2 Assume that it is now 31 January 2022. You are an ICAEW Chartered Accountant employed by a large consultancy practice. You have been seconded to Tunstall pic, a leisure company, to help with the preparation of its consolidated financial statements for the year ended 31 December 2021. The financial controller of Tunstall plc left suddenly following a disagreement with Jenkins Weston, the managing director. Jenkins has explained to you that Tunstall pic is looking to raise additional finance and needs to maximise profits this year to make the company look attractive to potential investors and lenders. Tunstall plc's bank has made a provisional offer to provide additional finance on the condition that the profit margin for the year (calculated as profit for the year/revenue) is above 15%. Jenkins has given you a file which contains the draft consolidated financial statements along with notes on a number of outstanding issues. Jenkins said that the position of financial controller could be yours if you ensure that the profits remain above the 15% threshold. The draft consolidated financial statements show that profit for the year ended 31 December 2021 is 389,400 and revenue is 2,300,000. Outstanding issues: (1) Tunstall plc owns a site which was acquired on 1 January 2012 and has one building on the land. On 31 December 2015 Tunstall plc changed its accounting policy to the revaluation model and the building was assessed as having a useful life of 50 years from this date. A second valuation was carried out on the land and building at 31 December 2019 and was correctly recognised in the financial statements. On 31 December 2021 a third valuation was carried out. No accounting entries were made in relation to this at that date. Details of all three valuations of the site to date are given below: Land E Building Carrying amount 31 December 2015 200,000 370,000 Valuations at 31 December 2015 300,000 450,000 31 December 2019 320,000 460,000 31 December 2021 220,000 300,000 Tunstall plc does not make an annual transfer between the revaluation surplus and retained earnings. (2) During the year Tunstall plc opened a number of new leisure complexes across the UK. There are two different payment options available to customers of each leisure complex . Pay-as-you-go: a pricing structure which applies depending on the facilities that are used. B Full membership: an annual subscription of 600 is paid in advance. Members have unlimited access to all the facilities for no additional charge. By 31 December 2021, 500 new members had signed up and paid an annual subscription. The average unexpired period of membership at 31 December 2021 is four months. Members use the facilities equally throughout the year. At 31 December 2021 all subscription receipts had been recognised within revenue. (3) The directors want to change the company's accounting policy for land and buildings from the revaluation model back to the cost model. The finance director explained to the board that if the policy was changed back to the cost model, the valuation decrease this year would not have to be recognised. The finance director also stated that it would cost less in future as the company would not have to pay for a qualified professional to carry out the valuations. (4) On 1 January 2021 Tunstall plc purchased 30% of Bussow Ltd's ordinary shares for 45,000, which gave Tunstall plc significant influence. At the date of acquisition by Tunstall plc, Bussow Ltd owned a property with a fair value 20,000 in excess of its carrying amount and a remaining useful life of 20 years. The remaining assets and liabilities at the date of acquisition were equal to their carrying amounts. Bussow Ltd made a loss for the year ended 31 December 2021 of 185,000. Bussow Ltd was recognised as an investment at cost on the date of acquisition. No other accounting entries have been made in relation to Bussow Ltd for the year ended 31 December 2021 as Bussow Ltd did not report a profit and did not pay any dividends. Requirements 2.1 Explain the required IFRS Standards financial reporting treatment of issues (1) to (4) above in Tunstall plc's consolidated financial statements for the year ended 31 December 2021, preparing all relevant calculations. (25 marks) 2.2 Calculate Tunstall plc's revised consolidated profit for the year ended 31 December 2021. (2 marks) 2.3 Describe any differences between IFRS Standards and UK GAAP in respect of the financial reporting treatment of issue (2) above. (2 marks) 2.4 Discuss the ethical issues you face from the scenario and set out the steps that you should take to address them