题目内容
Analysis of recently published data, detailing the frequency and impact of earthquakes around the world, suggest that the likelihood of a strong earthquake occurring in the area where WSK has its only manufacturing and chemical storage facility is high. This very serious claim was made by the operations director at a recent board meeting following consultation with the senior scientific team. It has always been recognised that the WSK factory was situated in an area where earthquakes could occur, but the area had not experienced any major tremors for several years.
The possibility of an earthquake which could destroy the WSK factory and then cause a major environmental incident was of grave concern to the board, who decided that it needed to be fully evaluated and then effectively managed. The board asked the scientific team to calculate the probability of a toxic chemical emission being caused by an earthquake together with the consequential effects on the local environment and population, many of whom depended on WSK for employment and commercial activity. However, the scientific team were unable to provide any objective analysis to support their initial claim, they merely offered their best guess of what they perceived the risk to be.
The board concluded that this was inadequate, so they tasked the internal audit team to conduct an environmental audit, and to determine WSK’s environmental footprint.
Required:
(a) Evaluate the difficulties of risk perception, and describe the problems with the perception of risk shown by the scientific team at WSK. (8 marks)
(b) Explain the stages and benefits to WSK of conducting an environmental audit, and assess the importance of then reporting good quality information to the board. (10 marks)
(c) Explain the term environmental footprint, and assess how the activities of WSK contribute to its footprint. (7 marks)
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Section B – TWO questions ONLY to be attempted
(a) Mehran, a public limited company, has just acquired a company, which comprises a farming and mining business. Mehran wishes advice on how to fair value some of the assets acquired.
One such asset is a piece of land, which is currently used for farming. The fair value of the land if used for farming is $5 million. If the land is used for farming purposes, a tax credit currently arises annually, which is based upon the lower of 15% of the fair market value of land or $500,000 at the current tax rate. The current tax rate in the jurisdiction is 20%.
Mehran has determined that market participants would consider that the land could have an alternative use for residential purposes. The fair value of the land for residential purposes before associated costs is thought to be $7·4 million. In order to transform. the land from farming to residential use, there would be legal costs of $200,000, a viability analysis cost of $300,000 and costs of demolition of the farm buildings of $100,000. Additionally, permission for residential use has not been formally given by the legal authority and because of this, market participants have indicated that the fair value of the land, after the above costs, would be discounted by 20% because of the risk of not obtaining planning permission.
In addition, Mehran has acquired the brand name associated with the produce from the farm. Mehran has decided to discontinue the brand on the assumption that it will gain increased revenues from its own brands. Mehran has determined that if it ceases to use the brand, then the indirect benefits will be $20 million. If it continues to use the brand, then the direct benefit will be $17 million. (8 marks)
(b) Mehran wishes to fair value the inventory of the entity acquired. There are three different markets for the produce, which are mainly vegetables. The first is the local domestic market where Mehran can sell direct to retailers of the produce. The second domestic market is one where Mehran sells directly to manufacturers of canned vegetables. There are no restrictions on the sale of produce in either of the domestic markets other than the demand of the retailers and manufacturers. The final market is the export market but the government limits the amount of produce which can be exported. Mehran needs a licence from the government to export its produce. Farmers tend to sell all of the produce that they can in the export market and, when they do not have any further authorisation to export, they sell the remaining produce in the two domestic markets.
It is difficult to obtain information on the volume of trade in the domestic market where the produce is sold locally direct to retailers but Mehran feels that the market is at least as large as the domestic market – direct to manufacturers. The volumes of sales quoted below have been taken from trade journals.
(9 marks)
(c) Mehran owns a non-controlling equity interest in Erham, a private company, and wishes to fair value it as at its financial year end of 31 March 2016. Mehran acquired the ordinary share interest in Erham on 1 April 2014. During the current financial year, Erham has issued further equity capital through the issue of preferred shares to a venture capital fund.
As a result of the preferred share issue, the venture capital fund now holds a controlling interest in Erham. The terms of the preferred shares, including the voting rights, are similar to those of the ordinary shares, except that the preferred shares have a cumulative fixed dividend entitlement for a period of four years and the preferred shares rank ahead of the ordinary shares upon the liquidation of Erham. The transaction price for the preferred shares was $15 per share.
Mehran wishes to know the factors which should be taken into account in measuring the fair value of their holding in the ordinary shares of Erham at 31 March 2016 using a market-based approach. (6 marks)
Required:
Discuss the way in which Mehran should fair value the above assets with reference to the principles of IFRS 13 Fair Value Measurement.
Note: The mark allocation is shown against each of the three issues above.
