UJL-4 Please do not copy other answers. This is a different question. If copied from other answers I will downvote and report your account

Q1.

Q2:

You are the financial controller of Epsilon, a listed entity with a number of subsidiaries. The consolida Epsilon for the year ended 31 March 20x5 are currently being prepared. One of the directors of Epsi which have arisen as a result of her review of the draft consolidated financial statements. The following exhibits, available on the left-hand side of the screen, provide information relevant to 1. New subsidiary the financial statements of Newby. 2. Investment - details of an equity investment. 3. Measurement change - details of a change in measurement method of inventory. This information should be used to answer the question requirements within the response option I know during the year ended 31 March 20X5 we acquired Newby. Newby is a small company which operates in the construction industry. I also know that the shares in Newby were previously owned equally by three family members, and that Newby's borrowing was a bank loan. I had a look at Newby's audited individual financial statements for the current year. The audit report identified no issues with how the financial statements had been prepared but I don't understand how this can be correct. Newby is located in the same country as we are and is subject to the same regulatory regime. The financial statements of Newby do not appear to be wholly compliant with full International Financial Reporting Standards (IFRS standards). For example, the notes to Newby's financial statements state that all borrowing costs are expensed as they are incurred despite some of these borrowings relating to the construction of a new factory. Furthermore, the notes to Newby's financial statements don't appear to contain all the disclosures required by full IFRS standards. Please can you answer the following questions (I don't need to know the mechanics of the consolidation process - I know that already): 1. Please explain why Newby has been allowed to prepare individual financial statements which don't appear to wholly comply with full IFRS standards. 2. Please explain if Newby will need to use full IFRS standards in its own financial statements now that it's part of our group. You will know that during the year we made a strategic long-term Investment in Sandy, an entity which is a vital part of our supply chain. I believe we purchased 40% of the shares, which carry one vote cach, and that this gave us the right to appoint four of the ten directors. The other six directors are independent of each other, they don't always agree when voting. I was expecting to see Sandy Included as a subsidiary in our consolidated financial statements but instead the Investment has been shown as a single figure in our consolidated statement of financial position. The carrying amount of the investment is presented as $40 millon but, given the share price, I have calculated the fair value as $42 million. I thought that equity Investments that weren't consolidated needed to be measured at fair value. Please explain: 1. Why we aren't including Sandy as a subsidiary in our consolidated financial statements. 2. What method will have been used to arrive at the carrying amount of $40 milion rather than measuring the investment at talr value. The draft financial statements indicate that in the current period we began measuring our inventory of raw materials using the weighted average cost formula. In previous periods we measured all our inventories using the first in first out formula. I have a number of questions here: 1. Are we allowed to change the measurement method in this way? 2. If we do change the measurement method for our inventory of raw materials shouldn't we change it for all of our inventories? 3. How do we ensure that the financial statements for this year are comparable with those of last year given that a different measurement method has been used for raw materials inventory? Provide answers to the queries raised by one of Epsilon's directors relating to the consolidated financial statements for the year ended 31 March 20X5. The queries you need to address appear in exhibits 1 - 3. 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 You are the financial controller of Epsilon, a listed entity with a number of subsidiaries. The consolida Epsilon for the year ended 31 March 20x5 are currently being prepared. One of the directors of Epsi which have arisen as a result of her review of the draft consolidated financial statements. The following exhibits, available on the left-hand side of the screen, provide information relevant to 1. New subsidiary the financial statements of Newby. 2. Investment - details of an equity investment. 3. Measurement change - details of a change in measurement method of inventory. This information should be used to answer the question requirements within the response option I know during the year ended 31 March 20X5 we acquired Newby. Newby is a small company which operates in the construction industry. I also know that the shares in Newby were previously owned equally by three family members, and that Newby's borrowing was a bank loan. I had a look at Newby's audited individual financial statements for the current year. The audit report identified no issues with how the financial statements had been prepared but I don't understand how this can be correct. Newby is located in the same country as we are and is subject to the same regulatory regime. The financial statements of Newby do not appear to be wholly compliant with full International Financial Reporting Standards (IFRS standards). For example, the notes to Newby's financial statements state that all borrowing costs are expensed as they are incurred despite some of these borrowings relating to the construction of a new factory. Furthermore, the notes to Newby's financial statements don't appear to contain all the disclosures required by full IFRS standards. Please can you answer the following questions (I don't need to know the mechanics of the consolidation process - I know that already): 1. Please explain why Newby has been allowed to prepare individual financial statements which don't appear to wholly comply with full IFRS standards. 2. Please explain if Newby will need to use full IFRS standards in its own financial statements now that it's part of our group. You will know that during the year we made a strategic long-term Investment in Sandy, an entity which is a vital part of our supply chain. I believe we purchased 40% of the shares, which carry one vote cach, and that this gave us the right to appoint four of the ten directors. The other six directors are independent of each other, they don't always agree when voting. I was expecting to see Sandy Included as a subsidiary in our consolidated financial statements but instead the Investment has been shown as a single figure in our consolidated statement of financial position. The carrying amount of the investment is presented as $40 millon but, given the share price, I have calculated the fair value as $42 million. I thought that equity Investments that weren't consolidated needed to be measured at fair value. Please explain: 1. Why we aren't including Sandy as a subsidiary in our consolidated financial statements. 2. What method will have been used to arrive at the carrying amount of $40 milion rather than measuring the investment at talr value. The draft financial statements indicate that in the current period we began measuring our inventory of raw materials using the weighted average cost formula. In previous periods we measured all our inventories using the first in first out formula. I have a number of questions here: 1. Are we allowed to change the measurement method in this way? 2. If we do change the measurement method for our inventory of raw materials shouldn't we change it for all of our inventories? 3. How do we ensure that the financial statements for this year are comparable with those of last year given that a different measurement method has been used for raw materials inventory? Provide answers to the queries raised by one of Epsilon's directors relating to the consolidated financial statements for the year ended 31 March 20X5. The queries you need to address appear in exhibits 1 - 3. 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