(i) Value in use
This is the present value of the estimated future cash flows expected to be derived from
the continuing/use of an asset and from its disposal at the end of its useful life.
(ii) Recoverable amount
This is the higher of an asset's value in use and the fair value less costs to sell or, net
realizable value.
marto answered the question on February 15, 2019 at 06:22
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In 1993, the Nairobi County Government constructed a public primary school at a cost of Sh.25 million. It was estimated that the school would be...
(Solved)
In 1993, the Nairobi County Government constructed a public primary school at a cost of Sh.25 million. It was estimated that the school would be used for 40 years. By the end of 2013, the school population had declined from 1,500 students to 400 students as a result of a population shift caused by the bankruptcy of a major employer in the area. The management decided to close the two top floors of the three storey school building. The management has no expectation that enrollment will increase in future such that the upper storeys would be reopened. The current replacement cost of the school is estimated at Sh.13 million.Required:
Calculate the impairment loss to be recognized using the depreciated replacement cost approach.
(b) International Public Sector Accounting Standard (IPSAS) 22 (Disclosure of Financial Information about the General Government Sector (GGS)), defines a general government sector as "comprising all organizational entities of the general government as defined in statistical bases of financial reporting".
With regard to this standard, outline eight items that should be disclosed in respect of a GGS.
(c) IPSAS 20 (Related Party Disclosures) defines a related party as 'any party that has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if the related party entity and another entity are subject to common control'.
With respect to the above statement:
i) Explain the meaning of 'significant influence'.
ii) Outline four ways in which significant influence might be exercised.
Date posted:
February 15, 2019
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Answers (1)
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With reference to IPSAS 9 (Revenue from Exchange Transactions), summarize five conditions that must be satisfied before revenue from the sale of goods can be...
(Solved)
With reference to IPSAS 9 (Revenue from Exchange Transactions), summarize five conditions that must be satisfied before revenue from the sale of goods can be recognized.
Date posted:
February 15, 2019
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Answers (1)
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In the context of IPSAS 4 (The Effects of Changes in Foreign Exchange Rates), explain how exchange differences arising on monetary items are recognized.
(Solved)
In the context of IPSAS 4 (The Effects of Changes in Foreign Exchange Rates), explain how exchange differences arising on monetary items are recognized.
Date posted:
February 15, 2019
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Answers (1)
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i) On 1 January 2009, the government purchased a software licence for Sh.350,000 for an application on its new main frame computer. The government estimated...
(Solved)
i) On 1 January 2009, the government purchased a software licence for Sh.350,000 for an application on its new main frame computer. The government estimated that the useful life of the software would be eight years and that it would receive benefits and service potential from the software on a straight-line basis over the useful life of the software. As at 31 December 2013, usage of the application had declined to 15% of its originally anticipated demand. A licence for a software application to replace the remaining service potential of the existing software application would cost Sh. 150,000.
Required:
Impairment loss to be recognized for the software using the depreciated replacement cost approach.
ii) On 1 January 2004, the government built an office at a cost of Sh.50 million. The building was expected to provide service for 40 years. On 31 December 2013, after 10 years of use a fire caused severe structural damage and due to safety reasons, the office building was closed for repairs that cost Sh.35.5 million. These repairs were made to restore the office building to occupiable condition. The current cost' of a new office building is Sh,100 million.
Required:
Impairment loss to be recognized for the office building using the cost restoration approach
Date posted:
February 15, 2019
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Answers (1)
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With reference to IPSAS 26 (Impairment of Non-Cash Generating Assets):
i) Explain the meaning of ‘cash-generating assets’.
ii) Analyse the criteria that could be used to identify...
(Solved)
With reference to IPSAS 26 (Impairment of Non-Cash Generating Assets):
i) Explain the meaning of ‘cash-generating assets’.
ii) Analyse the criteria that could be used to identify ah asset that might be impaired.
Date posted:
February 15, 2019
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Answers (1)
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In the context of unethical management practices, discuss four incentives that could motivate the management of a business entity to manipulate the entity's financial statements...
(Solved)
In the context of unethical management practices, discuss four incentives that could motivate the management of a business entity to manipulate the entity's financial statements as well as the underlying supporting records.
Date posted:
February 14, 2019
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Answers (1)
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The following financial statements relate to Hamada Group:
(Solved)
The following financial statements relate to Hamada Group:
Date posted:
February 14, 2019
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Answers (1)
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Pamoja group has-prepared the following draft statements of financial position as at 30 June:
(Solved)
Pamoja group has-prepared the following draft statements of financial position as at 30 June:
Date posted:
February 14, 2019
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Answers (1)
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The following financial statements relate to the Techno Group for the year ended 31 October 2012:
(Solved)
The following financial statements relate to the Techno Group for the year ended 31 October 2012:
Date posted:
February 14, 2019
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Answers (1)
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The following trial balance relates to Ndovu Limited as at 31 March 2013:
(Solved)
The following trial balance relates to Ndovu Limited as at 31 March 2013:
Additional information:
1. The value of land in the trial balance is given as Sh.300 million. The buildings were revalued on 31 March 2013 at Sh.920 million. The estimated useful life of buildings was 20 years as at 1 April 2012. Depreciation on buildings is charged at 60% to cost of sales and 20% each to distribution costs and administrative expenses.
