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Specific Financial Reporting(FAC3703 Exam pack 2023)
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FAC3703 EXAM PACK2023
QUESTIONS AND
ANSWERS
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Email:gabrielmusyoka940@gmail.com
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1
FAC3703 MayJun 2017
Paper 1
Suggested solution
Question 1
a) Calculate employee benefits
W1.
Salary: (275 000 x 9 months [Apr – Dec]) 2 475 000
(275 000 x 3 months [Jan – Mar] x 100/110) 750 000
Bonus paid: 275 000
Bonus obligation OB: (275 000 x 1/12) (22 917)
Bonus obligation CB: (275 000 x 1,1 x 1/12) 25 208
Leave obligation OB: (52 145)
Leave obligation CB: (24 – 6 – 8) = 10 days x 60% = 6 days 62 857
.’. 6 days x 275 000x 12x 80%
252 days
Shortterm employee benefits 3 513 003
W2. (2 475 000 + 750 000) (W1) x 7,5% = 241 875
W3. Termination benefit = 123 000
W4. Government grant relating to salaries = 45 000 x 9/36 = 11 250
.’. Employee benefits to be disclosed in profit before tax note:
(3 513 003 (W1) + 241 875 (W2) + 123 000 (W3) – 11 250 (W4) = 3 866 628
* Illustrative PBT note:
2. Profit before tax
Profit before tax includes:
Expenses
Employee benefits 3 866 628
Shortterm employee benefits (3 513 003 (W1) – 11 250 (W4)) 3 501 753
Defined contribution plan expense (W2) 241 875
Termination benefits 123 000
b) Discussion of related party
Ms Smith owns 25% of WWT and therefore has significant influence over WWT.
Mr Lampard owns 80% of Rubber Ltd and therefore has control over Rubber Ltd.
Ms Smith the fiancée of Mr Lampard. It could be argued that they are close family even
though this type of relationship is not specifically addressed by IAS 24.
Assuming that Ms Smith and Mr Lampard are close family, Rubber Ltd and WWT are
related parties owing to Ms Smith’s significant influence over WWT and Mr Lampard’s
control over Rubber Ltd.
FAC3703 MayJun 2017 (Paper 1) suggested solution
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