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financial accounting and reporting

Questions and Answers of Financial Accounting And Reporting

2 A Describe and contrast investors who are a risk-averse b risk-neutral, and c risk-loving B Suggest some useful approaches suitable for each one of these three types of investors.
1 At the heart of traditional performance analysis are two factors α and β.Briefly describe these two factors, giving some common examples.
5 a Summarize the two uses of the ANOVA Table in data analysis.b For data analysis, suggest an applicable R code segments.
4 a How is regression analysis carried in the R environment?b Provide examples of the R functions used for regression analysis.
3 a What is meant by regression analysis?b How is regression analysis used in data analysis?
2 a How are these analyses carried out in the R environment?b Give examples of the R code segments for these analyses.
1 Define: univariate, bivariate, and multivariate data analyses, giving an example of each.
2 With respect to the Black–Litterman model for assets allocation and portfolio optimization, a state and discuss the basic assumptions and the strengths and weaknesses of this model;b state and
1 Contrast the following three classical theories of portfolio allocation using i) The Markowitz model, ii) The Black–Litterman model, and iii) Capital asset pricing model (CAPM)in terms of the
5 The Black–Scholes formula for pricing European call options is Vs; T s Φflogs=k r 1=2 σ2Tg=σp T keτTΦflogs=kr 1=2σ2Tg=σp Twhere Φx
4 GBM: Let Yt and Y t be two independent Brownian motions, and λ is a constant such that 1
2 a Why is the Ito calculus suitable for analyzing GBM (Geometric Brown motion)?b i) What are the advantages of using Ito calculus in this application?ii) What are the disadvantages? Any
1 Define differential calculus.a Define Ito calculus.b What are the essential differences between these two concepts? Explain
2 Besides allocating one’s assets in terms of buying/selling stocks, bonds, and other financial instruments, discuss the likely challenges associated with investing in the following:a Foreign
1 In finance and economics, it is tacitly assumed that inflation will continue, and will most probably continue indefinitely, with the following concomitant result:The price of good and services such
The following information is available in relation to MCRV Ltd (based on the ICAS Repor t) for the year ending 31 December 20X8:(a) Statement of assets and liabilities as at 31 December. This
The historical cost accounts of Smith plc are as follows:Notes 1 Land and buildings were acquired in 20X0 with the buildings component costing £800,000 and depreciated over 40 years.2 Share capital
The balance sheets of Parkway plc for 20X7 and 20X8 are given below, together with the profit and loss account for the year ended 30 June 20X8.Notes 1 The freehold land and buildings were purchased
7 Discuss the relevance of the information in the Statement of Recognised Income and Expense to an investor. Explain the advantages and disadvantages of combining the income statement and this
11..‘A single set of multi-purpose financial statements is unable to satisfy the needs of shareholders for both a stewardship repor t and a repor t to assist the prediction of future cash flows.’
11..What are the fundamental objectives of corporate repor ts? 2
‘Companies should begin to move to greater disclosure of:● Days training per year for categories of staff.● Expenditure on training, both in total and differentiated between categories of
Classify the following items into cost of sales, distribution costs, administrative expenses, other operating income or item to be disclosed after trading profit:(a) Personnel depar tment costs (b)
11..An income statement might contain the following profit figures:Gross profit Profit from operations Profit before tax Net profit from ordinar y activities Net profit for the period.Explain when
11..Explain why two companies carr ying out identical trading transactions could produce different gross profit figures.
The following is an extract from Accountancy Age, 25 Januar y 2001.A powerful and ‘shadowy’ group of senior par tners from the seven largest firms has emerged to move closer to edging control of
The following extract is from ‘Comments of Leonard Spacek’, in R.T. Sprouse and M. Moonitz, A Tentative Set of Broad Accounting Principles for Business Enterprises, Accounting Research Study No.
The following extract is from Conceptual Framework for Financial Accounting and Repor ting: Elements of Financial Statements and Their Measurement, FASB 3, December 1976.The benefits of achieving
11..An asset is defined in the Framework as a resource which an entity controls as a result of past events and from which future economic benefits are expected to flow to the entity. Discuss whether
11..The key qualitative characteristics in the Framework are relevance and reliability. Preparers of financial statements may face a dilemma in satisfying both criteria at once. Discuss.
11..Rules-based accounting adds unnecessar y complexity, encourages financial engineering and does not necessarily lead to a ‘true and fair view’ or a ‘fair presentation’. Discuss.
