Financial Accounting > QUESTION PAPER (QP) > MODULE CODE: ABF311 TITLE OF PAPER: Advanced Financial Accounting and Reporting. STUDY AND REVISION (All)

MODULE CODE: ABF311 TITLE OF PAPER: Advanced Financial Accounting and Reporting. STUDY AND REVISION QUESTIONS

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QUESTION 1 [25 marks] On 1 January 2009 Drive acquired 3 million equity shares in Wheels by way of a share for share exchange. Shareholders in Wheels plc received one share in Drive for every two shares in Wheels plus £1 per acquired Wheels‟ share in cash. The market price of each Drive share at the date of acquisition was £6. At 31 March 2009 only the cash consideration had been recorded in the financial statements of Drive plc. Summarised draft financial statements of the three companies for the year ending 31 March 2009: QUESTION 2 [25 marks] On 1 January 2008 Rocket Group plc entered into a non-cancellable lease agreement where the Rocket Group would lease a new turbo charger. The terms of the agreement were such that the Rocket Group would pay six rentals of £12,000 annually in advance, commencing on the 1 January 2008. After this initial period the Rocket Group could continue, at its option, to use the turbo charger, for a nominal „peppercorn‟ rental which is not material. The cash price of the asset would have been £61,570 and it has been estimated that the asset has a useful life of eight years. The Rocket Group considers this lease to be a finance lease. The rate of interest implicit in the lease is 8%. The group will use the sum of digits method of interest allocation. Rocket Group plc prepares consolidated financial statements under IFRS GAAP. (Please note that the annuity factor at 8% for five years is 3.993 and the annuity factor for six years is 4.623) Requi Reynard purchased an item of plant on 1 April 2007 for £2,000,000. It had an estimated life of five years and an estimated residual value of £400,000. The plant is depreciated on a straight line basis. The tax authorities do not allow depreciation as a deductible expense. Instead the company can claim an allowance of 40% against the annual tax charge in the year of purchase and 20% per annum (on a reducing balance basis) in subsequent years. The current rate of tax is 25%. Requirement (a) Produce a schedule of all future reversals of the deferred tax liability or asset. (10 marks) (b) In accordance with the requirements of IAS 12 calculate Reynard‟s deferred tax liability or asset in the statement of financial position as at 31 March 2010 and 31 March 2011 and the associated deferred tax charge/credit in the statement of financial position for each of these years. (4 marks) (c) What would be the deferred tax liability or asset as at 31 March 2010 and 2011 if the partial provision method were adopted? Extracts from the consolidated financial statements of the AH Group for the year ended 30 June 2005 are given below: Notes 1. Several years ago, AH acquired 80% of the issued ordinary shares of its subsidiary, BI. On 1 January 2005, AH acquired 75% of the issued ordinary shares of CJ in exchange for an issue of 2 million of its own £1 ordinary shares (issued at a premium of £1 each) and £2 million in cash. The net assets of CJ at the date of acquisition were assessed as having the following fair values:

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