CRA nov 2012 ans

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    InstituteofCertifiedManagementAccountantsofSriLankaCorporateReporting&Analysis(CRA/ML2302)ManagerialLevel

    November2012Examination

    SuggestedAnswerScheme

    Question 01 (30 marks)

    1. 100 x 6 / 12 = 50Cv = 230+50+21 =301NCI = 280x30%= 84

    217

    Gain (225-217) =8RReserve (10x70%) =7Total gain =15

    2. 100- .2(100+200-50)x115=5.750

    3.

    CPLC Group

    Rs. 000

    Revenue 88000

    Cost of Sales (53000)Gross Profit 35000

    Other Income 0

    Administrative Expenditure (12000)

    Distribution Cost (14000)

    Finance cost (3000)

    6000

    KPLC share 5600x30% 100x30%150 1500

    Profit before tax 7500

    Income tax (1000)

    Profit after tax 6500

    Exchange gain 320Total comprehensive income 6820

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    4.

    B

    group NCI

    Ppe 36+20+36 92000 invest 18000 FV 4400

    GW

    6600 equityB

    12800

    3200investmnts 2,000 reserv 3200 800

    Stock 32000 2000 GW 400

    Debt 12500 GWNCI 400

    Cit 500 FullGW 2400

    145600

    C

    Scap 20000 invest 10000 FV 7000

    Res 61600 indire 7200 eq

    2560

    NCI

    14000 equity5440 res

    3840contingentconsider 2000

    Loan 26000 res 8160 600

    liabilities 22000 3600

    145600 600

    fullgw 4200

    ENTIRE 6600

    NCI group

    FV 11400

    investC 1800

    reservesB 1200 4800

    reserves

    c 3200 6800

    Areerv 50000

    14000 61600

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    Question2

    1. If the bank has provided a standard loan, no related party disclosure required.

    2.

    i. Reportable segments are operating segments or aggregations of operating

    segments that meet specified criteria:

    a) its reported revenue, from both external customers and

    intersegment sales or transfers, is 10 per cent or more of the combined

    revenue, internal and external, of all operating segments; or

    b) the absolute measure of its reported profit or loss is 10 per cent or

    more of the greater, in absolute amount, of (i) the combined reported

    profit of all operating segments that did not report a loss and (ii) the

    combined reported loss of all operating segments that reported a loss;or

    c) its assets are 10 per cent or more of the combined assets of all

    operating segments.

    (ii) Yes.Shouldbeincludedinsegmentresultwhichisthedifferencebetween

    segmentrevenueandexpense.

    (iii) Itisrequiredtoeliminateasitiswithinthesegment. Outofthesegmentnot

    required.

    (iv) Itisallowedtoreportasaseparatesegment.SLFRS8.

    Question03

    1. 2mntobeprovidedimmediately.

    2.

    i. A financial liability is any liability that is:

    a contractual obligation:

    o to deliver cash or another financial asset to another entity; or

    o to exchange financial assets or financial liabilities with another entity

    under conditions that are potentially unfavourable to the entity; or

    a contract that will or may be settled in the entitys own equity instruments and is :

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    a non-derivative for which the entity is or may be obliged to deliver a variable

    number of the entitys own equity instruments; or

    o a derivative that will or may be settled other than by the exchange of a

    fixed amount of cash or another financial asset for a fixed number of the

    entitys own equity instruments.

    ii. Yes,Hollandhasanobligationtopayinterestonspecificdates.Hence,itnotanequity

    component.

    iii. Offsetting Possible Only; if ithas a current right to set off the recognised amounts; andintends either to settle on a net basis, or to realise the asset and settle the liabilitysimultaneously.

    iv. Equitycomponent

    CF Factor PV

    100000 0.6355 63550

    10000 0.8928 8928

    10000 0.7972 7972

    10000 0.7117 7117

    10000 0.6355 6355

    PVofdebt 93922

    proceeds 100000

    Equity

    portion 6078

    Question4

    Candidateshouldcalculateatleasttworatiosineachcategory:profitability,liquidityandefficiency.

    Thecompany

    runs

    over

    its

    capacity,

    candidate

    should

    identify

    the

    symptoms

    in

    the

    report.

    Atleastfourlimitationsofratiosasananalyticaltechniqueexpected.

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    Question 5

    1. CSR

    2. theyprovidemanagement,shareholdersandotheruserswithcomparableinformationfromperiodtoperiod,relatingtotheunderlyingresultsofoperations,capitalmaintenanceand

    trendsin

    performance;

    Theyenablemanagementtomakemorereliabledecisionsoncapitalexpenditureplans,as

    thefinancialstatementsaremorerelevant;and

    Theybecomemoreusefultointernationalinvestorsandotherusersoffinancialstatements

    inthattheyarecomparablewithotherundertakingsinthesameindustry.

    3. Governance

    4. Effective corporate governance is the need of the era for corporate sector. Past

    failures and corporate scams like golden key amply prove this fact, and have

    forced regulators to review the existing regulations

    The Best Practice on Corporate Governance (ICASL) requires that the Board shouldmaintain a sound system of internal control to safeguard shareholders investments

    and the Companys assets. Directors should, at least annually, conduct a review of

    the effectiveness system of internal controls, to be able to report to shareholders

    This could be made the responsibility of the Audit Committee. Companies, which do

    not have an internal audit function, should from time to time review the need for one.

    strong internal control would deliver accurate ,complete and timely information to

    the investor community and to the public .

    2. The costs incurred during the growth of fish, should be written off in that periodas the fair value is not reliable.