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ICMA.

Pakistan

Extra Reading Time:


Writing Time:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

15 Minutes
03 Hours

MODEL PAPER
ADVANCED FINANCIAL ACCOUNTING AND
CORPORATE REPORTING (AF-501)
SEMESTER-5
Maximum Marks: 100

Roll No.:

Attempt all questions.


Answers must be neat, relevant and brief.
In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram/ chart, where appropriate.
Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
Use of non-programmable scientific calculators of any model is allowed.
DO NOT write your Name, Reg. No. or Roll No., or any irrelevant information inside the answer script.
Question Paper must be returned to invigilator before leaving the examination hall.

Answer Script will be provided after lapse of 15 minutes Extra Reading Time (9:15 a.m. or 2:15 p.m. [PST] as the case may be) .

Marks
Q. 1 The Nutra group carries on business of import and supply of nutrition products range in the
country for infant only. Nutra was incorporated in 2006 and expanded its business activities to
include the distribution of its product and import of other range of nutrition products by the
acquisition of shares in Prime in 2010 and in Gohar in 2012. The draft statements of profit or loss
for Nutra, Prime and Gohar for the year ended June 30, 2012 are as follows:
Nutra
Limited
Revenue
Cost of sales
Gross profit
Operating expenses
Finance costs
Profit / (Loss) before tax
Income tax expenses
Profit / (Loss) after tax

44,000
(30,800)
13,200
(6,800)
(325)
6,075
(1,800)
4,275

Prime
Limited
(Rs. in million)
30,000
(19,500)
10,500
(5,400)
(100)
5,000
(1,500)
3,500

Gohar
Limited
25,000
(18,750)
6,250
(2,500)
(150)
3,600
(1,080)
2,520

The draft statements of financial position for Nutra, Prime and Gohar for the year ended June 30,
2012 are as follows;
Nutra
Prime
Gohar
Limited
Limited
Limited
(Rs. in million)
Non-Current Assets
Property, plant and equipment
14,000
17,500
12,000
Investments:
Shares in Prime
10,000
Shares in Gohar
13,500
Loan assets
100
Current Assets
Inventories
14,000
12,000
5,520
Accounts receivable
8,000
6,000
3,000
Cash and bank
2,000
2,000
1,000
24,000
20,000
9,520
61,600

AFACR-MP

37,500

21,520

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Marks
Equity
Ordinary share capital @ Rs.10 each
Retained earnings

20,000
26,500
46,500

8,000
18,200
26,200

7,000
11,520
18,520

1,800

800

1,000

13,300
10,500
61,600
37,500
The following information is available related to Nutra, Prime and Gohar:

2,000
21,520

Long-term Liabilities
Long-term loan
Current Liabilities
Current liabilities

(i)

On 1st July 2010 Nutra acquired 640 million shares in Prime for Rs.10,000 million at which
date there was a credit balance on the retained earnings of Prime of Rs.2,425 million. No
shares have been issued by Prime since Nutra acquired its interest.

(ii)

On 1st Jan 2012 Nutra acquired 420 million shares in Gohar for Rs.13,500 million. No
shares have been issued by Gohar since Nutra acquired its interest. It is assumed that
profit of Gohar accrue evenly throughout the year.

(iii)

During the year, Prime made inter-company sales to Nutra of Rs.260 million making a
profit of 25% on cost and Prime could sell only 75% of these goods during the period.

(iv)

On 1st April 2012 Nutra imported machine having landed cost of Rs.200 million and sold
Prime for Rs.240 million. Nutra kept this machine in inventory. Prime has included this
machine in its non-current assets. Prime charge depreciation @ 20% on machine and full
years depreciation is charged in the year of acquisition in cost of sales.

(v)

Prime purchased a new wrapping machine for packaging of its finished material to avoid
damages during distribution of goods. The cost of machine was Rs.500 million before
trade discount of 10%, which was charged to profit or loss. Depreciation is charged @
20% on machine and full years depreciation is charged in the year of acquisition to the
cost of sales.

(vi)

Nutra has a loan assets carried at Rs.100 million and held at amortized cost. The effective
interest rate is 10%. On 1st July 2011, Nutra felt that because of the financial problem of
the borrower, it would receive Rs.40 million in two years time i.e., 30 June 2013. At year
end Nutra still expects to receive same amount on the same date. These facts were not
accounted for in the draft financial statements.

(vii)

It is group policy to account for non-controlling interest on a proportionate basis. The


goodwill of Prime has been fully written off as a result of an impairment review which took
place in 2011.

Required:
(a)

Prepare Consolidated Statement of Profit or Loss for the year ended June 30 2012.

14

(b)

Prepare Consolidated Statement of Financial Position as at June 30, 2012.

21

(c)

Nutra is pursuing to protect the environment from its operations and designed policies and
systems for managing environmental risk. The Director is considering of publishing
environmental report.

AFACR-MP

(i) Describe the possible advantages of producing environmental report.

03

(ii) Describe the general contents of environmental report.

