Final AssessmentKAPLAN PUBLISHING Page 1 of 8
ACCA FINAL ASSESSMENT
Professional Accountant
JUNE 2009QUESTION PAPERDo not open this paper until instructed by the supervisor This question paper must not be removed from the examinationhall
Time allowed Reading time:
15 minutes
Writing time:
3 hoursThis paper is divided into two sectionsSection A
This ONE question is compulsory and MUST beattempted
Section B
TWO questions ONLY to be attempted
Kaplan Publishing/Kaplan Financial
ACCA P1 Professional Accountant © Kaplan Financial Limited, 2008All rights reserved. No part of this examination may be reproduced or transmitted in any formor by any means, electronic or mechanical, including photocopying, recording, or by anyinformation storage and retrieval system, without prior permission from Kaplan Publishing.Page 2 of 8 KAPLAN PUBLISHING
Final Assessment
SECTION AThis ONE question is compulsory and MUST be attempted
QUESTION 1
The Perkins Group is a major player in the oil industry listed on a European stock exchange.Its primary business involves oil exploration and extraction. The Perkins board have taken astrategic decision to increase its international presence as a means of gaining global marketshare, and have identified Pillar as a potential acquisition target. Pillar is based outsideEurope in an oil industry growth area and is seen by analysts as a good expansionopportunity for Perkins, especially as its recent flotation (75% of its share capital) providespotential access to a controlling shareholding through the regional stock market where Pillaroperates.Although Pillar is a leading player in oil extraction, it has been responsible for considerablecontamination of land and the pollution of seas and rivers. Company policy is to only clean upcontamination if it is a legal requirement in the country of operation. The following informationhas been produced for Pillar by a group of environmental consultants:
Cost to clean up contamination Law existing in country
$m5 No7 To come into force in December 20084 YesThe directors of Pillar have a widely publicised environmental attitude which shows littleregard to the effects of their business on the environment. No provision for environmentalcosts has been made in the financial statements of the company. Pillar has never felt theneed to promote socially responsible policies and practices or make positive contributions tosociety because it has always maintained its market share. It is renowned for poor customersupport, bearing little regard for the customs and cultures in the communities where it doesbusiness.Perkins Group was a formerly publically owned business. Since its privatisation it has beenmanaged by a unitary board, with Don Hean as the current chief executive. At a recent boardmeeting the proposed acquisition of Pillar featured highly on the agenda. Directors raised anumber of points with Don Hean who has been leading the acquisition process to date.Nico Giordino, operations director, raised the concern that Perkins could be exposed to anumber of risks resulting from the proposed acquisition of Pillar. He requested details on therisk management policies operated by Pillar and any exposure to significant risks that the firmis already facing. An industry colleague had told him of rumours circulating that Pillar wasfacing investigation relating to its poor environmental record in a number of countries. Donstated that he was unaware of such rumours but would seek further information on the riskmanagement process if the acquisition discussions progressed to the next stage.The next agenda item was for Jessica Smith, the company secretary, to provide a summaryto the board on her analysis of the governance structure of Pillar. She stated that Pillar hadbeen family owned for most of its 23 year history, having been floated only 3 years ago.KAPLAN PUBLISHING Page 3 of 8
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P1- Final
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