Background You are a trainee chartered accountant working for a global accountancy and business advisory firm in Northern Ireland. Texon plc, a Northern Ireland-based company and one of your firm's clients, supplies gas and electricity to the Northern Ireland market. There is increasing concern within the gas industry of increased demand for supply, coupled with anticipated disrupted supply from suppliers in Russia and Eastern Europe. Bobby Jean, a partner in your firm, recently emailed you the following memo. Memo Date: To: From: Subject: dd/mm/yy Trainee Chartered Accountant Bobby Jean Texon ple As you are aware, I met with Rosa Lita yesterday, the Finance Director of Texon Plc. At the meeting, Rosa outlined several issues that will be considered at my upcoming meeting with Texon plc's Board of Directors to discuss the company's draft financial statements for the year ended 30 September 2022. Rosa indicated that the directors are considering recording the company's refinery at fair value rather than depreciated historic cost in the financial statements for the year ended 30 September 2022. The refinery, which is included in non-current assets in the attached statement of financial position at 30 September 2022, was completed in late 2017 at a cost of 10,000,000 when it was deemed to have an estimated useful economic life of 15 years. Furthermore, as you may be aware due to the media coverage, on 4 August 2022 there was an incident in Texon plc's refinery which resulted in four of the company's employees being injured. The four employees have initiated legal proceedings against Texon plc, alleging breach of health and safety requirements by the company. The maximum total compensation payable is 750,000 and the company's lawyers have advised that the company should not contest the claim. It is anticipated that the case will not be heard before January 2023. Given the lower- than-expected profits for the year ended 30 September 2022, and that the case is unlikely to be settled before January 2023, the directors wish to include any costs associated with the claim in the financial statements for the year ended 30 September 2023.) The attached file contains the company's financial statements for 2021 and 2022, together with supporting notes. I would be grateful if you would examine this information and meet with Rosa Lita and myself on Friday morning to discuss the above matters, together with the financial performance of the company. Signed: Bobby Jean Statements of Profit or Loss and Other Comprehensive Income for the Year Ended 30 Texon plc September Revenue Cost of sales Gross profit Operating expenses Profit from operations Finance costs Profit before taxation Income tax Profit after taxation Texon ple (Draft) 2022 '000 34,200 (Final) 2021 '000 28,700 (24,000) 10,200 (5.100) 5,100 (1.490) (19,000) 9,700 (5,050) 4,650 (1,200) 3,610 3,450 (1.110) (1,050) 2,500 2,400 Statements of Financial Position at 30 September ASSETS Non-current assets Property, plant and equipment (Draft) 2022 '000 '000 (Final) 2021 '000 '000 42,000 35,000 Current assets Inventories 2,500 1,600 Receivables and prepayments (Note 1) Cash and cash equivalents 2,100 1,400 4,600 400 3,400 Non-current assets held for sale 2,000 48.600 38,400 EQUITY AND LIABILITIES Capital and reserves Issued capital - 1 ordinary shares 4,000 3,000 Share premium 2,000 1,600 Revaluation surplus (Note 2) 5,000 2,000 Retained earnings 17,490 14.200 28,490 20,800 Non-current liabilities Long term borrowing 8% bonds (Note 3) 15,000 14,500 Current liabilities Trade and other payables 2,700 1,650 Taxation 1,110 1,050 Short-term borrowings 1.300 5,110 48,600 400 3.100 38,400 Notes: 1. Included in 'Receivables and prepayments' are accounts receivable of 1,800,000 in 2022 and 1,200,000 in 2021. 2. The movement in the revaluation surplus relates to the company's head office which was revalued during 2022. 3. The 8% bonds are repayable on 23 January 2023. 4. Texon ple's divisional information for the year ended 30 September 2022 shows: Revenue Gross profit Profit from operations Finance costs 5. Performance information Gas Division Electricity Division '000 '000 20,520 13.680 6,200 4,000 2,880 2,220 1,050 440 2022 2021 Texon plc-operating profit margin Industry-average operating profit margin 15% 16% 18% 14% Texon plc-return on capital employed 12% 13% Requirement Prepare a 15-minute presentation which: (a) analyses the financial performance and position of Texon plc. 50 Marks (b) identifies any further information required to complete your analysis of the company's financial performance and position and considers the possible limitations of your analysis. 10 Marks (c) discusses the difficulties that may be encountered by the directors of Texon ple when attempting to value the refinery at fair value. 20 Marks (d) explains how the legal claim arising from the injuries suffered by four of the company's employees should be accounted for. 20 Marks Total 100 Marks