a) BeGreen Ltd (BeGreen) is an agro-processing company which reports under International

Financial Reporting Standards (IFRSs) and prepares its financial statements up to 31

December each year. The company intends to comply fully with IAS 12 Income Taxes by introducing deferred tax in its financial statements.

On 1 January 2020, the company acquired an item of plant which cost GH750,000 and has a useful life of 5 years with no residual value. BeGreen enjoys capital allowance at the rate of 30%. Revenue generated by using the plant is taxable, any gain on disposal of the machine will be taxable and any loss on disposal will be deductible for tax purposes. BeGreen estimates current tax provision for the year to 31 December 2020 at GH10,125. The tax rate of BeGreen is 25%.

Required:

i) In accordance with IAS 12: Income Taxes, explain the amounts to be reported in the

Statement of Financial Position and Statement of Profit or Loss for the year ended 31

December 2020. (5 marks) ii) Explain the term temporary difference and state ONE (1) circumstance in which temporary difference may arise. (2 marks)

b) Kundugu Ltd (Kundugu) is a manufacturing company located in the Savannah Region. The reporting date of Kundugu is 31 December and the company reports under International Financial Reporting Standards (IFRSs). Kundugu intends to expand its production to take advantage of emerging economic activities in the new region.

On 1 January 2020, the company entered into a lease agreement for a production equipment which has a useful economic life of 8 years. The lease term is for four years and Kundugu agrees to pay annual rent of GH50,000 commencing on 1 January 2020 and annually thereafter. The interest rate implicit in the lease is 7.5% and the lessee's incremental borrowing rate is 10%. The present value of lease payments not yet paid on 1 January 2020 is GH130,026. Kundugu paid legal fees of GH1,000 to set up the lease.

Required:

Prepare extracts for the Statement of Financial Position and Statement of Profit or Loss for

2020 and 2021, showing how Kundugu should account for this transaction. (6 marks)

c) On 1 June 2020, Karikari Ltd received a Government of Ghana grant of GH8 million towards the purchase of new plant with a gross cost of GH64 million. The plant has an estimated life of 10 years and is depreciated on a straight-line basis. One of the terms of the grant is that the sale of the plant before 31 May 2024 would trigger a repayment on a sliding scale as follows:

Intended sale in the year ended:	Repayment amount
31 May 2021	100%
31 May 2022	75%
31 May 2023	50%
31 May 2024	25%

The directors propose to credit the statement of profit or loss with GH2 million (GH8 million @ 25%) being the amount of the grant they believe has been earned in the year ended 31 May 2021. Karikari Ltd accounts for government grants as a separate item of deferred credit in its statement of financial position. Karikari Ltd has no intention of selling the plant before the end of its useful economic life.

Required:

Explain with computations, the appropriate accounting treatment of the above transaction

in accordance with IAS 20 Government Grants and Disclosure of Government Assistance

in the financial statements of Karikari Ltd for the year ended 31 May 2021. (3 marks)

d) The recognition, measurement and disclosure of an Investment Property in accordance with IAS 40: Investment Property appears straight forward. However, this could get complicated when measured either under the fair value model or under the revaluation model.

Required:

i) Define Investment Property under IAS 40 and explain the rationale behind its accounting

treatment. (2 marks) ii) Explain how the treatment of an investment property carried under the fair value model differs from an owner-occupied property carried under the revaluation model. (2 marks)