2009 Suggested Solutions

2009

SUGGESTED SOLUTIONS

OF

PREVIOUS EXAMINATION QUESTIONS

The following are suggested solutions for the selected past exam questions.

Disclaimer:

The following solutions were correct at the time of the examination. They are only an indication of suggested solutions. Students are advised to check the solutions below with their recent lecture notes and tutorials and compare these answers to their text- book answers, as we have no responsibility for their validity.

INTERMEDIA TE FINANCIA ACCOUNTING

PAST EXAM QUESTIONS

SUGGESTED DRAFT SOLUTIONS

SECTION 1

Question 1

1.1

According to SAC 1, general-purpose financial reports should be prepared by all reporting entities. ‘General-purpose financial reports’ are reports that comply with Statements of Accounting Concepts and Accounting Standards. Paragraph 6 of SAC 1 further defines them as reports:

Intended to meet the information needs common to users who are unable to command the preparation of reports tailored so as to satisfy, specifically, all of their information needs.

Further, paragraph 8 of SAC 1 states that ‘general-purpose financial reports’ should be prepared when there are users whose information needs have common elements, and those users cannot command the preparation of information to satisfy their individual information needs.

If an entity is not deemed to be a ‘reporting entity’ then it will not be required to produce GPFRs; that is, it will not necessarily be required to comply with Accounting Standards. The determination of whether users are dependent upon GPFRs for the purposes of making and evaluating resource allocation decisions (that is, whether an entity is a reporting entity) requires professional judgement. Where dependence is not readily apparent, SAC 1 suggests factors that may indicate whether the entity is a ‘reporting entity’. These factors are:

• the separation of...