TANZANIA INSTITUTE OF ACCOUNTANCY (TIA)

FIRST SEMESTER, 2022/2023

SUPPLEMENTARY EXAM

SUBJECT: Advanced Financial Accounting

COURSE: MSC Finance and Accounting
CODE: AFG 09101
DATE:
TIME ALLOWED: 3 Hours

Question One

The revised conceptual framework of financial reporting came into effect in 2018
and changed the definitions of the elements of financial statements and their
recognition and de-recognition creteria.
Required:
a) Highlight the definitions of assets, liabilities, equity, revenue and expenses as
stipulated in IASB’s conceptual framework for financial reporting (2018).
(10 marks)
b) Briefly discuss the meaning and criteria for recognition and de-recognition of
assets and liabilities in the financial statements. (10 marks)

Question Two
The broad principles of accounting for tangible non-current assets involve
distinguishing between capital and revenue expenditure, measuring the cost of
assets, determining how they should be depreciated and dealing with the challenges
of subsequent measurement and subsequent expenditure. IAS 16 “property, plant
and equipment” was introduced to improve consistency in those arrears.
Required:
a) Explain how the initial cost of property, plant and equipment should be
measured and the treatment of subsequent expenditure.
(5 marks)

b) Describe the requirement regarding the revaluation of non-current assets, the

treatment of surpluses and deficits on revaluation and gains and losses on
disposal of non-current assets.

1|Page
 c) B Ltd. operates a factory as its sole cash generating unit (CGU). During the
year ended on 30th April, 2022 there was an explosion in the factory which
necessitated an impairment review. The carrying amounts of the assets were
as follows:
TZS.'000,000'
Goodwill 2,000
Patent 3,600
Machinery 4,000
Computer Equipment 8,000
Premises 30,000

Additional information:
1. An impairment review reveal a net selling price of TZS.19,200,000,000 and a
value in use of TZS.31,200,000,000 for the factory.
2. Half of the machinery have been destroyed and have no resale value.
3. The patent have been superseded and now considered worthless.
4. The company follows the cost model as permitted by international accounting
standard (IAS) 16.

Required:
Discuss with suitable calculations how any impairment loss in the cash generating
unit (CGU) would be accounted for in accordance with IAS 36 “Impairment of
assets” (10 marks)

Question Three
The following trial balance have been extracted from the books of YYY Ltd. as at 31 st
March 2015.

2|Page
 Tshs. Tshs.
Land at cost 720,000
Buildings at cost 250,000
Equipment at cost 206,000
Vehicles at cost 284,000
Accumulated depreciationat 1st April 2014:
Buildings 90,000
Equipment 86,000
Vehicles 132,000
Inventory 1st April 2014 107,000
Trade receivables and payables 183,000 117,000
Allowance for receivables 8,000
Bank balance 63,000
Ordinary shares @ Tshs. 1 200,000
Retained earnings 1st April 2014 803,000
Turnover 1,432,000
Purchases 488,000
Directors fees 150,000
Wages and salaries 276,000
General distribution costs 101,000
General administration expenses 186,000
Dividends paid 20,000
Rent received 30,000
Disposal of vehicle 10,000
2,971,000 2,971,000
.
The following information is also available:
1. The company depreciation policy is as follows:

Buildings 4% p.a Straight line

Equipment 40% p.a Reducing balance
Vehicles 25% p.a Straight line

2. Depreciation is apportioned as follows:

Distribution Administrative
costs costs
Buildings 50% 50%
Equipment 25% 75%
Vehicles 70% 30%
3. The company’s inventory at 31 st March, 2015 cost Tshs. 160,000 however this
included items of inventory with a cost of Tshs. 41,000 which were actually
worthless.
3|Page
 4. Trade receivables include a debt of Tshs. 18,000 which is to be written off. The
allowance for receivables is to be adjusted to 4% of the amount of receivables
remaining after the debt is written off.

5. The corporate tax liability for the year to 31 st March2015 is estimated to be

Tshs.30,000

6. One quarter of wages and salaries were paid to distribution staff and the
remaining three quarters were paid to administrative staff.

7. A vehicle which costed YYY Ltd. Tshs. 44,000 in July 2012 was disposed
during the year. YYY Ltd depreciate assets fully on acquisition and none on
disposal.

8. A dividend of 10c per ordinary share was paid on 31 st December 2014. No

further dividends were proposed for the year to 31 st March, 2015.

