Module Learning Outcomes:
Knowledge and understanding: Explain accounting conventions and principles used while dealing with various financial aspects in preparation of financial statements of different types of organisations.
Skills and abilities: Apply generally accepted accounting principles to measure, report and analyze information related to business enterprises, governmental and not-for-profit entities.
Assignment Task 1:
You have been newly appointed as the Chief Accountant of Hopkins Holding Corporation SAOG (Hopkins Corp). Hopkins Corp is a public limited Company which is listed on the Muscat Securities Market. Hopkins Corp specializes in manufacturing electronic home appliances such as microwave ovens, refrigerators and other kitchen appliances. On 1st January 2019, Hopkins Corp acquired a majority shareholding of Salisbury Corporation SAOG.
As per the requirements of the regulators, the Capital Market Authority of Oman, all Omani listed Companies are mandated to prepare Financial statements in accordance with relevant International Accounting Standards (IAS) / International Financial Reporting Standards (IFRS). Even though you are experienced accountant, this is your first job working for a holding Company. You look up the requirements of IFRS 10 - Consolidated Financial Statements and prepare notes that would assist you in the actual preparation of Consolidated Financial statements.
You take notes about the objectives, key definitions, Accounting requirements especially those relating to preparation of Financial statements and the consolidation procedures.
Assignment Task 2:
To further fortify your knowledge and skills of application, you look up an existing holding Company listed on Muscat Securities Market and study the key details of percentage of holding, principal activities, country of incorporation of both subsidiary and associate companies and add it to your notes.
Assignment Task 3:
It is now the end of the year 2019. You extract data from Hopkins's ERP system and pool together information from which you prepare the draft Statement of Financial Position of Hopkins Corporation SAOG.
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(Omani Rials)
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Assets:
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Non- Current Assets
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Premises
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534000
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Tools
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270400
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Computers
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301600
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Investments in Salisbury SAOG
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714000
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1820000
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Current Assets:
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Cash
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83200
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Accounts Receivables
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416000
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Inventory
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384800
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884000
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Total Assets
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2704000
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Equity and Liabilities
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Share Capital (Omani Rial 1 per share)
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1560000
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Retained Earnings
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374400
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Reserves
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41600
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Long term Bonds
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395200
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Accounts Payables
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332800
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Total Equity and Liabilities
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2704000
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You gather that it was on 1st January 2019, that Hopkins Corp acquired 510000 share of Salisbury Corporation SAOG (Salisbury Corp) for Omani Rials 714000. At this point of time, the market price of Salisbury SAOG's shares had been Omani Rials 1.4 per share and the retained earnings of Salisbury Corp had been Omani Rials 50000. At the acquisition date the value of Salisbury Corp's premises was Omani Rials 20000 greater than its net book value. Your perusal of the General ledger of Hopkins Corp, revealed that during the year 2019, Salisbury Corp sold goods to Hopkins Corp for Omani Rials 60000 at a markup of 20%. However, 40% of the goods sold by Salisbury Corp are still unsold by Hopkins Corp at the end of year.
You contact and also receive the draft financials of Salisbury Corporation SAOG from their Accountant.
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(Omani Rials)
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Assets:
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Non- Current Assets
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Premises
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322400
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Tools
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124800
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Computers
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124800
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572000
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Current Assets:
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Cash
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20800
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Accounts Receivables
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208000
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Inventory
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384800
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613600
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Total Assets
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1185600
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Equity and Liabilities
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Share Capital (Omani Rial 1 per share)
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728000
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Retained Earnings
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218400
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Reserves
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62400
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Long term Bonds
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6240
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Accounts Payables
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114400
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Total Equity and Liabilities
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1185600
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You set out to prepare the group consolidated financial statements in compliance with IFRS 10 for submission to the capital market authority.
Assignment Task 4:
On finishing the task of preparing the Group Consolidated Financial Statements, The Chief Financial Officer, request you to offer your assistance to Aladdin SAOG, one of the few associate Companies of Hopkins Corp. The Chief Accountant of Aladdin SAOG has taken unwell and since it is the end of the year, there is no time to search for a new accountant as the submission date to the Capital Market Authority is coming closer. The net profits reported for 2019 were OMR 92400. During the year, the Company sold its unused land in Salalah for a price of OMR 39600. The board of directors declared dividends declared for 2019 amounting to OMR 24750. All of the Company purchases such as Computer equipment and machinery for were paid in cash.
The current Chief Accountant has already prepared Statement of Comprehensive Income, Statement of changes in equity and finally Statement of Financial Position. The only statement not yet prepared is the Statement of Cash Flows. You download the Statement of Financial Position for the year 2018 and collate the two years in the format below. Armed with this information, you set out to prepare the Statement of Cash Flows.
Assignment Task 5:
Aladdin SAOG has applied for a loan from Oman Development Bank. The Bank officers have asked for an analysis of the Cash Flows of the Company for the financial year 2019 as a part of the loan application.
You set forth to write an analytical report to the Bank, discussing the Components of Aladdin SAOG's statement of cash flows and their implication on the company's ability to repay the proposed bank loan.
Assignment Task 6:
The Chief Financial Officer of Aladdin SAOG is concerned that the statement of cash flows has shown a net decrease in cash. He asked for your suggestions on any further action that they need to take to enhance the cash flows from operations for the year 2020.
As senior Accountant, you put together your suggestions on measures Aladdin SAOG can undertake to enhance the future Cash flows of the organisation.
GUIDELINES:
Task 1: discuss the following (please do not copy from IFRS 10 online document. You need to paraphrase and rewrite in your words.)
- Objective of IFRS 10
- 4/5 key definitions
- Accounting requirements especially those relating to preparation of Financial statements
- Consolidation procedures
Task 2: discuss the difference between holding and associate company (theory)
Select one listed HOLDING company from Muscat Securities Market. Download financial statements for 2019.
Study the notes to financial statements and put down the details below.
For Subsidiary Companies
- Percentage of Stake,
- Principal activities,
- Country of incorporation
For associate companies
- Percentage of Stake,
- Principal activities,
- Country of incorporation
Task 3: Prepare consolidated Statement of Financial Position for the group clearly showing the workings for non-controlling interest, goodwill and group retained earnings.
Task 4: Prepare the statement of cash flows of Aladdin SAOG for the year ended 31 December, 2019 as per IAS 7 using the indirect method.
Task 5: Discuss the three sources of cash flows... give examples
Cash from operating activities (theory)
Cash from investing activities (theory)
Cash from financing activities (theory)
Analyze and comment on the cash flows from each of the three sources for Aladdin SAOG and the overall increase / decrease in cash. Use cash flow of Aladdin SAOG which you prepared
Task 6: Suggest 7/8 measures to Aladdin SAOG that can be undertaken to enhance the future Cash flows of the organization.
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