• 10) How must Wild Safari account for the release of the pack of six wild dogs and four white rhinoceroses into the wild on Born Free?

ACCT 3350 International Accounting Spring 2016 As part of your case research assignment, you need to search the online IFRS (international financial reporting standards) for SMEs (small and medium-sized entities) website for authoritative support for the positions you are taking in your solution. Your solution should contain specific references to IFRS standard numbers you are relying upon. You need to first register with the IFRS website in order to gain access to the standards. There is no charge for eIFRS Basic. I have the written standards in my office if you would like to see them. The link to the website: www.ifrs.org/Pages/default.aspx On the top ribbon got to IFRS -> IFRS for SMEs http://www.ifrs.org/IFRS-for-SMEs/Pages/IFRS-for-SMEs.aspx Next click Access the IFRS for SMEs (on left) -> Not Registered Click on Register for eIFRS Basic or Upgrade to eIFRS Professional http://eifrs.ifrs.org/eifrs/Register Follow the instructions to get free access to the Basic. _____________________________________________________________________________________________ The Wild Safari Company Case Study The case study from which this case study is derived benefited greatly from the feedback and comments from people attending a series of workshops on the Framework-based approach to teaching International Financial Reporting Standards (IFRS) organized by the IFRS Foundation and others and from peer review by a number of anonymous reviewers. Background Company A PLC is a company listed on the London Stock Exchange. The company has operated successfully in the manufacturing sector for more than twenty years and for many years has prepared its financial statements in accordance with International Financial Reporting Standards (IFRS). Although Company A presents its financial statements in British Pounds (), its functional currency is the Euro (). In 20X0 Company A's board of directors decide to expand Company A's operations into new types of business and into a geographical location in which it currently does not operateSub-Saharan Africa. Accordingly, management selects a number of activities in Southern Africa to be carried out as part of a ten-year diversification plan. The company appoints James and Judith Dowling to manage its African operations, under the brand name The Wild Safari Company (Wild Safari). Wild Safari prepares financial statements in compliance with the IFRS for Small and Medium-sized Entities (SMEs). Events in 20X0-20X2 On 2 January 20X0, Company A incorporates a wholly-owned separate legal entity, Wild Safari, in the Republic of Africania (Africania) by contributing 10,000,000 to form Wild Safari's permanent capital. On 3 January 20X0, Wild Safari obtains an 8,000,000 loan facility from a British bank. The loan is denominated in British pounds (). The loan agreement obligates the bank to transfer 8,000,000 to Wild Safari on 3 January 20X0 and Wild Safari to transfer to the bank ten years later 13,031,157 on 2 January 20Y0 (in full and final settlement of the loan). Company A guarantees all payments to the bank in the event that Wild Safari defaults. Acquisition of land On 1 February 20X0, Wild Safari purchases 1,000 hectares of undeveloped natural land called Born Free Country, an area of land in central Africania, for $10,000,000, with the aim of establishing an ecotourism business. The property is not fenced and adjoins a national park on all its boundaries except the western boundary, where Born Free Country adjoins privately owned undeveloped land that is currently unused. A wide range of indigenous plants and wild animals (including significant numbers of buffalo, crocodile, giraffe, hippopotamus, leopard, lion, zebra and a wide variety of antelope) inhabit Born Free Country and the surrounding lands. Law in Africania specifies that wild animals are the property of the owner of the land that they occupy. Neither elephant nor rhinoceros frequent Born Free Country because both species are no longer present in Africania because of heavy poaching during the civil war that plagued the country approximately a decade ago. 20X4 The Africanian operations are generating a profit significantly in excess of the Dowlings' expectations and Company A's forecast. Consequently, the Dowlings decide to expand Wild Safari's African operations further. The introduction of elephant-back safaris in March 20X4 allows Wild Safari to significantly increase the price of its Africanian safaris in response to unexpectedly high demand for that service. Acquisition of Hendrix Safari's assets and businesses On 2 January 20X4 Wild Safari acquires all of the assets and businesses of Hendrix Safaris at public auction for ZAR30 million.3 Wild Safari also retained all of Hendrix Safari's staff. The founding owner-manager and sole shareholder of Hendrix Safaris (Mr. Lucky) disposed of Hendrix Safaris to fund his retirement. Hendrix Safaris operates in the ecotourism and agribusiness sectors on land it owns in South Africa. That land, which is securely fenced, is the sole remaining habitat of the endemic quagga (Equus quagga quagga). The quagga is a subspecies of the common zebra (Equus quagga) and was, until its rediscovery by Mr. Hendrix about a decade ago, thought to be extinct. Hendrix Safari's profitable ecotourism business allows tourists to observe the world's only quaggas in their natural habitat in a one-hour elephant-back safari. The elephant-back safaris are marketed under the registered 'Hendrix' brand name. Hendrix Safari's profitable agribusinesses comprise a premium