F7（国际）-2015年12月答案.pdf

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1、AnswersFundamentals Level Skills Module, Paper F7 Financial ReportingSeptember/December 2015 AnswersSection B1(a)Moston Statement of profit or loss and other comprehensive income for the year ended 30 June 2015$000 Revenue (113,500 3,000 see below)110,500 Cost of sales (w (i)(95,700) Gross profit14,

2、800 Distribution costs (3,600) Administrative expenses (6,800 500 loan note issue costs) (6,300) Investment income300 Gain on financial asset equity investments (9,600 8,800)800 Finance costs (w (ii) (1,710) Profit before tax4,290 Income tax expense (1,200 + 800)(2,000) Profit for the year2,290Other

3、 comprehensive income Items that will not be reclassified to profit or loss Gain on revaluation of property (29,000 (28,500 1,900) w (i)2,400 Total comprehensive income for the year4,690The sale of the maturing goods is an in-substance loan of $3 million carrying interest at 10% per annum. This is b

4、ecause the option is almost certain to be exercised because the expected value of the goods of $5 million is considerably higher than the cost of buying them back.(b)Moston Statement of changes in equity for the year ended 30 June 2015ShareOther RevaluationRetainedTotal capitalcomponentssurplusearni

5、ngsequity of equity $000$000$000$000$000 Balance at 1 July 201420,0002,3003,0006,20031,500 Share issue10,0007,00017,000 Total comprehensive income for the year2,4002,2904,690 Dividends paid (20,000 x 20 cents)(4,000)(4,000) Balance at 30 June 201530,0009,3005,4004,49049,190Workings (monetary figures

6、 in brackets in $000)(i)Cost of sales$000 Per trial balance 88,500 Goods re in-substance loan(2,000) Depreciation of property (28,500/15 years)1,900 Depreciation of plant and equipment (27,100 9,100) x 15%)2,700 Research and development expenses (see below)4,600 95,700Research and development costs

7、can only be capitalised from the date the directors became confident that the new product would be commercially successful; 1 May 2015 in this case. Thus, research of $3 million (1,000 x 3 months) and Aprils development costs of $16 million should be written off, total $46 million. This would leave

8、$32 million (1,600 x 2 months) to be capitalised at the year end (though not required by the question).(ii)Loan interest5% loan note (20,000 500) x 8% see below)1,560 In-substance loan (3,000 x 10% x 6/12)150 1,710The 5% loan note issue costs should not be charged to administrative expenses, but ded

9、ucted from the proceeds of the loan.112(a)Assessment of the comparative performance and financial position of Kandid and Kovert for the year ended 30 September 2015Introduction This assessment of the two companies will look at the areas of profitability, liquidity and gearing with reference to some

10、differences which may make the comparison of the reported figures potentially invalid.Profitability ROCE is usually considered as the most important measure of profitability and is often described as a measure of managements overall efficiency in the use of the assets at its disposal. The ROCE of 62

11、5% of Kandid is far superior (more than double) to the 310% return achieved by Kovert. This superior return of Kandid can be analysed into its component parts of profit margin and asset turnover and in both of these areas Kandids performance is better than that of Kovert. Kandid is generating $330 f

12、or every dollar invested, compared to only $250 per dollar invested in Kovert and earning a profit margin of 190% compared to just 123% by Kovert. Additionally, Kandids gross profit margin at 24% is a third (6%/18%) higher than the 18% of Kovert. This may be (at least in part) due to marketing polic

13、y; Kovert may be deliberately charging lower selling prices in order to generate greater revenue. This is evidenced by Koverts turnover of $40 million compared to only $25 million for Kandid. The superior gross margin of Kandid continues into the operating profit level indicating that Kandid has bet

14、ter control of its overheads. There are, however, a number of areas relating to the capital employed which may bring this superiority into question. Kandid has deducted the receipt of a government grant directly from the carrying amount of the related plant (this is allowed but is rather unusual). N

15、ormally, plant is shown gross (less accumulated depreciation) and related government grants are shown as a (separate) deferred credit. It also appears that Kandid rents its property whereas Kovert has purchased its property (and indeed revalued it which has increased its capital employed). Kandid al

16、so holds proportionately less inventory and receivables than Kovert. Whilst these factors may not necessarily result in a higher profit for Kandid (e.g. property rental may be higher than the equivalent depreciation of property), they would act to give Kandid lower net assets (and thus lower capital

