Financial Reporting and Ethics - The Institute of Chartered ...

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FINANCIAL REPORTING AND ETHICSto write off such losses, or those having substantial fictitious assets such asgoodwill, preliminary expenses, profit and loss account debit balances.Reconstruction can either be internal or external.3.2 AMALGAMATIONThis refers to a situation where companies that exist separately under differentownerships combine to form a new one. The major feature of this arrangementis that the two businesses that amalgamate will no longer exist, that is, theyare liquidated. For example, company A may combine with company B to formcompany AB which is expected to be larger and more viable. Ideally suited tothis method are similar businesses of the same sizes, operating on a relativelysmall scale.Reasons/benefits of amalgamation include:(a) The desire to gain larger share of the market.(b) The desire to attain synergy.(c) The desire to establish a solid capital base.(d) To provide efficient customer service.(e) To acquire a base adequately for raw material sourcing in the case of amanufacturing firm.(f) To be able to challenge a major competition.(g) In order to meet legal and statutory requirement.When businesses amalgamate, two major accounting problems arise,viz:(i) Those concerned with closing the books of the discontinuingbusinesses which are being wound up;(ii) Those concerned with the establishment of the new business.3.3 CLOSING THE BOOKS OF THE DISCONTINUING COMPANIESTo close the books of the discontinuing companies, the following ledger accountsare necessary;(a) Realisation account.(b) New company account.(c) Sundry members account.(d) Each liability account, for example creditors, liquidation expensespayable/creditors for dissolution expenses, loan or debenture account.(e) Bank account.(f) Components of purchase consideration, for example ordinary sharesissued, preference shares issued, debenture stock issued and cash paid.3.4 REALISATION ACCOUNTThis is the account in which the profit or loss on the dissolution of a company isdetermined. It is usually prepared in a columnar form. The number of columnswill depend on the number of companies amalgamating.20
AMALGAMATION, ABSORPTION AND RECONSTRUCTIONThe following transactions or events are usually accounted for in the realisationaccount:(a) Debit all assets at book values to realisation account;(b) Determine the purchase consideration and credit it to the realisationaccount;(c) Amalgamation, dissolution or liquidation expenses should be debitedto realisation account. This will in effect reduce the profit on realisationor increase the loss on realisation(d) Profit or loss on realisation is determined; that is, the balance onrealiation account is transferred to the sundry members’ account(ordinary).3.5 NEW COMPANY ACCOUNTThis is the account where the purchase consideration and related transactionsare treated. The purchase consideration, when agreed, is debited to this account(remember that the credit entry goes to realisation account) while transactionsrelating to the purchase consideration are credited to the account whensettlement of the agreed purchase consideration is made. The account cantherefore be regarded as a “self balancing” account.3.5.1 Sundry Members Account (Ordinary Shares and PreferenceShares)The following accounting transactions/events are effected in the sundrymembers account:(a) Transfer the components of the shareholders’ fund (for example,ordinary shares, preference shares, and reserves) to the accountby debiting each of the components of the shareholders’ fundand crediting sundry members’ account;(b) The profit/loss on realisation is also transferred to this account;and(c) Each of the components of purchase consideration, when settlementis effected as agreed, including cash, are transferred to thisaccount and the account will automatically balance.This account is similar to the partners’ account in the amalgamation ofpartnership.It should be noted, however, that if there is more than one class ofpreference shares, the classes should be separated and different ledgeraccounts opened for each class. For example, if in the balance sheetthere are 10% preference shares, 8% cumulative preference shares and5% redeemable preference shares, these are three different classes ofpreference shares. Therefore, three different sundry members preferenceaccounts must be opened to present each of them separately.21
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ANALYSIS AND INTERPRETATION OF FINA
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5ACCOUNTING STANDARDS5.0 LEARNING O
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ACCOUNTING STANDARDS(i)(ii)(iii)(iv
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ACCOUNTING STANDARDSThere is no SAS
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ACCOUNTING STANDARDS5.2.4 Borrowing
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ACCOUNTING STANDARDS(iii)Certain pe
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ACCOUNTING STANDARDSby venture capi
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ACCOUNTING STANDARDSIFRS 7 Financia
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ACCOUNTING STANDARDSactivity, non-c
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ACCOUNTING STANDARDSin the year inc
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ACCOUNTING STANDARDS(v)(vi)(vii)whe
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ACCOUNTING STANDARDS(v)Actions requ
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ACCOUNTING STANDARDSAccounting stud
