XRX-10 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.

Omega is a listed entity and you are the financial controller. The financial statements of Omega for the year ended 31 March 20X5 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? I 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. Alpha's investment in Beta On 1 April 20X3, Alpha acquired 180 million equity shares in Beta. On that date Beta had 200 million equity shares in issue. Alpha made a cash payment of $60 million to the former shareholders of Beta on 1 April 20X3 and agreed to make a further payment of $26.62 million on 31 March 20X6. Alpha had correctly accounted for the deferred payment in its financial statements for the year ended 31 March 20X4 but has made no further entries in its financial statements for the year ended 31 March 20X5. An appropriate annual rate to use in any discounting calculations is 10%. At a discount rate of 10% per annum the present value of $1 payable in three years is $0.7513. On 31 December 20X4, Beta paid a dividend of $5 million. This was the only dividend paid by Beta in the year ended 31 March 20X5 and was appropriately recognised by Alpha. On 1 April 20X3, Alpha made a long-term loan to Beta of $25 million. The loans are included in the financial statements of Beta at this amount. These long-term loans attract interest at an annual rate of 8%. Both Alpha and Beta have correctly accounted for this interest in their individual financial statements for the year ended 31 March 20X5. No impairments of the goodwill on acquisition of Beta have been evident up to and including 31 March 20X5. Note 2 - Intra-group trading Alpha supplies Beta with a raw material which it uses in its production process. Alpha applies a mark-up of one-third to its cost. Sales of the raw material by Alpha to Beta in the year ended 31 March 20x5 totalled $10 million. On 31 March 20X4 and 20X5, the inventories of Beta included goods costing $2 million and $3 million respectively which had been purchased from Alpha. Note 3 Alpha's other investments Apart from its investments in the equity shares and loans of Beta, Alpha has a portfolio of equity investments which are correctly classified as fair value through profit or loss. The investment income of Alpha for the year ended 31 March 20x5 currently correctly includes dividend income from this portfolio. However, the carrying amount of the portfolio has not yet been adjusted to its fair value at 31 March 20X5. On 31 March 20X5, the carrying amount of the portfolio was $32 million and its fair value $33.5 million. 3 (P.T.O. Note 4 Revaluation of property, plant and equipment (PPE) Both Alpha and Beta measure their PPE using the revaluation model. PPE is re-measured at the end of each financial year. In previous periods Alpha had recorded net revaluation losses of $3.5 million. These