P2 Pass Year Paper

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Corporate Reporting
(International)

Time allowed
Reading and planning:
Writing:

15 minutes
3 hours

This paper is divided into two sections:
Section A – This ONE question is compulsory and MUST be attempted Section B – TWO questions ONLY to be attempted
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper P2 (INT)

Professional Pilot Paper – Essentials module

Section A – This ONE question is compulsory and MUST be attempted

1

The following draft financial statements relate to Zambeze, a public limited company:

DraftGroupBalanceSheetsat30June

Assets:
Non-current assets:
Property, plant and equipment
Goodwill
Investment in associate

2006
$m

2005
$m

1,315
30
270

1,005
25
290

1,615

1,320

650
610
50

580
530
140

1,310

1,250

2,925

2,570

Equity and liabilities:
Share capital
Share premium account
Revaluation reserve
Retained earnings

100
30
50
254

85
15
145
250

Minority interest

434
60

495
45

Total equity

494

540

Non-current liabilities
Current liabilities

850
1,581

600
1,430

Total liabilities

2,431

2,030

Total equity and liabilities

2,925

2,570

Current assets:
Inventories
Trade receivables
Cash at bank and cash equivalents

Total assets

DraftGroupIncomeStatementfortheyearended30June2006

Revenue
Cost of sales
Gross profit
Distribution and administrative expenses
Finance costs (interest payable)
Share of profit in associate

$m
4,700
(3,400)
1,300
(600)
(40)
30

Profit before tax
Income tax expense (including tax on income from associate $10 million)

690
(210)

Profit for the period

480

Attributable to:
Equity holders of the parent
Minority interest

455
25
480

2



DraftGroupStatementofRecognisedIncomeandExpensefortheyearended30June2006

$m
Foreign exchange difference of associate
(5)
Impairment losses on property, plant and equipment offset against revaluation surplus
(95)
Net expense recognised in equity
Profit for period

(100)
455

Total recognised income and expense

355

DraftStatementofchangesinequityfortheyearended30June2006

Total recognised income and expense for the period
Dividends paid
New shares issued

$m
355
(446)
30

Total movement during the year
Shareholders’ funds at 1 July 2005

(61)
495

Shareholders’ funds at 30 June 2006

434

The following relates to Zambeze:
(i)

Zambeze acquired a seventy per cent holding in Damp, a public limited company, on 1 July 2005. The fair values of the net assets acquired were as follows:

$m
Property, plant and equipment
70
Inventories and work in progress
90
160
The purchase consideration was $100 million in cash and $25 million (discounted value) deferred consideration which is payable on 1 July 2006. The difference between the discounted value of the deferred consideration ($25 million) and the amount payable ($29 million) is included in “interest payable”. Zambeze wants to set up a provision for reconstruction costs of $10 million retrospectively on the acquisition of Damp. This provision has not yet been set up.

(ii) There had been no disposals of property, plant and equipment during the year. Depreciation for the period charged in cost of sales was $60 million.

(iii) Current liabilities comprised the following items:

Trade payables
Interest payable
Taxation

2006
$m
1,341
50
190

2005
$m
1,200
45
185

1,581

1,430

(iv) Non-current liabilities comprised the following:

2006

$m
Deferred...
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