2. The company constructed its own plant at a total cost of Sh.240 million. The plant was brought into use on 1 October 2012 but its cost had not been capitalized. Instead, its cost had been included in the cost of sales. Plant is depreciated at 12.5% per annum using the reducing balance method (time apportioned) and charged to the cost of sales.
3. The fair value of the investments held at fair value was Sh.271 million as at 3 1 March 2013.
4. The balance of tax on the trial balance represents an overprovision of previous years" tax.
The estimate of tax for the current year is Sh.187 million. At 31 March 2013, there were Sh.400 million of taxable temporary differences. For deferred, tax assume an average tax rate of 30%.
5. The 2% loan note was issued on 1 October 2012 under the terms that require a large premium on repayment. The effective interest rate therefore is 6% per annum.
6. The suspense account relates to a rights issue of shares that was made on 1 January 2013. The terms of the issue were one share for every four held at Sh.8 per share. The par value of each share is Sh.5. The issue was fully subscribed.
Required:
Prepare the following statements in a format suitable for publication:
a) Statement of comprehensive income for the year ended 31 March 2013.
b) Statement of financial position as at 31 March 2013.
Date posted:
February 14, 2019
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Answers (1)
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The Kengo group has prepared the following financial statements for the years ended 31st March 2013 and 2012:
(Solved)
The Kengo group has prepared the following financial statements for the years ended 31st March 2013 and 2012:
Date posted:
February 14, 2019
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Answers (1)
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The following trial balance relates to Mapema Limited, a quoted company, as at 30 April 2013:
(Solved)
The following trial balance relates to Mapema Limited, a quoted company, as at 30 April 2013:
Required:
Prepare for publication purposes:
a) A statement of comprehensive income for the year ended 30 April 2013.
b) A statement of changes in equity for the year ended 30 April 2013.
c) A statement of financial position as at 30 April 2013.
Date posted:
February 14, 2019
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Answers (1)
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The following financial statements relate to the Crest group for the year ended 31 March 2013:
(Solved)
The following financial statements relate to the Crest group for the year ended 31 March 2013:
Date posted:
February 14, 2019
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Answers (1)
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The following are the group income statement and group statement or financial position of Soma group of companies, for the financial year ended 31 October...
(Solved)
The following are the group income statement and group statement or financial position of Soma group of companies, for the financial year ended 31 October 2013:
Date posted:
February 14, 2019
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Answers (1)
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Zeddy Limited is a company quoted at the securities exchange. The following trial balance was extracted from the books of the company as at 31...
(Solved)
Zeddy Limited is a company quoted at the securities exchange. The following trial balance was extracted from the books of the company as at 31 October 2014:
Date posted:
February 14, 2019
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Answers (1)
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Afya pensioners is a funded, non-contributory defined benefit scheme that was established by the management of Afya Food processors Limited in 1950. The directors have...
(Solved)
Afya pensioners is a funded, non-contributory defined benefit scheme that was established by the management of Afya Food processors Limited in 1950. The directors have always expensed the company’s contribution to the scheme in the period of contribution and also credited to the income statement of any period, any refunds made from the scheme during the period in question.
As a result of the above policy, material variations in costs and incomes of Afya Food Processors Limited have arisen in the past years. These worsened by any contribution holidays or redundancies of employees. In this year’s audit, the auditors. Ujuzi and Associates described the company’s pension accounting policy as “inadequate” as the resulting accounts do not give a true and fair view of pension costs to the employer. The auditors have also pointed out that current policy can be used to manipulate the company’s profit levels.
The auditors have suggested that either of two approaches (the accrued benefits or prospective benefits) be adopted the management in accounting for pension costs.
Required:
i) Do you agree with the auditors positions? Why?
ii) State and explain three reasons why there may be variations in the regular pension costs to the employer.
iii) Briefly explain the two accounting approaches suggested by the auditor. What is their effect on the pension fund?
iv) What would be the main objective of adopting an accounting standard, with respect to pension costs, for organization like Afya Food Processors Limited?
Date posted:
February 14, 2019
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Answers (1)
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Explain the meaning of the following terms as used in pension accounts
(i) Funded schemes.
(ii) Experience adjustments.
(Solved)
Explain the meaning of the following terms as used in pension accounts
(i) Funded schemes.
(ii) Experience adjustments.
Date posted:
February 14, 2019
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Answers (1)
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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)