CPA REVISION KIT – ADVANCED FINANCIAL REPORTING REVISION KIT (PAST PAPERS WITH ANSWERS)

SAMPLE WORK

Complete copy of CPA ADVANCED FINANCIAL REPORTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317

Email: info@masomomsingi.com

CPA

 

ADVANCED FINANCIAL REPORTING

 

ADVANCED LEVEL

 

REVISION KIT

 

PAST EXAMINATION PAST PAPERS WITH SUGGESTED ANSWERS

 

TOPICALLY ARRANGED

 

 Updated with May 2021 past paper

 

INTRODUCTION 

Following our continued effort to provide quality study and revision materials at an affordable price for the private students who study on their own, full time and part time students, we partnered with other team of professionals to make this possible.

This Revision kit book (Question and answers) contains kasneb past examination past papers and our suggested answers as provided a team of lecturers who are experts in their area of training. The book is intended to help the learner do enough practice on how to handle exam questions and this makes it easy to pass kasneb exams.

Special appreciation and recognition goes to FA Kegicha William Momanyi (MBA Accounting, CPA, CISA and CCP), FA Bramwel Omogo (B.sc Actuarial Science, CIFA, CIIA, CFA first level and ICIFA member), Johnmark Mwangi (MSc Finance, CPAK, BCom Finance), CPA Gregory Mailu (Bsc. Economics) CPA Dominic Rasungu and CPA Lawrence Ambunya among others.

 

PAPER NO. 18 ADVANCED FINANCIAL REPORTING

 

GENERAL OBJECTIVE

 

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her account for complex accounting transactions and prepare advanced financial reports.

 

18.0    LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Prepare financial statements for subsidiaries, associates and jointly controlled entities in compliance with International Financial Reporting Standards (IFRSs) and International Public Sector Accounting Standards (IPSASs) as applicable
  • Analyse financial statements for public and private sector entities
  • Account for complex accounting transactions
  • Apply ethical standards in accountancy work and practice

 

CONTENT

18.1     Framework for preparation and presentation of financial statement

  • Importance of the accounting framework
  • Steps in developing international financial reporting interpretations IFRIC (excluding detailed IFRICS)
  • Ethical and legal issues in financial reporting

 

18.2    Assets and liabilities

  • Inventories
  • Non-current assets held for sale and discontinued operations
  • Impairment of assets
  • Exploration for and evaluation of mineral resources
  • Income taxes – including group aspects
  • Share based payments
  • Employee benefits with emphasis on post-employment benefits

 

18.3    Preparing financial statements and other reports

  • Published financial statements (including group statement of cash flows where a subsidiary is acquired or sold during the year)
  • Interim financial statements
  • Financial statements of pension schemes/retirement benefit plans
  • Operating segment reports
  • Earnings per share
  • IFRS for small and medium sized entities
  • Related parties disclosures
  • Effects of inflation and hyper inflationary economies (exclude inflation adjusted financial statements)
  • Business combinations and corporate restructuring
  • Management commentary (management discussion and analysis)
  • Integrated reporting

 

18.4     Accounting and reporting of financial instruments

  • Nature and scope of financial instruments
  • Equity and financial liabilities
  • Recognition and de-recognition of financial instruments
  • Hedge accounting
  • Other disclosures

 

18.5    Consolidated and separate financial statements

  • Accounting for subsidiaries including piece-meal acquisitions, several subsidiaries and sub-subsidiaries
  • Investments in associates and jointly controlled arrangements
  • Foreign entities (subsidiary, associate and jointly controlled entities)
  • Disposal of investment in subsidiary (partial and full disposal)

 

18.6    Public sector accounting

Provisions of the following IPSASs (emphasis on distinctions with equivalent IASs/IFRSs)

