M.Sc Financial Reporting & Analysis II Dec 2023

Description

Financial Reporting & Analysis – II

December 2023 Examination

 

 

 

 

Q1.) On January 1 2015, Royal Manufacturers acquired 25% Equity Interest in Skyline Corp  for  Rs. 900000 USD. The following Information of Asset & Liabilities of Skyline is available:  (10 Marks)

 

PARICULARS	Book Value ($)	Fair Value ($)
Current Assets	220,000	220,000
Plant &Equipment	13,00,000	15,00,000
Land	9,00,000	10,50,000
Total Assets	24,20,000	27,70,000
Liabilities	7,50,000	7,50,000
Net Assets	16,70,000	20,20,000

 

Plant & Equipments are depreciated on Straight Line basis  Zero over a Term of 10 Years

ROYAL Group uses EQUITY Method to Account for this  Investment in Alton. Alton

Reports NETINCOME of Rs. 250,000 for 2010 & Pays Dividend of $ 100,000.

 

CALCULATE    :         for ROYAL

# GOODWILL INCLUDED IN PURCHASE PRICE

# AMT OF EQUITY INCOME TO BE REPORTED ON ROYAL INCOME STATEMENT 2010

# VALUE OF ALTON’S INVESTMENT RECOGNIZED BY ROYAL ON BALANCE SHEET FOR 2015.

 

Ans 1.

Introduction 

Goodwill is an intangible asset linked with buying one firm and employing another. Specifically, goodwill is recorded in a segment in which the purchase price is more than the sum of the fair value of all intangible belongings and visible assets purchased in the acquisition and the liabilities assumed in the manner. The fee of a company’s brand call, precise client relations, solid purchaser base, good employee family members, and patents or proprietary technology are some examples of goodwill.

Goodwill arises when an organization acquires any other entire business. The amount of

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Q2.) In case of annual risk audit of a recognized Manufacturing Company at USA, How Beneish Model M Score can be significant in judgment of its overall Financial Reporting Quality for Risk Manager & Top Management of Company. Kindly Elaborate in Financial Reporting Quality parameters from Beneish Model pt. of view.                            (10 Marks)

Ans 2.

Introduction

The Beneish model is a mathematical version that utilizes eight variables and financial ratios to identify whether an organization has manipulated its revenue. It’s far used as a tool to uncover financial manipulation and fraud.

The variables are developed from the information within the organization’s financial statements and, once determined, create an M-score to describe the value and degree to which the earnings have been manipulated.

• The Beneish model may be defined as a mathematical version that includes eight variables and an economic ratio to discover whether a company has manipulated its earnings.

 

 

3a)  How is Impairment of Good will recognized in IFRS?  (5 Marks)

Ans 3a.

Introduction

While a company acquires control over any other company, goodwill often arises, too.  You need to present it as an intangible asset. However, when you think about it minutely, goodwill isn’t always a general asset because, unlike other investments, you can’t sell it to anyone; you can not use it to your production method or provide services.

Therefore, IFRS standards are pretty complex and strict about goodwill – for instance, you need to check charity for impairment each year (you do not need to try other assets, most

 

1. b) How a Debt Instrument ‘Available for Sale’ (AFS) Category has crucial impact in IFRS? (5 Marks)

 

Ans 3b.

Introduction

(AFS) available-for-sale safety is a fairness or debt safety bought to sell before it reaches maturity or is held for an extended period so it does not have an adulthood or expiry date. Accounting standards require that companies classify any investments in debt or equity securities while purchased as held-to-maturity, to be had-for-sale or held-for-trading. Available-for-sale securities are recorded at a truthful price; changes in cost between