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6ETHICAL FRAMEWORK, CONCEPTSAND VAL
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ETHICAL FRAMEWORK, CONCEPTS AND VAL
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7THE ENVIRONMENT: CORPORATE,PROFESS
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THE ENVIRONMENT: CORPORATE, PROFESS
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8PROFESSIONAL ETHICS8. 0 LEARNING O
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PROFESSIONAL ETHICSobjectivity are
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PROFESSIONAL ETHICS(c)(d)The type o
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PROFESSIONAL ETHICSabout conflicts
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PROFESSIONAL ETHICS(d)(e)Confidenti
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PROFESSIONAL ETHICSA. III onlyB. II
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9DECISION MAKING IN ETHICS9. 0 LEAR
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DECISION MAKING IN ETHICS9.2 A FRAM
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ETHICAL THREATS AND SAFEGUARDS(d)We
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DECISION MAKING IN ETHICS4. A perso
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10ETHICAL THREATS TS AND SAFEGUARDS
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ETHICAL THREATS AND SAFEGUARDS(iv)(
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ETHICAL THREATS AND SAFEGUARDSto th
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ETHICAL THREATS AND SAFEGUARDSpayab
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ETHICAL THREATS AND SAFEGUARDS(a)Fi
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ETHICAL THREATS AND SAFEGUARDSimmin
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ETHICAL THREATS AND SAFEGUARDSHowev
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ETHICAL THREATS AND SAFEGUARDS(iii)
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11CORPORATE GOVERNANCE11.0 LEARNING
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CORPORATE GOVERNANCE11.3.1 Nature(a
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CORPORATE GOVERNANCEThe company sho
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CORPORATE GOVERNANCEtrust, possible
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CORPORATE GOVERNANCEAn agent has im
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CORPORATE GOVERNANCE(a)(b)(c)(d)(e)
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CORPORATE GOVERNANCE11.6.1 The law
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CORPORATE GOVERNANCEILLUSTRAUSTRATI
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CORPORATE GOVERNANCEimitated. They
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CORPORATE GOVERNANCE(a)(b)Greenbury
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CORPORATE GOVERNANCE11.9.2 Boards d
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CORPORATE GOVERNANCErelationship wi
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CORPORATE GOVERNANCE(e)(f)(g)(h)(i)
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CORPORATE GOVERNANCE(vi)Inquisitive
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CORPORATE GOVERNANCE(e)ConsultancyA
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CORPORATE GOVERNANCEThe incoming au
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CORPORATE GOVERNANCEIn summary, acc
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CORPORATE GOVERNANCEAccording to Th
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CORPORATE GOVERNANCE3. A body corpo
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12SOCIAL AND ENVIRONMENTALISSUES IN
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SOCIAL AND ENVIRONMENTAL ISSUES IN
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APPENDIX ISUGGESTED SOLUTIONS TO RE
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SUGGESTED SOLUTIONS TO REVISION QUE
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SUGGESTED SOLUTIONS TO REVISION QUE
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APPENDIX IICOMPREHENSIVE QUESTIONS
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COMPREHENSIVE QUESTIONS AND SUGGEST
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APPENDIX IIICASE STUDY 1Karsashi, a
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CASE STUDIES(iii)(iv)The floor sale
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CASE STUDIESShare price and dividen
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CASE STUDIESSUGGESTED SOLUTION(A) A
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CASE STUDY 3The following informati
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CASE STUDIESCASE STUDY 4Ologobojo i
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APPENDIX IVTable 1:SUMMARY OF INTER
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SUMMARY OF INTERNATIONAL ACCOUNTING
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APPENDIX VGLOSSARY OF TERMSAbsorpti
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GLOSSARY OF TERMSEthical Objectivis
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APPENDIX VIBIBLIOGRAPHYChambers Ham
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APPENDIX VIISTUDY AND EXAMINATION T
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STUDY AND EXAMINATION TECHNIQUES7.3
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INDEXAAbsorption, 17, 19, 39, 40, 4
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INDEXProfessional Behaviour, 136, 1
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