000 Advanced Financial Reporting - DFA3000Y (5) al Question 4 (15 marks) Sparkling Wine Traders Limited, a Mauritius-based company, has just finished i bilen its financial year to 31 December 2019. It has been an excellent year for the or company with record sales. a) nov In addition, the company has invested a considerable amount of sales and Tiwaan badvertising expenditure in developing its own special brand label wine- loquuq not Chamdor, an unusual blend of white and red grapes. It is estimated that an amount of Rs6,000,000 has been spent through a combination of advertising on television and in the quality press, supported by special briefings at luxury hotels in Mauritius and South Africa together with participation in trade shows in Paris to better market the wine abroad. The sales and marketing director believes that the brand has been accepted enthusiastically by the public with sales showing encouraging early growth, leading to optimism for a successful loorba ls future for the product. In a board meeting, one of the directors was quoted as saying "I think the brand Chamdor should be capitalized and included as part of our identifiable assets; after all, brands and goodwill are both intangible assets and since goodwill can be recognised in the books, so too can brands!" Required: Using the provisions of IAS 38 Intangible Assets, assess the validity of the director's opinion. [3 marks] el b) UOM Enterprise Ltd issued 6% Rs20,000 debentures on 1st April 2019 at a discount of 10%. Issue costs amounted to Rs1,000. The debentures will be redeemed at a premium of Rs1015 above par value on 31 March 2023. Interest payments (equivalent to nominal rate of 6% per annum levied on the nominal value of Rs20,000) are effected every 31 March. The effective rate of interest is 12% per annum. The discount of Rs2000 on issue together with the issue costs have been expensed to the profit and loss for the year and included in administrative expenses. UOM Enterprise Ltd has a 31 March year end. Required: (i) Explain why the effective rate of interest is much higher than the nominal rate of interest. [2 marks] (ii) Based on the information given above, state the reported carrying amount of the debentures in the balance sheet of UOM Enterprise Ltd at 31 March 2020 and explain whether this figure is correct. [2 marks] Using the provisions of IFRS 9, state the revised carrying amount of the Debentures at 31 March 2020. [2 marks]