17、 employed) and, in turn, a higher ROCE than Kovert. Bearing in mind these differences, it may be more helpful if Xpand were to calculate a return on its potential equity investment (ROE) of $12 million as this would be more relevant should it acquire either of the companies. Using profit after tax,

18、Kandids ROE would be 30% (3,600/12,000 x 100) whereas Koverts ROE would be 25% (3,000/12,000). This still supports Kandids superior return, but this introduces further differences. Both companies have $5 million in loan notes; however, the interest rate on Kandids loan is only 5% compared to 10% for

19、 Kovert, presumably this reflects the difference in the credit worthiness of the two companies which is something that Xpand should take note of. There also appears to be a favourable tax discrepancy with Kandid paying a nominal rate of tax on its profit of 20% compared with 25% paid by Kovert. This

20、 may be due to be adjustments relating to previous years profits or other tax issues. If Kandid had a comparable (to Kovert) finance cost and tax rate, its ROE would be nearer that of Kovert. Liquidity The given ratios show that both companies have healthy liquidity positions. Kandids current ratio

21、is slightly higher (perhaps too high) than Koverts. This seems to be down to holding more cash (than Kovert) as it has better inventory and receivables control (their payable periods are very similar); though arguably the current finance lease obligation of Kovert should not be included in this rati

22、o for comparative purposes. The individual components of the current ratio could suggest that Kovert holds a greater range of inventory (perhaps this helps it to achieve more sales) and the relatively high receivables collection period could be indicative of an uncollectible customer balance which s

23、hould have been written off or may just be due to poor credit control.Gearing At around 65%, both companies are highly geared. The relatively low equity, particularly retained earnings, may be due to the companies having a policy of paying most of their earnings as dividends. Koverts high gearing is

24、 in part due to its policy of using finance leases to acquire its plant. Xpand should be aware that, for both companies, the $5 million loans are due for repayment in the near future which will represent a substantial further cash outlay on top of the purchase price it may pay.Summary Although both

25、companies operate in a same industry sector and have a similar level of after-tax profits, and indeed have the same indicative valuation, they would represent very different investments. Koverts revenue is over 60% (15,000/25,000 x 100) higher than that of Kandid, it is financed by high levels of de

26、bt (loans and finance leases), and it also owns, rather than rents, its property. Another point of note is that Koverts plant is 80% depreciated and will need replacement in the near future (with consequent financing implications). Ultimately, the investment decision may be determined by Xpands atti

27、tude to risk and how well each investment would fit in with existing activities and management structure.(b)Basing an investment decision solely on one years summarised financial statements is fraught with danger. Below are a number of issues/items of information which Xpand may wish to seek answers

28、 to before making an offer.General: in addition to using different strategies (e.g. buying property or renting it, targeting low mark-up/high volume sales), the two companies may use different accounting policies the availability of non-published forward looking information such as profit forecasts,

29、 capital commitments and the size of orders on the books (providing this information should not be unreasonable if the shareholders are receptive to a takeover)12is either company established (mature) or a relatively young and growing company (more risk, but potentially more reward)?Specific: as not

30、ed above, the owned assets of Kovert are nearing the end of their useful life; will these need replacing soon, or have they already been replaced by the leased assets? how much of the profit is due to the reputation or contacts of the current management and would they continue in their role after a

31、takeover (and indeed would Xpand want this or would it prefer to use its own managers)? the fair value of the assets, compared to their carrying amounts, which will impact on the calculation of goodwill.3(a)Palistar Consolidated statement of financial position as at 30 June 2015$000 Assets Non-curre

32、nt assets: Property, plant and equipment (w (i)82,100 Goodwill (w (ii)5,000 Game rights (12,000 1,200 (w (iv)10,800 Financial asset equity investments (13,200 + 7,900)21,100 119,000 Current assets Inventory (17,000 + 15,400 + 800 GIT 600 URP (w (iii)32,600 Trade receivables (14,300 + 10,500 2,400 in

33、tra-group)22,400 Bank (2,200 + 1,600)3,800 58,800 Total assets177,800Equity and liabilities Equity attributable to owners of the parent Equity shares of $1 each (20,000 + 6,000 (w (ii)26,000 Other component of equity (share premium) (4,000 + 18,000 (w (ii) 22,000 Retained earnings (w (iv)52,800 100,

