(a) The Conceptual Framework for Financial Reporting identifies faithful representation as a fundamental qualitative characteristic of useful financial information.

Required:

Distinguish between fundamental and enhancing qualitative characteristics and explain why faithful representation is important.

b) IFRSs are developed through a formal system of due process and broad international consultation

involving accountants, financial analysts and other users and regulatory bodies from around the world.

The overall agenda of the IASB will initially be set by discussion with the IFRS Advisory Council.

Required

Describe the steps involved in the due process for developing an individual standard(5 marks)

c) You have been recently appointed as the technical manager ofSmart Consultancy Services [SCS].SCSprovides trainingand consultancy adviceto companieswhich prepare financial statements using International Financial Reporting Standards [IFRSs]. The managing partner of SCShas asked you to preparethe advice to be givento several clientsin respect of the accounting requirements of non-current assets for the year ended 31 December2019.

1)Boafo Ltd

BoafoBottling Ltdowns a bottling plant with an original cost ofGHS200,000. It was acquired in January 2011.On acquisition, management determined that the useful life was 10 years and the residual value would beGHS20,000. The asset is now 8 years old , and during this time there have been no revisions to the assessed residual value. At the end of year 8 (as at 31 December 2018), management has reviewed the useful life and residual value and has determined that the useful life [from date of acquisition] can be extended to 12 years in view of the maintenance program adopted by the company. As a result, the residual value will reduce toGHS10,000.

Required

Determine how the asset will be accounted for in the2015 financial statements ( Statement of Profit and Lossfor 2019 and Statement of financial position as at 31 December 2019)

ii) Wisdom Ltd

Wisdom Ltd received aGovernment grant ofGHS150 million in January 2019 to install and run asolar energy system in an economically backward area. WisdomLtd has estimated that such a system would costGHS250 million to construct. The secondary condition attached to the grant is that the entity should hire labour in the local market (i.e., from the economically backward area where the windmill is located) instead of employing workers from other parts of the country. It should maintain a ratio of 1:1 local workers to workers from outside in its labor force for the next 5 years. The windmill is to be depreciated using the straight-line method over a period of 10 years. The management of Wisdom has adopted the policy of treatingunearned government granton a deferral basis.

Required

AdviseWisdom Ltd on the treatment of this grant in the 2019 financial statements ( Statement of Profit and Lossfor 2019 and Statement of financial position as at 31 December 2019) in accordance with IAS 20.

iii)Esinam Ltd

Esinam company hadthe following loans in place at the beginning and end of 2019

1 January 31 December

2019 2019

GHS GHS

25% Bank loan repayable 2020480,000 480,000

30% Bank loan repayable2021320,000 320,000

20% Debenture Stock repayable 2022- 300,000

On 1 January 2019,the companybegan theconstruction of aqualifying asset(a bridge) to link the factory location to the settlement site of the workersat a cost of GHS400,000 , using existing borrowings (the 25% bank loanand the30% bank loan).Expenditure drawn down for theconstruction wasGHS120,000 on 1 January 2019; GHS80,000 on 1 May 2019 and GHS200,000on 1 October 2019.The bridge was completed and put to use on 31 December 2019.

The 20% debenture stock was specifically issued to fund the construction of another qualifying asset (an office building), construction of which began on 1 July 2019.

Required:

Calculate the borrowing coststo be capitalizedfor the bridge.

iv) ABC Ltd

ABC Ltd prepares accounts to 31 December. It acquired an administration blockwith an estimated useful life of 50 years at a cost of GHS22 millionon 1 January2013.The entity used the buildinguntil 1st April2019, when it moved itsofficeto a new building at the factory site. The building was reclassified as an investment propertyand leased outunder a 40 year lease.The fair valuesof thebuildingat1^stApril2019 and 31^stDecember 2019 wereGHS21 millionand GH21.5 million respectively

Required:

Explain thetreatment of the building in the 2019 financial statements(Statement of Profit and Lossfor 2019 and Statement of financial position as at 31 December 2019) on the assumption that the entityuses the fair valuemodel for investment properties.