payable method for computing tax expense. In the year ended 30 June 2000, the company changed to deferred tax method and the new policy was to be applied retroactively to the accounts of the years ended 30 June 1999 and 2000.
The following are the balance sheets of the company for the two years ended 30 June 1999 and 2000 before incorporating tax expense for the year 2000
No acquisition or disposal of fixed assets took place in the year ended 30 June 2000
3. Written down value of fixed assets were Sh.22, 500,000 and Sh.18, 000,000 as at 30 June 1999 and 2000 respectively
4. Stocks as at 30 June 2000 are net of a general provision for price fluctuation of 10% of the cost. The provision is not allowed for tax purposes.
5. Accruals include leave passage provision of Sh.2, 500,000 as at 30 June 1999 and Sh.1, 800,000 as at June 2000
6. Prepayments for the year 2000 include Sh.2, 000,000 allowed as a deduction on computation of current tax.
7. Assets subjects to wear and tear allowance were first revalued in 1999 and revaluation repeated in 2000. No adjustments were made to the tax base of the assets following the revaluations.
8. Foreign exchange loss balances amounted to Sh.3, 600,000 and Sh.2, 800,000 on 30 June 1999 and 2000 respectively.
9. Donations in the year 2000 were Sh.5, 000,000.
10 Tax rates in 1999 and 2000 were 40% and 50% respectively.
Current tax for a year is paid on 15 September of the following financial year.
Required:
a) Current tax for the year ended 30 June 2000
b) Using the method recommended by the revised IAS 12, calculate deferred tax expense or income for the years 1999 and 2000
c) The current tax account, deferred tax account and revaluation account for the years 1999 and 2000
Date posted:
February 14, 2019
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Answers (1)
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The following incomplete balance sheet relate to Concorde Ltd for the years ended 31 December 2007:
(Solved)
The following incomplete balance sheet relate to Concorde Ltd for the years ended 31 December 2007:
Additional information:
1. The company reported an accounting profit before tax of sh.60 million for the year ended 31 December 2007. This profit was arrived at as shown below:
2. The company declared a dividend of sh.10 million for the year ended 31 December 2007.
3. Depreciation on plant and equipment is provided at the rate of 20% on straight-line basis. Plant and equipment qualify for capital allowances at the rate of 25% of cost on straight –line basis.
4. Accumulated tax depreciation as at 31 December 2006 was sh.50 million. On 1 February 2007, the company purchased additional costing sh.150 million. The company’s policy is to charge a full year’s depreciation in the year of purchase and none in the year of disposal.
5. Included in selling and distribution expenses is sh.5 million representing an expense which was disallowed by the tax authorities.
6. The company charged the income statement with sh.14 million representing pension costs for the year ended 31 December 2007. Sh.11.5 million of this amount was allowed for tax purposes.
7. The company made a general provision for bad debts of sh.3 million for the year ended 31 December 2007. There were no bad debts written off during the year.
8. On 31 July 2007, the company made a tax payment of sh.15 million.
9. Corporation rate of tax is 30%.
10. The company separately accounts for deductible and taxable temporary differences.
Required:
i) Determine the charge in the income statement for current tax and deferred tax expenses.
ii) Prepare the income statement showing the retained profit balance.
iii) Prepare the complete balance sheet.
Date posted:
February 14, 2019
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Answers (1)
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Maji Limited had a deferred tax liability of Sh. 105 million as at 1 June 2010. During the year ended 31 May 2011, the...
(Solved)
Maji Limited had a deferred tax liability of Sh. 105 million as at 1 June 2010. During the year ended 31 May 2011, the company had the following items with regard to estimating deferred tax:
1. The carrying amount of property, plant and equipment as at 31 May 2011 was Sh.980 million. This included some buildings which were revalued upwards by Sh 50 million at 31 May 2010 which had a remaining useful life of 10 years at that date. The company's accounting policy is to treat revaluation surpluses as realized on disposal of the revalued assets. The tax base of property, plant and equipment as at 31 May 2011 was Sh 640 million.
2. Deferred development expenditure amounted to Sh.45 million at year end (Sh.40 million as at 31 May 2010). Sh.10 million of additional development expenditure was incurred during the year and the remaining difference between 2010 and 2011 figures relates to development expenditure amortized for products that have started being commercially produced. All development expenditure is allowed for tax purposes.
3. Included in current assets is an amount of Sh.40 million due in respect of some patent royalties on one of the company's older products which is now being produced by other companies. Patent royalties are taxed only when received.