badger-friendly honey production business and sustainable exotic pine plantations. The main reasons for Wild Safari acquiring Hendrix Safaris is to obtain its herd of quaggas and its ten safari-trained elephant bulls. Following the acquisition, the elephants are immediately relocated to Born Free Country using a military helicopter provided at no cost to Wild Safari by the government of Africania. The relocation assistance is provided in accordance with that government's ecotourism development support programme. Prior to the auction, the Dowlings estimate the fair values of Hendrix Safari's tangible assets as follows: ZAR (currency of South Africa) Land and all plants (including pine trees) growing on it Quaggas (herd: 30 mature + 10 immature) Elephants ('herd': 10 mature bulls) 500 active beehives Total tangible assets 20,000,000 4,000,000 2,500,000 500,000 27,000,000 Wild Safari also continues to operate Hendrix Safari's South African agribusinesses. In February 20X4, Wild Safari relaunches the modified South African ecotourism business using the Hendrix brand offering horseback quagga safaris using a herd of 20 horses that it acquired at a cost of ZAR200,000 in a separate acquisition from an independent third party. 20X5 to 20X8 After living in Africania for about five years, the Dowlings are further inspired by its potential as a showcase for wildlife. On 2 January 20X5, Wild Safari acquires a second property (Beachside) in Africania for $2,000,000. Beachside is a mix of undeveloped grassland and bushveld. Except for the portion of the property that adjoins the Indian Ocean, the perimeter of this property is securely fenced. Despite its being securely fenced, there are no animals of significant value on Beachside at the time of acquisition. The main purposes of acquiring Beachside are to obtain land on which to breed rare native animals (for example, African wild dog, brown hyena and rhino) for release into the wild on Born Free Country and to broaden the range of activities that Wild Safari can engage in, including: breeding Tuberculosis-free (TB-free) African buffalo and a range of antelope, zebra, giraffe and warthog for sale to other parties; operating land-based photographic safaris; licensing land-based self-drive photographic safaris; operating aquatic safaris (snorkeling, diving and whale watching) from the coast bordering Beachside; and developing a beach holiday facility and casino. All these activities take place on, or adjacent to, Beachside. Animal husbandry facilities In 20X6 Wild Safari constructs breeding dens in smaller, securely fenced enclosures to house wild dogs and brown hyena (cost AFZ270,000). Wild Safari also 'rhino proofs' the perimeter fence of Beachside by reinforcing it with a thick steel cable, which is secured one foot above ground level (cost ZAR400,000). In late 20X6 Wild Safari purchases the following animals at a reputable game auction in South Africa. The table also shows the prices paid at auction for animals in 20X7 and 20X8. (All amounts shown in Price paid by Price paid by others Price paid by others this table are per animal) Wild Safari at at auction in 20X7 at auction in 20X8 auction in 20X6 ZAR ZAR ZAR 4 wild dogs 1,500 1,600 1,100 4 brown hyena 1,300 1,800 1,700 5 white rhinoceros 150,000 180,000 200,000 5 black rhinoceros 120,000 130,000 150,000 10 TB-free Cape 100,000 160,000 140,000 buffalo The costs of food, supplies, keepers' wages and veterinarian services that are incurred in caring for the animals is about ZAR1,000,000 per year. The table below documents the success of Wild Safari's captive breeding programme on Beachside: Wild Dog Purchased at auction Died in relocation 31/12/20X6 Brown Hyena 4 White Rhinoceros Black Rhinoceros Buffalo 4 5 5 10 4 5 5 10 (1) 3 Born Poached 31/12/20X7 5 1 8 4 Born 3 2 3 6 (1) 4 13 2 1 5 31/12/20X8 Born Died Released on Born Free Country Sold at auction 31/12/20X9 11 6 8 5 18 2 2 1 8 (1) (6) 5 (4) 8 6 6 (5) 20 20X9 Release of captive-bred animals In July 20X9, following an intensive habituation programme, a pack of six wild dogs and four white rhinoceroses from the captive breeding programme on Beachside is released into the wild on Born Free Country. Answer the following. Compose the answers (in complete sentences with citations to the IFRS regulations) as if you were writing a letter to the CEO, Samuel Joseph, of Company A, the parent company of Wild Safari. You answer should be between 2-3 pages (no longer). 1) 2) 3) 4) 5) What is the implied interest rate on the loan from the bank (p. 1)? Are the wild animals on Born Free assets of Wild Safari? Identify the assets acquired by Wild Safari at the date of acquisition of Hendrix Safari? Are the horse that are acquired in a separate acquisition assets of Wild Safari? What judgements and estimates would Wild Safari make in accounting for the biological assets related to agricultural activity (the bees)? 6) What are the main issues in accounting for the capture and release of the wild animals relocated from Born Free to Beachside in 20X5? 7) What are the main issues in accounting for the initial recognition of animals purchased at auction and relocated to Beachside (pay particular attention to judgements and estimates)? 8) What are the main issues in accounting for animals relocated to Beachside after initial recognition pay particular attention to judgements and estimates)? 9) What are the main issues in accounting for the animals breed in Beachside after initial recognition (pay particular attention to judgements and estimates)? 10) How must Wild Safari account for the release of the pack of six wild dogs and four white rhinoceroses into the wild on Born Free