Professional marks will be awarded in question 2 for clarity and quality of presentation. (2 marks)
Angus Fortune, an ACCA qualified accountant, is a director of a medium-sized consultancy company and he heads up the business advisory division. Angus qualified 15 years ago and has worked for his current employer for nearly eight years, where he is viewed by his colleagues as a knowledgeable and experienced professional. His reputation for always offering good quality advice to clients, together with his work ethic and loyalty, earned him promotion to the board last year.
In recent discussions with Peter Wise, the managing director, it was agreed that as part of his continuous professional development (CPD) as a director, Angus should attend an overseas conference on tackling internet fraud, a line of business activity the company was keen to develop.
After the opening session, which gave delegates details of the content of the three-day conference, Angus realised that he already knew everything which was going to be covered from his private studies. So he decided instead to spend his time more productively at a local library reading up on issues which would directly help him with a forthcoming major assignment. He phoned Peter before leaving the conference explaining what he planned to do, but Peter said that he would still like him to attend the conference as he was bound to pick up new areas of useful and relevant knowledge. However, Angus still decided to leave after the morning coffee break.
He was observed leaving by one of the conference organisers, despite remaining signed in for the whole all day. At the start of Day 2, Angus returned to sign the attendance register again, but then immediately proceeded to leave the conference building. He was approached by the conference organiser who advised Angus that he really ought to report his absence. Angus explained to the conference organiser that he already knew much of the content of the conference, and so felt that it would be waste of his time if he stayed. Instead, he explained, he planned to spend the time more productively researching subject matter which better suited both his personal development and his company’s needs. On reflection, the conference organiser decided to report Angus’s absence.
Required:
(a) Evaluate the benefits of CPD to Angus Fortune, and describe the features of effective CPD. (10 marks)
(b) With reference to Kohlberg’s theory of human moral development, describe conventional level reasoning and discuss how Kohlberg’s conventional level arguments could be used to justify the conference organiser’s decision to report his absence. (8 marks)
(c) Evaluate Angus’s actions at the conference against the fundamental ethical principles which should have guided his behaviour as a professional accountant. (7 marks)
Section B – TWO questions ONLY to be attempted
Arthur Jellicoe has been the chief executive officer (CEO) of Scapa Holdings, a listed company, for over 15 years, during which time the company has been very successful in capturing market share and achieving levels of profitability well in excess of it direct competition. Much of this success has been credited specifically to the way Arthur has managed the company. So when he advised the board at its last meeting that he plans to retire at the end of the year, there was real concern about appointing his successor. Scapa Holdings is particularly aware that any uncertainty which may arise during the CEO transitional period could result in a fall in share price, which they clearly wish to avoid.
The remuneration policy at Scapa Holdings includes a provision for awarding significant share options to executive directors when the company attains high levels of performance. For many years the targets set by the remuneration committee have been exceeded, so Arthur has accumulated a large number of share options which he can exercise any time over the next year. As part of his retirement planning, Arthur has consulted with an independent financial adviser who has recommended that he exercises his share options before he retires because they will deliver a tax efficient capital gain which he can then invest for his future. Clearly it will be in Arthur’s best interest to choose an exercise date when the share price is trading at its highest. So when a new contract opportunity was tabled by the sales director, which would clearly increase the company’s share price this year, Arthur was an enthusiastic supporter. Unfortunately, the finance director advised the board that its bank loan contained a restrictive covenant requiring the company to maintain interest cover of four times its pre-tax profit. Although Scapa Holdings has always been able meet this loan condition, the finance director is concerned that the further investment in the working capital needed for the proposed new contract presented a significant risk of breaching the loan covenant.
To address this issue the CEO suggested that inventory could be valued differently in order to report a higher profit figure, and thereby increase the level of interest cover. He further suggested that ‘this minor policy change would not be opposed by shareholders’ as it would undoubtedly increase the value of the share price. He also advised the board that he was sure that he could use his longstanding friendship with the engagement partner of Scapa Holdings’ auditors, who he had trained with as an accountant many years ago, to convince the audit team to agree with the higher inventory valuation during the forthcoming audit.
Required:
(a) An inherent risk in any listed company is that its directors have the power to pursue their own personal interests, which may not be aligned with their fiduciary duties towards shareholders.
Explain the term conflict of interest in this context, and using information from the scenario, discuss how Arthur Jellicoe’s behaviour presents a clear conflict of interest, stating what course of action he should take. (8 marks)
(b) Describe the agency relationships at Scapa Holdings, and explain how clear accountability could increase trust between principal and agent thereby reducing agency costs. (9 marks)
(c) Explain the meaning of ‘probity’ when maintaining professional business relationships as described in the scenario, and criticise the ethical behaviour of Arthur Jellicoe with respect to probity. (8 marks)
对真菌有抑制作用药物是
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