Question $3$

$3$a$.$ Take it Easy Ltd$,$ a government business entity, acquires $40\%$ of the voting rights of Hardtime

Ltd$.$ The remaining investors each hold $5\%$ of the voting rights of Hardtime Ltd$.$ A shareholder

agreement grants Take it Easy Ltd the right to appoint, remove and set the remuneration of

management responsible for key business decisions of Hardtime Ltd$.$ To change this agreement, a

two$-$thirds majority vote of the shareholders is required.

Required:

In accordance with IFRS $10$: Consolidated Financial Statements, discuss whether Take it easy Ltd

controls Hardtime Ltd$.$

$5$ marks

$3$b$.$ On $1$ April $2019,$ Softcare Plc granted $500$ share appreciation rights $($SARs$)$ to its $300$

employees. All of the rights vested on $31$ March $2021$ can be exercised from $1$ April $2021$ up to

$31$ March $2023.$ At the grant date, the value of each SAR was $GH10,$ and it was estimated that

$5\%$ of the employees would leave during the vesting period. The fair value of the SARs is as

follows:

All the employees who were expected to leave the employment did leave the company as expected

before $31$ March $2021.$ On $31$ March $2022,60$ employees exercised their options when the intrinsic

value of the right was GH$10\mathrm{.}50$ and was paid in cash. Softcare Plc is$,$ however, confused as to

whether to account for the SARs under IFRS $2$: Share$-$based Payment or IFRS $13$: Fair Value

Measurement and would like to be advised as to how the SARs should have been accounted for

from the grant date to $31$ March $2022.$

Required:

Advise Softcare Plc on how the above transactions should be accounted for in its financial

statements with reference to relevant International Financial Reporting Standards $($IFRS$).$

$5$ marks $3$c$.$ Kafedel Ltd is a government business entity in Ghana. Kafedel Ltd operates a defined benefit

scheme which at $31$ December $2020$ was in deficit by $GH120$ million. Details for the current year

are as follows:

The rate of interest applicable to corporate bonds was $5\%$ at $31$ December $2020.$ The cash

contributions for the scheme have been correctly accounted for in the financial statements for the

year ended $31$ December $2021.$ This is the only adjustment that has been made in respect of the

scheme.

Required:

Recommend the correct accounting treatment of the above transactions to the directors of

Kafedel Ltd in the financial statements for the year ended $31$ December $2021,$ including financial

statements extracts in accordance with LAS $19$: Employee Benefits.

$5$ marks

$3$d$.$ Jayce Ltd $($Jayco$)$ is a manufacturing company that prepares Financial Statements in

compliance with IFRSs and has a reporting date to $31$ December. During the year to $31$

December $2021,$ Jayce entered into a contract with a customer to manufacture and sell some

goods such that the goods will be delivered $($control of the goods vests with the customer$)$ in two

years. The contract has two payment options:

i$)$ The customer can pay $GH6500,000$ when the contract is signed or

ii$)GH650,000$ in two years when the customer gains control of the goods.

Layco's incremental borrowing rate is $10\%.$ The customer paid GH$500,000$ on $1$ January $2021,$

when the contract was signed. Jayce intends to recognise revenue on this contract in the financial

statements.

Required:

In accordance with IFRS $15$: Revenue from Contract with Customers, explain $($with supporting

calculations$)$ how Jayco should account for the above transactions for years $2021$ and $2022.$

$5$ marks $3$e$.$ JVC Ltd manufactures equipment for lease or sale. The following transactions relates to

JVC Ltd for the year ended $31$ December $2021$:

On $31$ December $2021,$ JVC Ltd leased out equipment under a $10-$year finance lease. The

selling price of the leased item was $GH50$ million, and the net present value of the

minimum lease payments was $GH47$ million. The carrying value of the leased asset was

$GHc40$ million and the present value of the residual value of the product when it reverts

back to JVC Ltd at the end of the lease term is GHe$2\mathrm{.}8$ million. JVC Ltd has shown sales

of $GH650$ million and cost of sales of $GHd40$ million in its financial statements.

Required:

Recommend to the directors of JVC Ltd how the above transactions should be accounted

for in the financial statements for the year ended $31$ December $2021$ in accordance with

releyant International Financial Reporting Standards.

$(5$ marks$)$