11..As fair values may be unreliable and mislead users into thinking that the balance sheet shows the net worth of an entity, historical costs are preferable for repor ting assets and liabilities in
11..Explain the different ways in which future economic benefits may arise.
11..The President of the ICAEW has proposed that regulators from developed and developing countries star t talking to agree a set of principles for universal application that could underpin the
11..(a) Describe the different approaches that have evolved in the development of accounting theor y.(b) Assess its impact on standard setting.(c) Discuss the contribution of accounting theor y to
11..Financial accounting theor y has accumulated a vast literature. A cynic might be inclined to say that the vastness of the literature is in sharp contrast to its impact on practice.
11..‘The replacement of accrual accounting with cash flow accounting would avoid the need for a conceptual framework.’24 Discuss.
(a) In 1999 in the UK, the ASB published the Statement of Principles. Explain what you consider to be the purpose and status of the Statement.(b) Chapter 4 of the Statement identifies and defines
11..R. MacVe in A Conceptual Framework for Financial Accounting and Repor ting: The Possibilities for an Agreed Structure suggested that the search for a conceptual framework was a political
11..Give a brief synopsis of the ICAS Making Corporate Repor ts Valuable.
11..(a) Name the user groups and information needs of the user groups identified by the IASC Framework for the Presentation and Preparation of Financial Statements.(b) Discuss the effect of the
11..Consider the interest of the tax authorities in financial repor ting regulations. Explain why national tax authorities might be concerned about the transition from domestic accounting standards
11..Use the EDGAR ser vice (via the SEC website) to identify four European companies listed on the US Stock Exchange. From the Form 20-F identify which items feature in the reconciliation from net
11..Obtain the financial statements of two companies based in different countries. Review the accounting policies notes. Analyse what the policies tell you about the regulator y environment in which
Constructive review of the regulators.Required:(a) Obtain a copy of the Financial Reporting Council’s Annual Review.(b) Prepare a profile of the members of the Financial Reporting Council, the ASB
11..‘Measurement criteria are more impor tant than disclosure requirements for small entities.’Discuss.
11..‘Ever y European company should be required to prepare their financial repor ts in accordance with an IFRSSE similar in content to the UK’s FRSSE.’ Discuss.
11..‘Quar terly repor ting is essential in the interest of transparency and can, therefore, only be beneficial for investors.’ Discuss.
11..Review a SORP and discuss the reasons why existing FRSs need to be supplemented.
11..‘The most favoured way to reduce information overload was to have the company filter the available information set based on users’ specifications of their needs.’36 Discuss how this can be
11..Explain the main changes to interim repor ts following the ASB Statement of Best Practice.
11..(a) Name four companies that have been the subject of FRRP pronouncements and explain the reason for FRRP involvement.(b) ‘Shorter accounting standards are not a realistic option until both
11..To what extent do you think FRSs should take economic consequences into account?
‘The effective working of the financial aspects of a market economy rests on the validity of the underlying premises of integrity in the conduct of business and reliability in the provision of
11..Discuss the main arguments for dispensing with all SSAPs and FRSs.
11..How is it possible to make shareholders aware of the significance of the exercise of judgement by directors which can turn profits of £6m into losses of £2m?
11..Why is it necessar y for financial repor ting to be subject to (a) mandator y control and (b) statutor y control?
Raiders plc prepares accounts annually to 31 March. The following figures, prepared on a conventional historical cost basis, are included in the company’s accounts to 31 March 20X5.1 In the profit
11..‘. . . the IASB’s failure to decide on a capital maintenance concept is regrettable as users have no idea as to whether total gains represent income or capital and are therefore unable to
11..Explain the criteria for determining whether hyperinflation exists.
In April 2000 the G4 1 Group acknowledged that market exit value is generally regarded as the basis for fair value measurement of financial instruments and was discussing the use of the deprival
11..Explain how each of the limitations in question 11 could be overcome.
11..Explain why financial repor ts prepared under the historical cost convention are subject to the following major limitations:● inventor y is under valued● the depreciation charge to the income
11..‘Financial statements should reflect realistically the per formance and position of an organisation, but most of the accountant’s rules conflict directly with the concept of realism.’
11..‘The relevant financial per formance figure for an investor is the amount available for distribution at the balance sheet date.’ Discuss.
