OF CERTIFIED PUBLIC

THE INSTITTUTE ACCOUNTANTS

OF CERTIFIED OF
PUBLIC ACCOUNTANTS OF
PAKISTAN (ICPAP)

Stage Skills Course Code S-403

Financial and Corporate
Examination Summer-2011 Course Name
Reporting
Time Allowed 03 Hours Maximum Marks 100

NOTES:
1. All questions are to be attempted.
2. Answers are expected to the precise, to the point and well written.
3. Neatness and style will be taken into account in marking the papers.

Question No 1
The Statements of Financial Position of M/s .A. Limited, .B. Limited and .C. Limited as on
June 30, 2010 are as follows:

(Amount in Rs. .000.)

A B C
Limited Limited Limited

Non-Current Assets
Property, plant and equipment 35,450 4,250 6,050
Intangible assets 5,350 3,650 1,950
Investments
Investment in .B. Limited 6,600
Investment in .C. Limited 3,700
47,400 11,600 8,000

Current Assets
Inventory 2,600 1,600 2,000
Other current assets 1,000 2,400 1,500
3,600 4,000 3,500
Total Assets 51,000 15,600 11,500

Equity
Share capital (Rs.10 each) 20,000 5,000 3,000
Retained earnings 22,000 5,000 4,000
42,000 10,000 7,000
Non-Current Liability
Long-term loan 7,500 5,000 4,000
Current liabilities 1,500 600 500

Total Liabilities and Equity 51,000 15,600 11,500

.A. group carries on business of distribution of FMCG. .A. Limited is a listed company
and incorporated under the Companies Ordinance, 1984. Recently .A. Limited has
expanded its operation by focusing on diversification strategy and acquired shares in .B.
Limited and .C. Limited, which is listed in stock exchange and carries on similar
activities.

The following information is available relating to .A. group:

 ‘A’ Limited acquired 90% shares in .B. Limited on July 1, 2007 when retained
earnings of ‘B’ Limited were Rs.1,500,000.
 ‘B’ Limited acquired 240,000 shares in .C. Limited on July 1, 2008 when retained
earnings of ‘C’ Limited were Rs.1,200,000.
 During the year .C. Limited made inter-company sales to .B. Limited of
Rs.240,000 making a profit of 20% on cost and 25% of these goods are still in
stock at June 30, 2010.
 On January 1, 2010, .A. Limited purchased a non-current asset for Rs.160,000 and
sold to ‘B’ Limited for Rs.200,000. .A. Limited and .B. Limited charge
depreciation @ 25% using straight-line method.
 Goodwill has been tested for impairment and no impairment loss occurred.

Required:
Prepare Consolidated Statement of Financial Position as on June 30, 2010 in accordance
with the relevant International Financial Reporting Standard(s). (20 Marks)

Question No 2
Following is the Statement of Financial Position of M/s ACA and Co as at December 31,
2009:
M/s ACA & Co
Statement of Financial Position
As at December 31, 2009

Dec 31 Dec 31
2009 2008
(Rs. .000.)

Non-Current Assets
Property, plant and equipment 5,485 5,050
Less accumulated depreciation (1,250) (850)
4,235 4,200
Current Assets
Accounts receivable 875 635
Investments 100 75
Inventory 858 1,025
Cash and bank 275 175
2,108 1,910
Total Assets 6,343 6,110
Shareholders' Equity
Share capital 4,000 4,000
Retained earnings 300 250
Reserves and surpluses 350 225
4,650 4,475
Long-term Liabilities
Bonds payable 208 200
Liabilities against assets subject to finance leases 200 150
Deferred taxation 235 175
643 525
Current Liabilities
Accounts payable 250 205
Liabilities against assets subject to finance leases 50 30
Provision for taxation 290 265
Interest payable 260 310
Proposed dividend 200 300
1,050 1,110
Total Liabilities and Equity 6,343 6,110

Additional Data:
 Interest expense for the year, Rs.75,000.
 Tax payment for the year, Rs.95,000.
 During the year, assets costing Rs.375,000 were sold for Rs.275,000. Book values
of the assets were Rs.250,000.
 Investments are recorded as fair-value-through profit and loss.
 During the year, the company entered into finance lease agreement and acquired
a vehicle against lease. The vehicle would cost Rs.350,000 to the company if it
were purchased for cash.
 Bonds payable amounting to Rs.60,000 were issued during the year.

Required:
Prepare Statement of Cash Flows as per IAS-7 using indirect method. (20 Marks)

Question No 3
(a) Pak Limited entered into a seven-year finance lease agreement to lease a non-current
asset from Lessor limited. Lease commenced on January 1, 2009 and included seven
annual lease payments of Rs.100,000 each starting from January 1, 2009. Had Pak
Limited purchased the asset from the market on January 1, 2009, it would have cost
them Rs.511,160. Implicit interest rate is 12%. The asset has a useful life of seven years
and is to be depreciated using straight-line method with no residual value.

Required:

Prepare the following extracts in the books of Pak Limited:

(i) Income Statement for the year ended December 31, 2009. (10 Marks)

(ii) Statement of Financial Position as at December 31, 2009. (10 Marks)

Question No 4
Mr. Investor has a portfolio of diversified investments. In 2008, he made investments in
two financial assets:

(i) Rs.550,000 were invested in .fair-value-through profit and loss. Investment that also
incurred a transaction cost of Rs.5,000. At the end of 2008, value of the investment
increased to Rs.600,000. In 2009, he sold the investment for Rs.625,000.

(ii) Second investment was bought for Rs.775,000 and was classified as ‘available-forsale’
Transaction cost was Rs.6,000. Its value increased to Rs.790,000 at the end of 2008. It was
also sold for Rs.915,000 in 2009.

Required:
How above financial assets would have been accounted for in the financial statements of
2008 and 2009. (20 Marks)

Question No 5
For the last many years, M/s. ABC Limited has been facing the problem of turnover of
staff. In order to overcome this situation, management of the company has introduced
many plans to win the loyalty of the staff. On January 01, 2010, the company granted 200
cash share appreciation rights (SAR) to each of its 500 employees provided that they
would remain with the company until December 31, 2012. Following is the relevant data
as regards this scheme:

Assume that:
 During 2010, 30 employees leave. The entity estimates that a further 50
employees would leave during 2011 and 2012.
 During 2011, 15 employees leave. The entity estimates that a further 45
employees would leave during 2012.
 During 2012, 50 employees leave.

The fair value of one SAR for each year are shown below:
Year Fair value
(Rs.)
2010 10.00
2011 12.00
2012 15.00

Required:
Calculate the amount to be recognized as an expense in the Income Statement for each of
the three years ended to December 31, 2012 and the liability to be recognized in the
Statement of Financial Position at December 31, for each of the three years. (20 Marks)

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