  • Effects of changes in foreign exchange rates
  • Revenue from exchange and non-exchange transactions
  • Hyperinflationary economies (ignore inflation adjusted financial statements)
  • Segment reports
  • Related party disclosures
  • Impairment of cash generating and non–cash generating assets
  • Disclosure of information about the general government sector

 

18.7    Current trends

  • Reporting on corporate social responsibility
  • Reporting on environmental matters
  • Corporate governance reports (Directors reports and Chairman’s statements
  • contents only)
  • Sustainability reporting

 

18.8    Emerging issues and trends

 

 

 

 

PART A: PAST PAPERS 

 

TOPIC 1: Framework for preparation and presentation of financial statement…..………9

TOPIC 2: Assets and liabilities…….……………………………………………………14

TOPIC 3: Preparing financial statements and other reports…………………………….34

TOPIC 4: Accounting and reporting of financial instruments………………………….101

TOPIC 5: Consolidated and separate financial statements………..……………………104

TOPIC 6: Public sector accounting…………………………….………………………..133

TOPIC 7: Current trends……………………………………………….………………139

 

 

 

PART B: SUGGESTED SOLUTION 

TOPIC 1: Framework for preparation and presentation of financial statement……….144

TOPIC 2: Assets and liabilities…….………………………………………………….157

TOPIC 3: Preparing financial statements and other reports……………………………181

TOPIC 4: Accounting and reporting of financial instruments………………………….255

TOPIC 5: Consolidated and separate financial statements………..……………………262

TOPIC 6: Public sector accounting…………………………….………………………..296

TOPIC 7: Current trends……………………………………………….………………304

 

 

 

 

PART A

 

 

PAST EXAMINATION QUESTIONS

 

 

 TOPIC 1

 

FRAMEWORK FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENT

 

QUESTION 1

May 2021 Question Five A

The IASB’s Conceptual Framework for Financial Reporting sets out the concepts that underlie the preparation and presentation of financial statements for external users.

 

Required:

Discuss the aims of the Conceptual Framework clearly stating how a conflict between it and a particular accounting standard could be resolved.                                        (6 marks)

 

QUESTION 2

November 2020 Question One B

Professional accountants are expected to follow the guidance contained in the fundamental principles in the ethical code in all their courses of action. The ethical code sets out five fundamental principles of ethics comprising: Integrity, objectivity, professional competence and due care, confidentiality and professional behaviour the spirit of which must be complied with.

Required:

With reference to the ethical code, discuss three circumstances that may potentially threaten the professional accountant’s compliance with the fundamental principles of ethics.                                                                                                              (6 marks)

 

QUESTION 3

November 2019 Question One A

International Financial Reporting Standards (IFRSs) are developed the International Accounting Standards Board (IASB) through a formal system of due process and broad international consultation involving accountants, financial analysts, financial statements users and regulatory bodies from around the world.

 

The overall agenda of the IASB will initially be set discussion with the IFRS Advisory Council.

 

Required:

Explain the steps that are followed in the process of setting International Financial Reporting Standards.                                                                                             (4 marks)

 

 

QUESTION 4

November 2019 Question One B

Many countries have adopted international financial reporting standards (IFRSs) issued the International Accounting Standards Board (IASB). However, due to local requirements and other challenges, some countries still prefer to use their own local standards.

 

Required:

  • Summarise five reasons why reporting entities would prefer to adopt IFRSs.

(5 marks)

  • Identify five challenges that reporting entities are likely to encounter while implementing IFRSs. (5 marks)

 

QUESTION 5

May 2019 Question One A

A significant number of entities and countries have adopted International Financial Reporting Standards (IFRSs) as their basis for financial reporting. While the advantages of a common set of global reporting standards are recognised, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonised reporting system is to be achieved.

 

Required:

Discuss three implementation challenges that are faced the International Accounting Standards Board (IASB) in its push towards a successful move to IFRSs.

(6 marks)

QUESTION 6

May 2019 Question One B

International Financial Reporting Standards (IFRSs) are primarily designed for public limited companies. It has been argued that the same IFRSs should be used all entities or alternatively, a different body of standards should apply to small and medium-sized entities (SMEs).