11..Discuss the effect on setting per formance bonuses for staff if financial per formance for a period contains both realised and unrealised gains/losses.
11..‘To be relevant to investors, the profit for the year should include both realised and unrealised gains/losses.’ Discuss.
11..‘Historical cost accounting is the worst possible accounting convention, until one considers the alternatives.’ Discuss this statement in relation to CPP, CCA and NRVA.
11..Compare the operating and financial capital maintenance concepts.
11..To what extent are CCA statements useful to an investor?
11..What factors should be taken into account when designing a system of accounting for inflation?
11..Explain the features of the CPP model in contrast with those of the CCA model.
11..(a) Explain the limitations of HCA when prices are rising.(b) Why has the HCA model sur vived in spite of its shor tcomings in times of inflation?
Jason commenced with £135,000 cash. He acquired an established shop on 1 January 20X1. He agreed to pay £130,000 for the fixed and current assets and the goodwill. The replacement cost of the shop
(a) Describe briefly the theor y underlying Hicks’s economic model of income and capital. What are its practical limitations?(b) Spock purchased a space invader enter tainment machine at the
(a) ‘Measurement in financial statements’, Chapter 6 of the ASB’s Statement of Principles, was published in 1999. Amongst the theoretical valuation systems considered is value in use – more
11..Examine and contrast the concepts of profit that you consider to be relevant to:(a) an economist; (b) a speculator;(c) a business executive; (d) the managing director of a company;(e) a
11..To an accountant, net income is essentially a historical record of the past. To an economist, net income is essentially a speculation about the future. Examine the relative merits of these two
11..Discuss the arguments for and against revaluing fixed assets and recognising the gain or loss.
11..A company contemplates purchasing a machine that will generate an income of £25,000 per year over each of the next five years. A scrap value of £2,000 is anticipated on disposal. How much would
11..What is meant by present value? Does it take account of inflation?
11..The historical cost concept has withstood the test of time. Specify the reasons for this success, together with any aspects of historical cost that you consider are detrimental in the sphere of
11..Explain the nature of economic income.
11..What is the purpose of measuring income?
The following is an extract from the Financial Repor ting Review Panel website (www.frrp.org.uk)relating to the Wiggins Group showing the restated financial results.Year 1995 1996 1997 1998 1999 2000
The Piano Warehouse Company Limited was established in the UK on 1 January 20X7 for the purpose of making pianos. Jeremy Holmes, the managing director, had 20 years’ experience in the manufacture
Mr Norman is going to set up a new business in Singapore on 1 January 20X8. He will invest $150,000 in the business on that date and has made the following estimates and policy decisions:1 Forecast
Jane Parker is going to set up a new business in Bruges on 1 Januar y 20X1. She estimates that her first six months in business will be as follows:(i) She will put €150,000 into the firm on 1
11..The annual financial statements of companies are used by various par ties for a wide variety of purposes.For each of the seven different ‘user groups’, explain their presumed interest with
11..Explain the revenue recognition principle and discuss the effect of alternative treatments on the repor ted results of a company.
11..Accountants preparing financial statements in the UK do not require a standard such as IAS 18 Revenue.’ Discuss.
11..The asset measurement basis applied in accrual accounting can lead to financial difficulties when assets are due for replacement.’ Discuss.
11..‘Information contained in a profit and loss account and a balance sheet prepared under accrual accounting concepts is factual and objective.’ Discuss.
11..Cash flow accounting and accrual accounting information are both required by a potential shareholder.’Discuss.
11..‘Accrual accounting is preferable to cash flow accounting because the information is more relevant to all users of financial statements.’ Discuss.
11..Discuss which of the financial statements illustrated in Chapters 1 and 2 would be most useful to each of these seven groups if they could only receive one statement.
11..The Framework for the Preparation and Presentation of Financial Statements identified seven user groups: investors, employees, lenders, suppliers and other trade creditors, customers, government
Fred and Sally own a profitable business that deals in windsurfing equipment. They are the only UK agents to impor t ‘Dr yline’ sails from Germany, and in addition to this they sell a variety of
Mr Norman set up a new business on 1 January 20X8. He invested £50,000 in the new business on that date. The following information is available.1 Gross profit was 20% of sales. Monthly sales were as
Jane Parker is going to set up a new business on 1 Januar y 20X1. She estimates that her first six months in business will be as follows:(i) She will put £150,000 into a bank account for the firm on

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