THE INSTITUTE OF CHARTERED ACCOUNTANTS ... - Resourcedat

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(iv)
(v)
(vi)
(b)
Dr. Faaji Collins did not demonstrate that he is an individual of proven integrity
because of his comment that he will use his influence at the CBN to ensure that
the bank is not affected adversely. This is unethical.
The loan portfolio of the bank is concentrated in the hands of the related parties.
100% of the loans granted to the directors were non performing for more than
one year hence they should cease to be on the board of the bank.
Expenditure on the purchase of aircraft for the directors is wasteful. They have
placed their personal lifestyle and interest higher and above the survival of the
bank.
Wrongly accrued items
The items affected are the gross earnings of N10 billion in 2011, N4 billion in
and dividend of N700 million.
(i)
The related interest income should not have been recognized in the income
statement since the loans and advances were non-performing as required by the
IAS.
Journal/Accounting entries:-
Dr. Interest Income account
Cr. Interest in suspense account
(with the amount of interest on non-performing loan credited to interest income
account)
(ii)
Dividend payable: Under IAS 34, Contingent Liabilities provisions can only be
made when:
- An entity is having a present obligation (legal or constructive) arising
from a past obligating event;
- It is probable that outflow of resources embodying economic benefit
will be required to settle the obligation; and
- Amount of the obligation can be estimated with sufficient reliability.
PROFESSIONAL EXAMINATION I - MAY 2012
33