 

 

Required:

Discuss any two reasons why there is need to develop a set of IFRSs specifically for SMEs.                                                                                                              (4 marks)

 

QUESTION 7

November 2018 Question Three A

In the context of the IFRS for Small and Medium-sized Entities (SMEs), identify any four areas where the SMEs standard differs from the 1FRSs and IASs adopted public limited entities.                                                                                                     (4 marks)

 

QUESTION 8

May 2018 Question One C

The IASB framework for the preparation and presentation of financial statements sets out the concepts that underlie the development of accounting standards.

Required:

Discuss two challenges that might be encountered in the practical application of the above framework.                                                                                                  (4 marks)

 

QUESTION 9

May 2018 Question One D

Under certain circumstances, non-compliance with the detailed provisions of an accounting standard might be justified.

Required:

Highlight four disclosures that an entity that has elected not to comply with an accounting standard must make in order to explain the circumstances of the non-compliance.

(4 marks)

QUESTION 10

December 2017 Question Five A

Highlight six examples of unethical behaviour the management of business entities which professional accountants should report about.                                       (6 marks)

 

QUESTION 11

May 2017 Question Five A

Summarise three main reasons for developing a conceptual framework for the preparation and presentation of financial statements.                                                              (6 marks)

 

QUESTION 12

November 2016 Question Five A

Analyse three functions of the International Financial Reporting Interpretations Committee (IFRIC).                                                                                           (6 marks)

 

QUESTION 13

May 2016 Question Five A

Discuss the rationale for a regulatory framework in financial reporting.        (6 marks)

 

QUESTION 14

May 2016 Question Five B

Explain how the International Accounting Standards Board (IASB) approaches the task of producing a standard, with particular reference to the development and publication of an exposure draft.                                                                                                 (8 marks)

 

QUESTION 15

November 2015 Question Five C

Evaluate three factors that a country should consider in deciding whether it would be in its best interests to develop its own accounting standards.                                 (6 marks)

 

QUESTION 16

May 2015 Question Five A i

Explain the meaning of the term ‘conceptual framework for financial reporting’.

(4 marks)

QUESTION 17

May 2015 Question Five A ii

Advance three reasons to justify the adoption of a common conceptual framework for financial reporting.                                                                                            (8 marks)

 

QUESTION 18

May 2015 Question Five B

One way of regulating accounting, suggesting intervention beyond the more liberal approach, is through the adoption and enforcement of accounting standards either law or independent professional bodies.

 

Analyse five arguments against accounting standards.                                       (10 marks)

 

 

 

PART B 

 

 

SUGGESTED ANSWERS AND SOLUTIONS

 

 

TOPIC 1

 

FRAMEWORK FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENT

 

 QUESTION 1

The aims of the IASB’s conceptual framework for financial reporting

The conseptual framework was designed to set out fundamental concepts that underlie the preparation and presentation of financial statement. The following are other specific reasons for the development of the framework

  • To assist the IASB in developing and amending standards without framework, such as this, standards would be developed in an ad-hoc manner
  • To reduce the number of alternative accounting treatment permitted IFRS, which had weaker standards and inconsistency in the application of standards
  • To assist other standard setters in developing standards: Not all national standards setters have the resources or expertise to ensure theoretical sound standards.
  • To provide guidance to preparers and auditors in applying and assessing application of IFRS, especially in “grey” arrears where the guidance in IFRS is absent and ambiguous.
  • To assist users of financial statements interpret the information presented.

