Q10.

Sincere Request not to copy from other answers. This is a different question. If seen copying, will report your account and downvote the answer.

Q11.

Omega is a listed entity and you are the financial controller. The financial statements of Omega for the year ended 31 March 2005 are currently being prepared. One of Omega's directors has sent you three questions regarding the financial statements. Question 1 - Right-of- use asset When I looked at the note which gave details of our property, plant and equipment, a separate component appeared for the first time this year. This component was described as a right-of-use asset. Upon further investigation, I discovered that this related to a warehouse which we started to lease on 1 October 20X4 to provide us with more capacity. The warehouse is being leased on a five-year lease contract at an annual rental of $500,000, payable in arrears. There is no option to extend the lease at the end of the five-year period. Based on current annual interest rates (10%), these rentals have a total present value of $1,895,000. We incurred direct costs of $105,000 when arranging this lease with the owner. The carrying amount of the right-of-use asset which is shown in the financial statements is $1.8 million. I don't understand this at all. In particular, I have three questions about this that I would like you to answer: The warehouse would cost at least $10 million to purchase outright and has a useful life of around 25 years. How can it be presented as Omega's asset in these circumstances? Where does the figure of $1.8 million come from? Apart from the right-of-use asset, how else will this transaction affect our financial statements? | don't need detailed workings here, just explanations. (11 marks) Question 2 - Segment reporting I know that, because we're a listed entity, we are required to disclose details of the financial performance and financial position of different business segments in the notes to our financial statements. I thought it would be interesting to compare the segment report in our financial statements with that of a key competitor. When I did this, I found myself very confused. Our segment report was based on the performance and position by geographical area whereas our competitor's report was based on the performance and position by product type. How can this be correct when both of us are preparing our financial statements in accordance with International Financial Reporting Standards (IFRS Standards) is there not a definition of a 'segment that would be applied to all businesses? (8 marks) Question 3 Immaterial transactions You may know that the contract for cleaning purchase outright and has a useful life of around 25 years. How can it be presented as Omega's asset in these circumstances? - Where does the figure of $1.8 million come from? - Apart from the right-of-use asset, how else will this transaction affect our financial statements? | don't need detailed workings here, just explanations. (11 marks) Question 2 - Segment reporting I know that, because we're a listed entity, we are required to disclose details of the financial performance and financial position of different business segments in the notes to our financial statements. I thought it would be interesting to compare the segment report in our financial statements with that of a key competitor. When I did this, I found myself very confused. Our segment report was based on the performance and position by geographical area whereas our competitor's report was based on the performance and position by product type. How can this be correct when both of us are preparing our financial statements in accordance with International Financial Reporting Standards (IFRS Standards) is there not a definition of a 'segment' that would be applied to all businesses? (8 marks) Question 3 - Immaterial transactions You may know that the contract for cleaning our Head Office has been given to a firm which is controlled by my brother. This contract was approved in the normal way and I was not involved in the approval process to avoid any perception of a conflict of interest as my brother and I are known to holiday and socialise together. The contract has normal commercial terms and is very insignificant in the context of Omega as an entity. I'm very surprised, therefore, to see details of this contract disclosed in our financial statements when many other much more financially significant contracts are not disclosed in the same detail. Surely this disclosure is unnecessary when the monetary amounts are so small and there is nothing 'out of the ordinary' about the contract? (6 marks) Required: Provide answers to the questions raised by one of Omega's directors relating to the financial statements for the year ended 31 March 20X5. which the interest is actually paid. On 1 April 20X4, Delta purchased some land for $15 million. Delta uses the revaluation model to measure land in its financial statements. On 31 March 20X5, Delta estimated that the value of the land was $18 million and this amount was recognised in Delta's financial statements. Under tax legislation in the country in which Delta is located, gains on the value of land are not taxable unless or until the land is sold. Delta has no intention of disposing of this land in the foreseeable future. The rate of corporate income tax in the country in which Delta is located is 20% per annum. The directors of Delta anticipate that Delta will make taxable profits for the foreseeable future. Delta had no temporary differences at 31 March 20X4. (12 marks) Note 2 - Agricultural activity Delta is a farming entity specialising in milk production. Cows are milked on a daily basis. Milk is kept in cold storage immediately after milking and sold to retail distributors on a weekly basis. On 1 April 20X4, Delta had a herd of 500 cows which were all three years old. During the year, some of the cows became sick and on 30 September 20X4 20 cows died. On 1 October 20X4, Delta purchased 20 replacement cows at the market for $210 each. These 20 Cows were all one year old when they were purchased. On 31 March 20X5, Delta had 1,000 litres of milk in cold storage which had not been sold to retail distributors. The market price of milk at 31 March 20X5 was $2 per litre. When selling the milk to distributors, Delta incurs selling costs of 10 cents per litre. These amounts did not change during March 20X5 and are not expected to change during April 20X5. Information relating to fair value and costs to sell is given below: Date Fair value of a dairy cow which is: Costs to sell a cow at market 1 year old 172 years old 3 years old 4 years old $ $ $ $ $ 1 April 2004 200 220 270 250 10 1 October 20X4 210 230 280 260 10 31 March 20x5 215 235 290 265 11 (13 marks) 7 (P.T.O. Required: Using the information in notes 1 and 2, explain, with appropriate computations, how Delta should report these transactions in the financial statements for the year ended 31 March 20X5