题库·ACCA/CAT
财会类ACCA/CAT
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解答题

4 Whilst acknowledging the importance of high quality corporate reporting, the recommendations to improve it are

sometimes questioned on the basis that the marketplace for capital can determine the nature and quality of corporate

reporting. It could be argued that additional accounting and disclosure standards would only distort a market

mechanism that already works well and would add costs to the reporting mechanism, with no apparent benefit. It

could be said that accounting standards create costly, inefficient, and unnecessary regulation. It could be argued that

increased disclosure reduces risks and offers a degree of protection to users. However, increased disclosure has several

costs to the preparer of financial statements.

Required:

(a) Explain why accounting standards are needed to help the market mechanism work effectively for the benefit

of preparers and users of corporate reports. (9 marks)

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(a) It could be argued that the marketplace already offers powerful incentives for high-quality reporting as it rewards such byeasing or restricting access to capital or raising or lowering the cost of borrowing capital depending on the quality of the ent

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(b) During the inventory count on 31 December, some goods which had cost $80,000 were found to be damaged.

In February 2005 the damaged goods were sold for $85,000 by an agent who received a 10% commission out

of the sale proceeds. (2 marks)

Required:

Advise the directors on the correct treatment of these matters, stating the relevant accounting standard which

justifies your answer in each case.

NOTE: The mark allocation is shown against each of the three matters.

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题目答案

(b) The inventories should be valued at the lower of cost and net realisable value. Cost is $80,000, net realisable value is$85,000 less 10%, or $76,500. The net realisable value of $76,500 should therefore be taken (IAS2 Inventories)

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(c) In August 2004 it was discovered that the inventory at 31 December 2003 had been overstated by $100,000.

(4 marks)

Required:

Advise the directors on the correct treatment of these matters, stating the relevant accounting standard which

justifies your answer in each case.

NOTE: The mark allocation is shown against each of the three matters.

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(c) The opening inventory should be included in the current year’s income statement at the corrected figure, and the openingbalance of retained profit reduced by $100,000. The $100,000 reduction will appear in the statement of changes in equity.(IAS8 Acco

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(b) Discuss the relative costs to the preparer and benefits to the users of financial statements of increased

disclosure of information in financial statements. (14 marks)

Quality of discussion and reasoning. (2 marks)

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(b) Increased information disclosure benefits users by reducing the likelihood that they will misallocate their capital. This isobviously a direct benefit to individual users of corporate reports. The disclosure reduces the risk of misallocation of capita

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(ii) Construct the argument against Professor West’s opinion, and in favour of Professor Leroi’s opinion that

a principles-based approach would be preferable in developing countries. Your answer should consider

the particular situations of developing countries. (10 marks)

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(ii) Principles-based approachAdvantages of a principles-based approachThe rigour with which governance systems are applied can be varied according to size, situation, stage of developmentof business, etc. Organisations (in legal terms) have a choice to t

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(b) Identify and explain THREE approaches that the directors of Moffat Ltd might apply in assessing the

QUALITATIVE benefits of the proposed investment in a new IT system. (6 marks)

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题目答案

(b) One approach that the directors of Moffat Ltd could adopt would be to ignore the qualitative benefits that may arise on thebasis that there is too much subjectivity involved in their assessment. The problem that this causes is that the investment will

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(b) Explain how the use of SWOT analysis may be of assistance to the management of Diverse Holdings Plc.

(3 marks)

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题目答案

(b) The use of SWOT analysis will focus management attention on current strengths and weaknesses of each subsidiary companywhich will be of assistance in the formulating of the business strategy of Diverse Holdings Plc. It will also enable managementto mo

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The IOA Division is also considering whether to undertake an investment in the West of the country (the West Project).

An initial cash outlay investment of ￡12 million will be required and a net cash inflow amounting to ￡5 million is

expected to arise in each of the four years of the life of the project.

The activities involved in the West project will cause the local river to become polluted and discoloured due to the

discharge of waste substances from mining operations.

It is estimated that at the end of year four a cash outlay of ￡2 million would be required to restore the river to its

original colour. This would also clear 90% of the pollution caused as a result of the mining activities of the IOA

Division.

The remaining 10% of the pollution caused as a result of the mining activities of the IOA Division could be cleared

up by a further cash outlay of ￡2 million.

(c) Evaluate the West project and, stating your reasons, comment on whether the board of directors of NCL plc

should spend the further ￡2 million in order to eliminate the remaining 10% of pollution. (6 marks)

(Ignore Taxation).

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(c) The net present value of the West project is dependent upon the level of environmental expenditure that will be incurred byDivision IOA at the conclusion of the project. The potential NPV of the West project can be calculated using a discount rateof 1

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(e) Briefly discuss FOUR initiatives that management might consider in order to further enhance profitability.

(4 marks)

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(e) In order to enhance profitability management might take the following actions:(i) Increase the maximum capacity of the circus.(ii) Undertake a detailed review of operating costs which are budgeted at ￡239,200,000. Such a review might identify nonvalue

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(c) (i) Using ONLY the above information, assess the competitive position of Diverse Holdings Plc.

(7 marks)

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(c) (i) Organic Foods Ltd (OFL) with a market share of 6·66% is the market leader at 30 November 2005 and is forecast tohave a market share of 8% by 30 November 2007. Operating profits appear to be healthy and therefore it seemsreasonable to regard OFL as

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(ii) Explain THREE strategies that might be adopted in order to improve the future prospects of Diverse

Holdings Plc. (6 marks)

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(ii) The forecast situation of Diverse Holdings Plc is not without its problems. KAL and OPL require the immediate attentionof management. The position of KAL is precarious to say the least. There is a choice of strategies for it:(i) Outsource the manufac

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