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

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FINANCIAL REPORTING AND ETHICSILLUSTRAUSTRATION TION 3.8Carrygo Limited has been operating in the scrap metal industry for many years.The company is under pressure from its bankers and other creditors and thedirectors wish to consider re-organisations.The summarized balance sheet of Carrygo Ltd as at 30 th September, 2008 is asfollows:’000 ’000 ’000Capital and ReservesShare Capital:Ordinary shares of 1 each 1,5007% pref. shares of 1 each 5002,000Profit and loss balance (352)1,648Represented by:Fixed Assets: Patent, Research and Development 500Land and Buildings 700Plant and Machinery 1001,300Current AssetsStock 1,200Debtors 830Investment at cost (Market Value 14,000) 150Cash in hand 102,190Creditors falling duewithin 1 yearBank overdraft & short term loan 1,140Trade and other creditors 148Directors’ Loans 140Debenture interest 141,442Net current assets 7482,048Creditors due after more than 1 year7% Debenture secured on land and Building (400)1,648The following additional information is given;(a)Assets whose values have been impaired are to be written down orwritten off as appropriate.(b) The estimated cost of the re-organisation scheme is 50,000.(c) Of the trade and other creditors, 15,000 relates to arrears of 2 weekswages, 25,000 to Value Added Tax and 12,000 to Scrap Metal DealersAssociation, the balance being trade creditors.(d)Accrual for expenses in September of 60, 000 have not been included.60
AMALGAMATION, ABSORPTION AND RECONSTRUCTIONN(e) If the re-organisation took place, an estimated 90,000 would berequired for new processing equipment.(f) The bank will require part payment of its overdraft and short term loansbefore agreeing to the scheme. Preliminary negotiation suggests that a40% reduction would be accepted.(g) Preference dividends are 3 years in arrears(h) The value of certain assets on a going-concern basis are stated below:(i) Patents are worth 140,000(ii) The value of land and building is estimated to be 900,000.(iii) Plant and Machinery is worth only 10,000(iv) Stock is worth 800,000(v) Debtors include an estimated 40,000 bad debts(vi) A floating charge is held by the bank(i) There is a general willingness on the part of the shareholders anddirectors to forego part of their capital and their loans and to subscribefurther equity capital whilst ensuring that trade creditors are paid infull.(j) The debenture holders are to subscribe for 200,000 more debentureto be secured on land and building.(k) Ordinary Shareholders and Preference Shareholders are to makesacrifice of 60% and 50% of their interests respectively and to subscribefor further shares as follows:(i) Ordinary Shareholders (1 for 2) at the existing price of 0.4(ii) Preference Shareholders (1 for 2) at the existing price of 0.5(l) 15,000 of the arrears of wages for two (2) weeks is to remain unpaidin the current year.(m) The Directors’ loan is to be reduced by 30%Required:Prepare for consideration of the Directors of Carrygo Limited:! Your estimated state of affairs, assuming a liquidation with assetsrealized on a forced sale basis, making such assumptions as you considerappropriate.! Your suggested scheme of re-organisation; and! The balance Sheet following your scheme.SUGGESTED SOLUTION 3.8Carrygo Ltd! Step 1. The total losses to be written-offRe-organisation cost 50,000Accrual for expenses 60,000Patent (500,000-140,000) 360,000Plant & Mach. (100,000-10,000) 90,000Stock (1,200,000-800,000) 400,00061
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FINANCIAL REPORTING AND ETHICS1.3.3
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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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