Dambai Ltd (Dambai) is a large manufacturing company. Wherever possible, it structures its operations to take advantage of any financial assistance available from national and regional authorities. During the year, Dambai decided to relocate some of its other operations to a regional development area, which offers attractive labour costs and tax incentives. The regional government agreed to contribute GH200,000 as a result of Dambai setting up in the regional development area. There are no particular conditions as to what the money should be spent on. The cash was received on 1 August 2019.

Required:

In accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance explain the financial reporting treatment of the above in the financial statements of Dambai for the year ended 31 December 2019.

Q2.

On 1 April 2018, Chofi Ltd (Chofi) borrowed GH15 million in order to partly fund the construction of a new building. The interest rate was 6% payable annually in arrears. On 1 July 2018, construction commenced. On 1 October 2018, GH10 million was paid to the contractor as the first stage payment. On 1 December 2018, a further GH10 million was paid to the contractor. Construction was still in progress at the reporting date of 31 March 2019.

Required:

In accordance with IAS 23: Borrowing Costs, show the appropriate calculations, the amount that should be capitalised in the financial statements of Chofi for the year end 31 March 2019. (4 marks)

Q3.

IAS 12: Income Taxes sets out guidance for dealing with under provision and over provision of income taxes by reporting entities. During the year ended 31 March 2019, Dansoman Ltd finalised and paid its liability for corporate tax on profit for year ended 31 March 2018, at an amount of GH21 million. It had previously made an estimated provision for corporation tax of GH25 million in the financial statements for year ended 31 March 2018. The directors estimate the liability for year ended 31 March 2019 at GH24.5 million.

Required:

Explain the treatment of the above transactions in the financial statements of Dansoman Ltd for the year ended 31 March 2019 in respect of taxation.

Q4.

Ayariga Ltd acquired its head office on 1 January 2007 at a cost of GH10 million (excluding land). The companys depreciation policy is to depreciate property over 50 years on a straight line basis. Estimated residual value is zero. On 31 December 2011, Ayariga Ltd revalued the non-land element of its head office to GH16 million.

In accordance with IAS 16 Property, Plant and Equipment the company has decided not to transfer annual amounts out of revaluation reserves as assets are used. In January 2017 storm damage occurred and the recoverable amount of the head office property (excluding land) was estimated at GH5.8 million.

Required:

In accordance with IAS 36 Impairment of Assets, recommend (with workings) how the above transaction should be accounted for as at 1 January, 2017.

Q4.

Bosco Aluworks Ltd, a manufacturer and supplier of aluminiumutensils for households, has recently established a new facility in Kumasi. To help in this new operation, Bosco Aluworks Ltd have secured a number of grants from the Government of Ghana and are unsure how the grants are to be accounted for in the financial statements.

The company has a year end of 30 April 2017 and all the following transactions took place at 1 May 2016.

i) Bosco Aluworks Ltd has been awarded a grant for GH80,000, to be received over three years, in respect of providing employment to fresh graduates in the area.

ii) Bosco Aluworks Ltd received a GH5,000 grant from the Ministry of Business Development for the initial training of the new employees.

iii) The company also received a grant of GH120,000 from the Ministry of Special Development Initiative towards the acquisition of a GH600,000 machine. The machine has a useful economic life of 8 years and an estimated residual value of GH60,000. Depreciation is on the straight line basis.

Required:

Explain how each of the above should be accounted for in the financial statements of Bosco Aluworks Ltd for the year ended 31 April 2017, in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

Q5.

IAS 23 Borrowing Costs requires that borrowing costs directly attributable to the acquisition, construction or production of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are to be capitalised or included in the cost of the asset once they meet certain conditions.

Required:

Identify THREE conditions that must be met before an entity can commence to capitalise borrowing cost.