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BS3521 Advanced Corporate Reporting
Assignment 2012-13
This is a three-part assignment
Part 1
The directors of Alfreton plc have decided that it is necessary to arrange for an impairment review of a subsidiary company, Barrington plc, at 30 September 2012. The business of Barrington plc comprise a single cash generating unit within the activities undertaken by the Alfreton group of companies.
The summarised draft statement of financial position of Barrington plc at the date of the impairment review, which took place on 30 September 2012, contained the following information:
Statement of financial position of Barrington plc at 30 September 2012
£million
Goodwill
100
Franchising arrangement
172
Special-purpose freehold property
195
Other tangible non-current assets
354
Inventories
107
Financial assets held for trading
18
Other assets
122
Total assets
1,068
Shareholders equity
Share capital
600
Reserve arising from revaluation of special-purpose property in 2010
50
Retained profit
335
985
Liabilities
83
Total equity and liabilities
1,068
The following information is relevant to the impairment review:
1. The accounts department of Alfreton plc has estimated the net cash inflows from the future activities of Barrington plc to be as follows:
Year to 30 September
£million
2013
256
2014
340
2015
275
2016
104
2. Barrington plc could be sold on 30 September 2012 for £620 million.
3. The franchising arrangement has no reliably identifiable market value. However, it is expected to generate future cash flows at least equivalent to the carrying value in the above statement of financial position.
4. The fair value less costs to sell of the special-purpose freehold property is estimated to be £130 million.
5. Neither the inventories nor any of the other tangible non-current assets has a net selling price that is greater than its carrying value.
6. The financial assets held for trading are estimated to be worth £43 million
7. Other assets are stated at their recoverable amounts.
8. Liabilities are stated at the amounts which are expected to be paid.
Required:
(a) Compute the amount of the impairment of the Barrington plc cash generating unit arising from the impairment review.
(b) Allocate the impairment loss between the relevant components of the assets of Barrington plc.
(c) Prepare and present the journal entry required to incorporate the effect of the impairment review in the books of Barrington plc.
Notes:The discount rate appropriate to the activities of Barrington plc is 12%.
Assume that the forecast net cash inflows of Barrington arise at the end of each year to which they relate.
Assume you are making the calculations on 30 September 2012.
All calculations should be made to the nearest £0.1 million.
[20 marks]
Part 2
Critically evaluate the extent to which the required treatment of impairment, as laid down in IAS 36 entitled Impairment of Assets, satisfies the fundamental qualitative characteristics of relevance and faithful representation contained in the conceptual Framework for the preparation and presentation of financial statements.
Part 3
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You are a business adviser and one of your clients is considering whether to purchase shares of the Lloyds Banking Group. Your client is unfamiliar with the following terms which feature in the groups Half-Year Resultsfor the six-months to June 2012: management basis; statutory basis; core business; impairment.
You are required to prepare a report for your client which explains these terms and critically examines their significance in the context of the accounts published by the Lloyds Banking Group for the half-year to June 2012.
The Lloyds Banking Groups 2012 Half-Year Results are accessible at.lloydsbankinggroup.com/investors/financial_performance/2012_halfyear_results.asp”>http://www.lloydsbankinggroup.com/investors/financial_performance/2012_halfyear_results.asp
[80 marks]
Notes:
There is no set breakdown of the 80 marks between Parts 2 and 3 and the overall mark awarded depends on the effectiveness with which the following criteria are satisfied: presentation of relevant facts; originality; critical ability; quality of written expression; and the quality of presentation of the assignment including references.
The presentation of your calculations in answer to Part 1 will produce a word count of roughly 150-200 words.
The length of your answers to each of the remaining Parts of the assignment is a matter of judgement but, as a general guideline, one would expect answers
to Part 2 to between 400 and 700 words.
to Part 3 to between 1,000 and 1,500 words.
Resources
Your examination and analysis should make appropriate use of the following resources:
· Knowledge obtained from following the Advanced Corporate Reporting module.
· The recommended reading for the Advanced Corporate Reporting module.
· Other relevant literature including books on financial accounting and reporting in the Aberconway library, journal articles and relevant press comment and other information available on the world-wide-web.
· The Lloyds Banking Groups 2012 Half-Year Results.
The presentation of your assignment should be preceded by a brief introduction, followed by: answers to Parts 1-3 above; a list of references; and appendices (if any).
System of referencing
Your assignment should be fully referenced using the Harvard system of referencing available online at:
.anglia.ac.uk/referencing/harvard.htm”>http://libweb.anglia.ac.uk/referencing/harvard.htm
Whenever you take material from another source, that source should be referenced. If you reproduce exact words from another source, start and end the quote with inverted commas. If the quote is 40 words or more in length, start the quote on a new line and indent 0.5cm from the left margin.
Presentation
The Assignment Submission Sheet should be completed and included as the front sheet of your assignment.
Your assignment should be:
· Typed using 12 point Arial font and spaced 1.5 (in Word go to: FormatàParagraphàLine spacing and select 1.5).
· Submitted on A4 paper with a 1.25 inch/3 cm margin all round and with the pages numbered.
· Stapled in the top left hand corner; do not submit it in a file, wallet, etc.
· 2,000 words in length, excluding references and appendices. Footnotes and quotes are included in the 2,000 words. [A 10% variation in length either above or below 2,000 is acceptable.]
The limit of 2,000 words requires a degree of conciseness, but you should make sure that you deal with all aspects of the question. If you want to include illustrative material, such as a copy of a financial statement taken from a set of accounts, this can be submitted as an appendix and does not, therefore, enter into the word count. Do not include more than three pages of material as appendices (this is a maximum and is not intended to suggest that appendices are necessary).
You are referred to the section in the module catalogue on plagiarism. This is defined as deceiving or attempting to deceive the examiners by passing off as the candidates own written work the work of another writer. The rule is DO NOT DO IT.
Submission
Your assignment is to be submitted to Room P28 by 10.00 am on Thursday, 13 December, 2012.
Your attention is drawn to the requirement that you adhere to the deadline for submission and that extensions to published deadlines will be granted only in exceptional circumstances. An extension can only be granted by the Chair of the Examining Board, and any application must be supported by documentary evidence.
In planning your work, you should allow for last minute contingencies, such as not being able to gain access to a working computer and printer, as extensions will not normally be considered in such a case. Also, ensure that you maintain a current backup copy of your work as it progresses; storing it on the central computer is a good idea.
John Richard Edwards – October 2012
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BS3521 Advanced Corporate Reporting
Assignment Submission Sheet
Complete this sheet and attach it as the front page of your submitted assignment
please write clearly
Surname
First name(s)
University number
Word count
Number of pages
including appendices
This is my own work and all sources have been fully referenced and acknowledged
Sign here to confirm this statement
Your assignment should be:
· Typed using 12 point Arial font with 1.5 spacing
· On A4 paper with a 1.25 inch/3 cm margin all round and with the pages numbered
· Stapled in the top left hand corner, where indicated by arrow; do not submit assignment in a file, wallet, etc.
· Not more than 2,000 words in length, excluding references and appendices. Footnotes and quotes are included in the 2,000 words.