4. The company’s tax rate proposals.
Required:
i) The deferred tax balance as at 31 May 2011 and the relevant journal entry.
ii) The directors of Maji Limited have proposed that deferred tax should be discounted and also provided on the share of post-acquisition profits in its subsidiary and associate companies.
Comment on these proposals.
Date posted:
February 14, 2019
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Answers (1)
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Lami Limited had a deferred tax liability as at I May 2011 of Sh.100 million. For the purposes of preparing financial statements for the year...
(Solved)
Lami Limited had a deferred tax liability as at I May 2011 of Sh.100 million. For the purposes of preparing financial statements for the year ended 30 April 2012, the following additional information is available:
1. Property, plant and equipment has a carrying amount of Sh.1,200 million and a tax base of Sh.1,000 million. Some land and buildings were revalued upwards by Sh.50 million during the year ended 30 April 2012.
2. Intangible assets consisting of trade licences being amortized over five years had a carrying amount of Sh 60 million. This was allowed for tax purposes in full two years ago.
3. The company has available for sale financial assets with a carrying amount of Sh.20 million and financial assets at fair value through profit and loss of Sh. 10 million. Both financial assets reported losses in fair value of Sh.2 million each as at 30 April 2012.
4. Inventory is shown at the lower of cost and net realisable value. The cost is Sh.800 million while the net realizable value is Sh.780 million.
5. Receivables had a carrying amount of Sh.500,million after making an allowance for doubtful debt of Sh.20 million and an exchange gain of Sh.40 million (unrealized). Both the allowance and exchange gain arc not allowed for tax purposes.
6. Trade and other payable are stated at Sh. 900 million after making provision for discount of Sh. 10 million.
7. Assume a tax rate of 30%.
Required
i) Compute the relevant temporary differences.
ii) Show the journal entry to record changes in the deferred tax liability
Date posted:
February 14, 2019
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Answers (1)
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Justify the provision of deferred tax using temporary differences in the financial statements of a reporting entity.
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Justify the provision of deferred tax using temporary differences in the financial statements of a reporting entity.
Date posted:
February 14, 2019
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Answers (1)
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IAS 32 'Financial Instruments: Disclosure and Presentation' states that the purpose of the disclosures required by this standard is to provide information that will enhance...
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IAS 32 'Financial Instruments: Disclosure and Presentation' states that the purpose of the disclosures required by this standard is to provide information that will enhance understanding of the significance of on-balance-sheet and off-balance-sheet financial instruments to an enterprise’s financial position, performance and cash flow and assist in assessing the amounts, timing and certainty of future cash flows associated with those instruments. State and briefly describe three types of financial risks described in the standard, in relation to transactions in financial instruments.
Date posted:
February 14, 2019
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Answers (1)
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With reference to IAS 39(Financial Instruments: Recognition and Measurement), explain how financial instruments are initially recognized and subsequently measured in the books of a reporting...
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With reference to IAS 39(Financial Instruments: Recognition and Measurement), explain how financial instruments are initially recognized and subsequently measured in the books of a reporting entity.
Date posted:
February 14, 2019
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Answers (1)
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With reference to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), differentiate between a 'constructive obligation' and a 'contingent liability'.
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With reference to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), differentiate between a 'constructive obligation' and a 'contingent liability'.
Date posted:
February 14, 2019
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Answers (1)
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Discuss the approach taken by International Financial Reporting Standard (IFRS) 9 in measuring and classifying financial assets and the main effect that IFRS 9 will...
(Solved)
Discuss the approach taken by International Financial Reporting Standard (IFRS) 9 in measuring and classifying financial assets and the main effect that IFRS 9 will have on accounting for financial assets.
Date posted:
February 14, 2019
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Answers (1)
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(a) IAS 16: property, plant and equipment gives certain criteria to be satisfied before an item of property, plant and equipment should be recognized as...
(Solved)
(a) IAS 16: property, plant and equipment gives certain criteria to be satisfied before an item of property, plant and equipment should be recognized as an asset. State these criteria and state the value at which the asset should be measured initially. Give six examples of directly attributable costs that could be included in the value and four examples of cost that should not be included in the value.
(b) Chumuki Supermarket Limited is a quoted company which runs 22 Supermarket stores throughout Kenya. 12 of these stores are situated in and around Nairobi and all 12 are supplied by Chumuki’s central go down situated in the industrial area of Nairobi. Pricing, marketing and human resources policies are decided centrally by Chumuki. All stores are managed in the same way and management run the business on a store-by-store profit basis.
