Exam (elaborations)
FAC3702 EXAM PACK 2024/2025
- Institution
- University Of South Africa (Unisa)
FAC3702 EXAM PACK 2024/2025 QUESTIONS WITH DETAILED ANSWERS, DRAWN FROM RECENT PAST PAPERS. GOOD FOR EXAM PREPARATION.
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lOMoAR cPSD| 18998289,UNIVERSITY EXAMINATIONS
OCT/NOV 2023
FAC3702
DISTINCTIVE FINANCIAL REPORTING
100 marks
3 hours 30 minutes for
uploading.
THIS PAPER CONSISTS OF NINE (9) PAGES.
INSTRUCTIONS:
Please remember to complete the Honesty Declaration.
Follow these steps to submit your take-home answer file.
1. Open the Take-Home (Assignment) assessment.
2. Download the question paper and note any additional information provided, such as the proctoring
tool to be used.
3. Complete the Take-Home assessment in MS Word or on paper.
Note: MS Word documents need to be saved as PDF documents, and paper-based answers must be
scanned into a combined PDF document.
4. When ready to submit, open the Take-Home (Assignment) assessment again and click on the Add
Submission button.
5. Note the file requirements such as:
• File size limit.
• Number of files that can be submitted.
• File formats allowed.
6. Check the acknowledgment checkbox and upload your answers document and then click on the Save
changes button.
7. Review your submission information regarding the status and click on your submission file link to check if
it's correct.
8. If you need to resubmit a file, you can click on the Edit Submission button.
Note: You will need to delete any existing files.
9. This is a closed book take home assessment.
10. The use of anon- programmable calculator is permitted.
PLEASE NOTE:
1. The paper consists of TWO (2) questions.
2. All questions must be answered.
3. All calculations must be shown.
5. Each question attempted, must commence on a new (separate) page.
6. PROPOSED TIME-TABLE: (Avoid deviating from this as much as possible.)
Question Subject Marks Time
number (minutes)
Property, plant and equipment, Impairment losses,
1 59 106
intangible assets & foreign exchange transactions
Non-current assets held for sale, intangible assets,
2 41 74
property plant & equipment
,QUESTION 1 (59 marks) (104 minutes)
Manni Maker Limited (“Manni”) is an international pharmaceutical and medical technology
company listed on the JSE. Manni has a medical & pharmaceutical, cometic and respiratory
device divisions. Manni does business with both the government and ordinary South Africans
through various partnerships with retail companies in South Africa. Manni prepares its financial
statements using the International Financial Reporting Standards (IFRS) and has a 30
September financial year-end. Its functional currency is South African Rand (ZAR).
With the increase in medical costs for ordinary South Africans, Manni saw an opportunity to
manufacture a wearable device that can monitor and detect early symptoms of respiratory
failure in those who were exposed to COVID-19.
Manni has the following assets:
1. Machines 1 and 2
Manni purchased the respiratory monitor manufacturing machine (Machine 1) on 1 November
2016 for a total cost of R1250 000 for use in the production line. It was available for use on 1
January 2017 and has a total estimated useful life of 15 years with a R120 000 residual value.
Machine 1 needs to be inspected by the manufacturer every three years to ensure that it is
operating within the required parameters. Machine 1 underwent an inspection on 1 October
2021 at a cost of R60 000. Manni was issued with an inspection certificate that allows them to
use the machine for a further three years, after which the next inspection must be performed.
The initial cost of the machine does not relate to an inspection.
Due to changes in technology and the inefficiencies experienced using machine 1 during the
current financial year, Manni decided to test machine 1 for impairment on 30 September 2023.
The following information of the expected cashflows was provided:
2024 2025 2026 2027
Net cash inflows R256 000 R221 000 R199 000 R158 000
The fair value of Machine 1 was R721 000 on 30 September 2023 and the expected selling
costs were R24 000. It is expected that the value in use will be materially higher than the fair
value less cost of disposal.
Manni purchased a robotic machine (Machine 2) that will assemble a device faster than human
intervention to meet the demands of the retail industry. Machine 2 was purchased on 1
February 2023 from a local supplier. The terms of the contract were to make a cash payment
of R1 000 000 immediately, and monthly instalments of R125 000 for 12 months in arrears
starting in March 2023. The supplier has a 6-month standing payment terms. An additional
installation & testing costs of R40 000 were incurred. Machine 2 was available for use on 1
April 2023.Machine 2 is depreciated on a straight-line basis over its estimated useful life of 15
years with R400 000 residual value. The relevant pre-tax discount rate is 9%.
, 2. Land
Manni purchased 10 hectares of land in the Free state on 1 February 2012 for R7 000 000.
The land was left vacant until the current year. The following fair values are applicable:
Date Fair value
30 September 2017 R7 300 000
30 September 2020 R6 900 000
30 September 2023 R7 200 000
3. Research purchased.
On 1 May 2023, Manni purchased in-process research from the middle eastern company. The
research is based on Dr Naidoo’s research on adult malnutrition. The research was purchased
for AED1 340 000. Manni continued with the research and completed it on 31 August 2023.
Additional research costs incurred were AED657 000. Development stage commenced
immediately after research was finalised and was conducted in Manni South African premises.
The development costs incurred in September 2023 were R312 000 and did not meet the IAS
38 recognition criteria on 30 September 2023. All these costs were paid for with long-term debt.
These are the exchange rates for the year:
Date Spot rate AED1: R1 Average rate AED1:R1
1 May 2023 R5,19
31 August 2023 R5,21
30 September 2023 R5,10
1 May – 31 August R5,07
1 May – 30 September R5,05
4. Factory building
Manni owns in a factory building with a carrying amount of R2 160 000 at 30 September 2022,
which was purchased on 1 October 2016. The factory building was brought into use on this
date. It has a total estimated useful life of 30 years, after which it will be scrapped. The
respiratory monitor production line makes use of the entire factory building.
Land is considered negligible.
5. Plant
On 1 June 2016, Manni purchased a plant for a pharmaceutical division for R5 600 000. The
plant is depreciated over hours used in production and has a nil residual value. The plant was
used for a total of 52 000 hours on 30 September 2019 and a total of 68 000 on 30 September
2022 and 6 800 hours during the current year. The plant has a total expected use of 120 000
hours.
The following fair values less cost of disposal were provided for the plant:
Date R
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