34、800 Non-controlling interest (w (v)15,800 Total equity116,600 Current liabilities Deferred consideration (18,000 + 900 finance cost (w (iv)18,900 Other current liabilities (25,800 + 18,100 (2,400 intra-group 800 GIT) 42,300 61,200 Total equity and liabilities177,800Workings (figures in brackets are

35、in $000)(i)Property, plant and equipment$000 Palistar55,000 Stretcher28,600 Fair value reduction in plant(2,000) Fair value reduced depreciation (2,000/2 x 6/12)500 82,10013(ii)Goodwill in Stretcher$000$000 Controlling interest Share exchange (20,000 x 75% x 2/5) = (6,000 x $400) 24,000 Deferred con

36、sideration (20,000 x 75% x $132/11)18,000 Non-controlling interest (20,000 x 25% x $300)15,000 57,000 Equity shares20,000 Pre-acquisition retained earnings: at 30 June 201414,000 from 1 July to 31 December 2014 (10,000 x 40%)4,000 Fair value adjustments plant(2,000) game rights12,000 investments1,00

37、0(49,000) Goodwill on acquisition8,000 Impairment(3,000) Goodwill at 30 June 20155,000The shares issued by Palistar (6 million at $4 see above) would be recorded as share capital of $6 million (6,000 x $100) and share premium in other components of equity of $18 million (6,000 x $300).(iii) The inve

38、ntory of Stretcher at 30 June 2015 (adjusted for goods-in-transit (GIT) sale of $800,000) is $26 million (1,800 + 800). The unrealised profit (URP) on this will be $600,000 (2,600 x 30/130).(iv)Consolidated retained earnings:$000 Palistars retained earnings (26,200 + 24,000)50,200 Stretchers adjuste

39、d post-acquisition profit (3,200 x 75% see below)2,400 Finance cost on deferred consideration (18,000 x 10% x 6/12)(900) URP in inventory (w (iii)(600) Gain on equity investments (13,200 11,500)1,700 52,800The adjusted post-acquisition profit of Stretcher is:$10 million x 60%6,000 Gain on investment

40、s (7,900 7,000)900 Reduced depreciation of plant (2,000 x 6/24)500 Amortisation of game rights (12,000/5 years x 6/12)(1,200) Goodwill impairment (w (i)(3,000) 3,200(v)Non-controlling interestFair value on acquisition (w (i)15,000 Post-acquisition profit (3,200 x 25% (w (iii)800 15,800(b)To be treat

41、ed as an associate (i.e. equity accounted) an investor must have significant influence over the investee company. Significant influence is the power to participate in (but not control) the affairs of the investee. There are several ways in which significant influence is determined, the most importan

42、t of which is that a holding of 20% or more of voting shares leads to presumed influence. Another indicator of influence is a seat on the board of the investee. Prior to Agressos offer, Dilemma could demonstrate both of these influences and correctly treated Myno as an associate. IAS 28 Investments

43、in Associates and Joint Ventures says the 20% holding criteria gives presumed influence unless it can be clearly shown that this is not the case.After the successful offer by Agresso, Dilemma still holds 35% of Myno (it did not sell its shares); however, there is strong evidence that this no longer

44、gives Dilemma any level of influence over Myno. From 1 April 2015, Myno became a subsidiary of Agresso which means it can exert control over Myno. It is difficult to see how Dilemma can have any influence over Myno when Agresso is exerting active control as is evidenced by Dilemma immediately losing

45、 its seat on the board of Myno.Thus from 1 July 2014 to 31 March 2015, Myno should (continue to) be equity accounted in the consolidated financial statements of Dilemma. At that date equity accounting should cease and instead Myno should be treated as a (simple) financial asset equity investment. It

46、s initial carrying amount at 1 April 2015 would be its carrying amount immediately before reclassification; subsequently it would (probably) be accounted for at fair value through profit or loss with any dividends received being treated as investment income.14Fundamentals Level Skills Module, Paper

47、F7 Financial ReportingSeptember/December 2015 Marking SchemeThis marking scheme is given as a guide in the context of the suggested answers. Scope is given to markers to award marks for alternative approaches to a question, including relevant comment, and where well-reasoned conclusions are provided

48、. This is particularly the case for written answers where there may be more than one acceptable solution.Marks Section B1(a)Statement of profit or loss and other comprehensive income revenue1 cost of sales3 distribution costs administrative expenses 1 finance costs2 investment income gain on investments income tax expense1 other comprehensive income1 11(b)Statement of changes in equity balances b/f1 share issue1 dividends paid1 total comprehensive inc