Conflict between the framework and particular standards

  • The conceptual framework is not an IFRS and does not seek to provide guidance on any specific accounting transaction.
  • It is anticipated that the framework and IFRS involve the number of conflicts will decline
  • It is recognized that the framework is much younger than most standards and that there may be contradictions between it and some standards. The framework does not overrule any IFRS. If there is any conflict , IFRS prevails

 

QUESTION 2

November 2020 Question One B 

Threats to compliance with fundamental principles of ethics

  • Self interest threat: The threat that a financial or other interest of a professional accountant of an immediate or close family will inappropriately influence the professional accountant judgement or behavior.
  • Advocacy threat: The threat that a professional accountant will promote a client or employers position to the point that the professional accountants objectivity is compromised.
  • Familiarity threat: The threat that due to a long or close relationship with a client or employer, a professional accountant will too sympathetic to their interest or to accepting of their work.
  • Intimidation threat: The threat that a professional accountant will be deterred from acting objectivity threats, either actual or perceived.

 

QUESTION 3

November 2019 Question One A

Steps followed in the process of setting IFRS

 

  1. Agenda consultation

Every five years, the Board conducts a comprehensive review and consultation to define international standard-setting priorities and develop its project work plan.

The Board can also add topics to its work plan if necessary between agenda consultations. This can include topics following Post-implementation Reviews of Standards; the IFRS Interpretations Committee may also request the Board review an issue.

 

  1. Research programme

We begin most projects with research—explore the issues, identify possible solutions and decide whether standard-setting is required. Often, we set out our ideas in a discussion paper and seek public comment.

If we find sufficient evidence that an accounting problem exists, the problem is sufficiently important to warrant changing a Standard or issuing a new one and a practical solution can be found, we begin standard-setting.

 

  1. Standard-setting programme

If the Board decides to amend a Standard or issue a new one, we generally review the research, including comments on the discussion paper, and propose amendments or Standards to resolve issues identified through research and consultation.

Proposals for a new Standard or an amendment to a Standard are published in an exposure draft for public consultation. To gather additional evidence, members of the Board and IFRS Foundation technical staff consult with a range of stakeholders from all over the world.

The Board analyses feedback and refines proposals before the new Standard, or an amendment to a Standard, is issued.

 

  1. Maintenance programme

This process includes consulting on the implementation of a new or amended Standard to identify any implementation problems that may need to be addressed. If issues arise, the IFRS Interpretations Committee may decide to create an IFRIC Interpretation of the Standard or recommend a narrow-scope amendment. Such amendments follow the Board’s normal due process.

 

  1. Post-implementation Reviews

After a new Standard has been in use for a few years, the Board carries out research through a Post-implementation Review to assess whether the Standard is achieving its objective and, if not, whether any amendments should be considered. As a result of the Post-implementation Review, the Board may start a new research project

 

QUESTION 4

November 2019 Question One B

 

i) Reasons why reporting entities would prefer to adopt IFRSs

  1. IFRS is important because it makes important elements involved in international trade comparable and more transparent
  2. The use of single, trusted reporting standard lowers international reporting cost
  3. They improve accountability and transparency
  4. It improves the reliability of accounts and boost the confidence of external agencies
  5. It enhances comparability among entities
  6. It improves in consistency in preparing and reporting of financial information
  7. IFRS contributes to economic efficiency helping investors to identify opportunities and risks across the world
  8. Enhances competitiveness
  9. Improves ability to attract and monitor listing foreign companies
  10. Enhances standardization of financial disclosures
  11. Improves regulatory oversight and enforcement

 

 ii) Challenges that reporting entities are likely to encounter while implementing IFRS

  1. Challenges in resources, system and personnel to implement IFRS
  2. Staff resistance
  3. Insufficient training and funding
  4. Complexity of conversion
  5. Ethical environment
  6. Compliance and lack of enforcement
  7. Misinterpretation of the standard

 

QUESTION 5

May 2019 Question One A

Implementation challenges faced International Accounting Standards Board (IASB) in push towards a successful move to IFRS

 

SAMPLE WORK

Complete copy of CPA ADVANCED FINANCIAL REPORTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy 

Phone: 0728 776 317

 

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