02

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Marks
Q. 2 The draft Financial Statement of Maaz Group for the year ended June 30, 2012 are as follows:
Rs. in million
Revenue
2,200
Cost of sales
(1,540)
Gross profit
660
Operating expenses
(225)
Gain on sales of subsidiary
98
Share of Profit from Associate(s)
45
Finance costs
(50)
Profit / (Loss) before tax
528
Income tax expenses
(151)
Profit / (Loss) after tax
377
Other Comprehensive income
Items that will be reclassified to profit or loss in
subsequent accounting periods
Gain on land revaluation
46
Total Comprehensive income for the year
423
Profit attributable to:
Owners of the parent
Non-controlling interest

343
34
377

Total Comprehensive income Attributable to:


Equity holders of Parent
Non-controlling interest

389
34
423
2012
2011
Rs. in million

Non-Current Assets
Property Plant & Equipment
Goodwill
Investment in Associate(s)
Current Assets
Inventories
Debtors
Cash and Bank

Equity
Ordinary share capital @ 10 each
Other components of equity
Retained earnings
Non-Controlling interest
Long-term liabilities
Long term loan
Obligations under finance lease
Deferred tax

AFACR-MP

3,500
100
200

2,900
150
225

550
450
201
1,201
5,001

450
575
150
1,175
4,450

2,000
46
1,484
3,530
127

2,000
1,200
3,200
225

500
150
300
950

400
50
250
700

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Marks
Current Liabilities
Trade Payables
Income tax
Obligations under finance lease

284
35
75
394
5,001

250
25
50
325
4,450

The following information is available relating to Maaz Group:


(i)

Land was re-valued upwards by Rs.46 million on 30 June 2012.

(ii)

Depreciation expense for the year is Rs.75 million.

(iii)

Additions include assets acquired under finance lease of Rs.150 million.

(iv)

On 1st April, 2012 Maaz disposed of a 60% owned subsidiary for Rs.350 million in cash.
The subsidiary had the following net assets at the date of disposal.
Rs. in million
Property, plant and equipment
Inventory
Receivables
Cash and bank
Trade payables
Long-term loans
Income tax
Total

400
150
75
50
(65)
(270)
(20)
320

The subsidiary was acquired on 1st July, 2010 for a cash payment of Rs.225 million when
its net assets had a fair value of Rs.275 million and the non-controlling interest had a fair
value of Rs.100 million.
(v)

It is group policy to account for goodwill on full goodwill method.

Required:
Prepare Consolidated Statement of Cash flows for the year ended June 30, 2012 using indirect
method.

Q. 3

(a)

List out the quantitative threshold that shall require an entity to report separately
information about an operating segment as provided under IFRS 8 Operating Segment.

(b)

Following data pertains to the post-employment defined benefit compensation scheme of


SBM Company:
Discount rate for each year
12.50%
Present value of obligation on January 1, 2011
Rs. 1,200,000
Fair value of plan assets on January 1, 2011
Rs. 1,075,000
Other relevant information

Current service cost


Benefits paid out
Contributions paid by the entity
Present value of obligation at year end
Fair value of plan assets at year end
AFACR-MP

2011
2012
(Rs.)
(Rs.)
150,000
225,000
160,000
240,000
110,000
120,000
1,350,000 1,600,000
1,164,000 1,250,000

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05

Marks
Required:
Calculate the amounts to be presented in the statement of financial position, statement of
profit or loss and statement of other comprehensive income for the year ended Dec 31st
2011 and 2012.

Q. 4

(a)

15

In July 2010 DNA investment issued 3-year 10% TFCs for Rs.25 million. At the date of
issuance of loan effective rate of interest was also 10%. The loan notes were redeemable
at par and the liability is held for trading purposes and classified at fair value through profit
and loss. DNA investment incurred transaction cost of Rs 500,000 to issue loan notes.
Market interest rates at year end were as follows:
Year end
Rate
At June 30, 2011
11%
At June 30, 2012
12%

Required:
As per IFRS 9, calculate the amount:

(b)

(i)

initially measured in the statement of financial position.

02

(ii)

to be presented in the statement of financial position and statement of profit or loss


for the year ended June 30, 2011 and 2012.

08

On 1st Jan 2011 KDC company announced one right share for each four share
outstanding, the exercise price of right issue was Rs.9.00 per share and last date of
exercise of right was 1st April 2011. Market price of one ordinary share immediately before
exercise date was Rs.14 per share. Following is the profit of the company from 2010 to
2012:
Profit attributable to ordinary shareholders
for the year ended:
Rs.
June 30, 2010
90,000,000
June 30, 2011
99,000,000
June 30, 2012
106,250,000
The company had 5 million shares outstanding before issuance of right share and average
market price/share for 2010-11 was Rs.12.50 and for 2011-12 was Rs.15.00.

Required:
Calculate the basic and revised earnings per share for the year ended June 30,
2010-2012.

10

THE END

AFACR-MP

5 of 5
(Note: The number of questions and their marks may vary in the examination paper)

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