Required:
Prepare the following financial statements for YYY Ltd. in accordance with
requirements of IFRS.
(a) A statement of profit or loss and other comprehensive income for the year ended 31
March 2015. (8 marks)
(b) A statement of changes in equity for the year ended 31 st March 2015.
(4 marks)
(c) A statement of financial position as at 31 March 2015. (8 marks)

4|Page
Question Four
Kibamba Limited is a publicly listed company. The following financial statement of
Kibamba Limited were made available to you;
Kibamba Limited
Statement of Profit or Loss and OCI
For the Year Ended 31 March 2021
TZS '000'
Revenue 5,740
Cost of Sales (4,840)
Gross Profit 900
Income from gains on investment property 60
Distribution Costs (120)
Administrative Expenses (note ii) (350)
Finance Costs (50)
Profit Before Tax 440
Income Tax Expense (160)
Profit for the Year 280
Other Comprehensive Income:
Gains on Property Revaluation 100
Total Comprehensive Income 380

5|Page
 Kibamba Limited
Statement of Financial Position as at 31 March 2021
2021 2020
TZS '000' TZS '000'
Assets
Non-Current Assets (note i)
Property, Plant & Equipment 2,880 1,860
Investment Property 420 400
Current Assets
Inventories 1,210 810
Trade Receivables 480 540
Income Tax Assets - 50
Cash & Bank 10 -
Total Assets 5,000 3,660
Equity and Liabilities
Equity
Equity shares of TZS. 20 each 1,000 600
Share Premium Account 600 -
Revaluation Reserve 150 50
Retained Earnings 1,440 1,310
Non-Current Liabilities:
6% Loan Notes - 400
Deffered Tax Liabilities 50 30
Current Liabilities
Trade Payables 1,410 1,050
Bank Overdraft - 120
Warranty Provisions (note iv) 200 100
Current Tax Payable 150 -
Total Equity and Liabilities 5,000 3,660

The following supporting information is available

(i) An item of plant with a carrying amount of TZS. 240,000 was sold at a
loss of TZS. 90,000 during the year. Depreciation of TZS. 280,000 was
charged (to cost of sales) for property, plant and equipment for the year
ended 31 March 2021.
Kibamba uses the fair value model as per IAS 40 – Investment
Property. There were no acquisitions or disposals in respect of
investment property.

(ii) The 6% loan notes were redeemed early incurring a penalty of TZS.
20,000 which has been charged as an administrative expense in the
profit or loss account.

6|Page
 (iii) There was an issue of shares for cash on 1 October 2020. There were
no bonus issue of shares during the year.

(iv)Kibamba gives a 12 month warranty on some of the products it sells.

The amounts shown in current liabilities as warranty provision are an
accurate assessment, based on past experience of the amount of claim
likely to be made in respect of warranties outstanding in each year end.
Warranty costs are included in cost of sales.

(v) A dividend of 3% per share was paid on 1 January 2021.

Required:
c) Prepare a brief to Chief executive officer of Kibamba Limited explaining the
benefits of preparing a cash flow statement. (5 marks)

d) Prepare a statement of cash flows for Kibamba Limited for the year to 31
March 2021 in accordance with IAS 7 – Statement of Cash Flows.
(15 marks)

Question Five
The draft statements of financial position of three companies as on 30 th September,
2021 are as follows:

7|Page
 Mango Ltd. Apple Ltd. Guava Ltd.
TZS.'000' TZS.'000' TZS.'000' TZS.'000' TZS.'000' TZS.'000'
Assets:
Non-current assets
Tangible assets 697,210 648,010 349,400
Investments:
160,000 shares in Apple Ltd. 562,000
80,000 in Guava Ltd. 184,000
1,443,210 648,010 349,400
Current assets:
Inventory 495,165 388,619 286,925
Trade receivables 385,717 320,540 251,065
Cash and bank 101,274 95,010 80,331
982,156 804,169 618,321
2,425,366 1,452,179 967,721
Equity and Liabilities
Equity shares 600,000 200,000 200,000
Retained earnings 1,050,000 850,000 478,000
1,650,000 1,050,000 678,000
Non-current liabilities:
Debentures 400,000 150,000 100,000
Current liabilities:
Trade payables 375,366 252,179 189,721
2,425,366 1,452,179 967,721

You are given the following additional information:

(1) Mango Ltd. purchased the shares in Apple Ltd. on 13 October 2016 when
the balance on retained earnings was TZS.500,000,000.

(2) The shares in Guava Ltd. were acquired on 11 May 2016 when retained
earnings stood at TZS.242,000,000.
(3) Included in the inventory figure for Guava Ltd. is inventory valued at
TZS.20,000,000 which had been purchased from Mango at cost plus
25%.

(4) Non-controlling interest is valued at fair value and at the date of

acquisition the fair value was TZS. 150,000,000. Goodwill in respect of
the acquisition of Apple has been impaired by TZS.1,500,000 since the
acquisition.

The recoverable amount of the investment in Guava Ltd. exceeds its

carrying value and therefore there is no impairment to account for.

(5) Included in the current liabilities figure of Mango Ltd. is TZS.18,000,000

8|Page
 payable to Guava, the amount receivable being recorded in the
receivables figure of Guava.
Required:
Prepare the consolidated statement of financial position and notes for Mango group
as on 30 September, 2021, together with your consolidation schedules.
(20 marks)

9|Page