Question 2 The reporting date of Vitu. a public listed company is 31 March 2021. Vitu owns and operates a number of online businesses. Its customers order goods through Vitu's websites. Recently, some shareholders expressed concern and worry at the financial performance of Vitu, at a recently held annual general meeting. The shareholders also complained about what they termed excessive remuneration packages of the directors. The directors are paid bonuses based on the profitability of the company every year. The recently recruited accountant has encountered a number of accounting issues as follows: Issue 1 Vitu purchased an item of property, plant and equipment for K20 million on 1 April 2019. The useful economic life was estimated to be five years. At 31 March 2020, the asset was revalued to K24 million. At 31 March 2021, the asset's value had fallen to K8 million. The Finance Director has advised the accountant to record the entire downwards revaluation in other comprehensive income. (6 marks) Issue 2 During the period Vitu sold 5% of the equity shares of Vaka for $2 million. Prior to the sale, Vitu owned 100% of the shares of Vaka. This transaction has improved Vitu's cash position while enabling it to retain control over Vaka. At the date of the share sale, the goodwill and net assets of Vaka were carried in the consolidated statement of financial position at $5 million and $25 million respectively. The non-controlling interest at acquisition was measured at fair value. The Finance Director has instructed the accountant to record a profit on the disposal of the shares in the consolidated statement of profit or loss. (7 marks) Issue 3 On 1 April 2020, there was an amendment to Vitu's defined benefit scheme whereby the promised pension entitlement was increased from 15% of final salary to 25%. The directors believe that the pension scheme, which is in deficit, is not an integral part of the operating activities of Vitu. As such they have changed their accounting policy so that, from the current year, all gains and losses on the pension scheme are recognised in other comprehensive income. The Finance Director believes that this will make the financial statements more consistent, more understandable and can be justified on the grounds of fair presentation (7 marks) In all these recommendations, the Finance Director reminded the accountant, that loyalty was important for a continued stay in his/her position and for promotion prospects. Required: Evaluate the appropriateness of Finance Director's recommended accounting treatment of the above transactions and the ethical implications of the above situations. (5 marks) Reference to ethical implication