Gokhale Institute of Politics and Economics

(Deemed to be University u/s 3 of the UGC Act, 1956)

Pune 411 004
M.Sc.(Financial Economics) 2021-2023
Semester:- September 2021 – February 2022
Online Semester End Examination: February 2022
FE-A-103: Accountancy, IFRS and Financial Statement Analysis
Wednesday Time: 10.00 a.m. to 01.00 p.m.
February 09, 2022 Max. Marks: 60

Instructions:
1) This is an open book exam.
2) Answer any five out of first seven questions. Question number 8 is compulsory.
3) Each question carries 10 marks

Q.1 a. What is impairment of fixed Property Plant & Equipment (PP&E)? When is (4)
impairment testing carried out?

b. A Ltd has an Cash Generating Unit (CGU) with the following assets (6)

Machine 1 50 Lakhs
Machine 2 30 Lakhs
Goodwill 20 Lakhs

On the reporting date the Cash Generating Unit (CGU) was tested for
impairment.
It was found that the fair value of the assets of the Cash Generating Unit
(CGU) on that day was 90 Lakhs.
The value in use on that day was 95 Lakhs.
What will be the accounting treatment for impairment?
What will be your answer if the value in use was 101 Lakhs.

Q.2 When are intangible assets recognized? Briefly mention all the three cases. (10)

Q.3 a. What is deferred tax liability? (4)

b. Extracts of the Profit & Loss of A Ltd in its first year of operations is as (6)
follows. Note the Fixed assets have a useful life of 4 years.

Profit before Depreciation 100

Tax Depreciation (WDV) 50%
Book Depreciation (SLM) 25%

Pass the deferred tax entries for all the four years.

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Q.4 Sun Ltd acquires 80 % shares in Moon Ltd. The balance sheet of the two
companies on the date of acquisition was as follows,

Sun Ltd Moon Ltd

Property Plant & Equipment (PP&E) 1000 200
Investments in Moon Ltd 250
Net Current Assets 500 100
Total Assets 1750 300
Share Capital 1000 150
Retained Earnings 500 50
Loans 250 100
Total Equity and Liabilities 1750 300

On the date of acquisition, the fair value of the Property Plant & Equipment
(PP&E) of Moon Ltd. was 300.
The fair value of the NCI on that day was 65.
Prepare the consolidated balance sheet on the acquisition date if,
a. Non-Controlling Interest(NCI) is calculated at intrinsic value. (5)
b. Non-Controlling Interest(NCI) is calculated at Fair Value. (5)

Q.5 A Ltd purchases 1000 bonds of B Ltd. With a face value `100 each bearing (10)
an interest rate of 10%. The bonds were to mature after three years. On the
date of acquisition, similar bonds fetched 9 % returns. What is the accounting
on the various dates using the effective interest rate method?

Q.6 a. Define a contingent Liability. How are contingent Liabilities accounted for? (5)

b. How are rectification of errors carried out under IFRS. How does this (5)
treatment differ from accounting of changes in estimates?

Q.7 a. Copycat Ltd. sells photocopy machines. It gives a three-year credit to (6)
customers. The contract with a customer for a standard model- M1 shows
the selling price is `1 lakh. There is no reference of any interest rate in the
contract. The cost of capital of A Ltd is 10 %. How will this sale be accounted
for under IFRS. Give entries on the date of sale and on subsequent year ends
assuming that the sale has happened at the start of the year.

b. Explain the Boston Consultancy Group (BCG) model using any company as (4)
an illustration in your own words.

Q.8 a. A company with a low Net Profit ratio can give high returns to the (3)
shareholders. Do you agree? Justify your answer.

b. A company with high debt equity ratio is called a leveraged company. Why? (4)

c. Current ratio must necessarily be at least 2. Do you agree? Why? (3)

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