Recently, the Githurai store has seriously under performed against its budget for the year ending 31 December 2000. Rising insecurity in the area together with difficulties in obtaining access to the store have seriously adversely affected its financial performance. The Githurai store together with the Kahawa store were purchased from Ruiru Superstores on 1 January 1998 for Sh.25 million and Sh.25 million and Sh.15 million respectively plus goodwill of Sh.8 million for both stores. The stores are being depreciated on the straightline method to nil residual value over 20 years the goodwill is being amortized to nil on the straight line basis over the same period. The Githurai store could be sold for Sh.15 million net. Its value in use is Sh.20 million. Management have performed a “bottom-up” test in relation to the goodwill and the purchase prices of the stores and are satisfied that a 'top-down' test is not needed.
Required:
State in detail how the impairment loss should be recognized for the Githurai cash-generating unit in the financial Statements for the year ending 31 December 2000: neither depreciation nor amortization has yet been charged for this period. State also the carrying value of the Githurai cash-generating unit after the impairment loss has been recognized. Ignore deferred tax.
Date posted:
February 14, 2019
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Answers (1)
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Identify and explain five indicators which show that an impairment loss to a fixed asset may have occurred.
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Identify and explain five indicators which show that an impairment loss to a fixed asset may have occurred.
Date posted:
February 14, 2019
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Answers (1)
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The following information is provided relating to the carrying amount of the assets comprising the cash generating units of Alexo Ltd as at 30 September...
(Solved)
The following information is provided relating to the carrying amount of the assets comprising the cash generating units of Alexo Ltd as at 30 September 2009:
Date posted:
February 14, 2019
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Answers (1)
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International Financial Reporting Standard (IFRS) 6 (Exploration for and Evaluation of Mineral Resources) provides guidance on how tangible and intangible assets used to explore the...
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International Financial Reporting Standard (IFRS) 6 (Exploration for and Evaluation of Mineral Resources) provides guidance on how tangible and intangible assets used to explore the existence of mineral resources can be accounted for and presented.
Required
Briefly explain four factors that indicate that such assets have been impaired.
Date posted:
February 14, 2019
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Answers (1)
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Explain how an impairment loss is measured according to IAS 36 (Impairment of Assets).
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Explain how an impairment loss is measured according to IAS 36 (Impairment of Assets).
Date posted:
February 14, 2019
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Answers (1)
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On 1 January 2006, Matopeni Primary School acquired a bus at a cost of Sh.6.000.000 to enable students from a nearby village commute to school...
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On 1 January 2006, Matopeni Primary School acquired a bus at a cost of Sh.6.000.000 to enable students from a nearby village commute to school free of charge. The school estimated that the bus had a useful life of 10 years. Or 31 December 2010, the bus sustained damage in a road accident requiring Sh. 1,200.000 to be restored to a usable condition. The restoration did not affect the useful life of the asset. The cost of a new bus to deliver a similar service was Sh.7, 500,000 as at 31 December 2010.
Required:
Evaluate the impairment loss attributable to the bus using the requirements of IPSAS 21 (Impairment of Non-Cash Generating Assets). Use the restoration cost approach.
Date posted:
February 14, 2019
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Answers (1)
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a) In the context of International Accounting Standard (IAS) 21 (The Effects of Changes in Foreign Exchange Rates), explain two factors that should be considered...
(Solved)
a) In the context of International Accounting Standard (IAS) 21 (The Effects of Changes in Foreign Exchange Rates), explain two factors that should be considered in determining an entity's functional currency.
b) Ufanisi Ltd. is a Kenyan-based company that uses the Kenya Shilling (Ksh) as its presentation currency. On 1 January 2010, the company established a wholly owned
subsidiary, Ng'ambo Ltd., in a foreign country known as Ugenini, In addition to Ufanisi Ltd. making an equity investment in the subsidiary, a long term note payable to an Ugenini bank was negotiated to purchase property and equipment. The currency used in Ugenini is known as the Falanga (Fn). The subsidiary began operations with the following statement of financial position as at 1 January 2010:
Required:
Translate the following financial statements of Ng'ambo Ltd. using the temporal method:
i) Income statement for the year ended 31 December 2010.
ii) Statement of financial position as at 31 December 2010.
Date posted:
February 13, 2019
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Answers (1)