Advanced Financial Reporting and Analysis Revision Kit (Past Papers With Answers)

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SAMPLE WORK

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TOPIC 1

ACCOUNTING FOR ASSETS AND LIABILITIES

QUESTION 1

April 2026 Question Three

a) Wanga Autos is a major car dealer in the country. The company is currently preparing its financial statement for the year ended 31 March 2026. The company sells cars in three different regions across the country. At the reporting date, the company has 300 cars (same type, model and age) whose fair value the company’s directors would like to estimate.

The directors believe that the fair value should be based on inputs from the market which provides the highest net benefits from car sales.

Information about the three regions as follows:

Region	Total Market Volume (No. of cars)	Wanga Autos’ sales volume (No. of cars)	Selling price per car (Sh.)	Transportation costs per car (Sh.)	Transaction costs per car (Sh.)
Northern Region	6,500	960	2,700,000	200,000	150,000
Southern Region	9,800	608	2,800,000	310,000	190,000
Western Region	5,000	800	2,500,000	250,000	250,000
Total	21,300	2,368

 

Required:

Determine, with appropriate computations, what fair value should be placed on the 300 cars at 31 March 2026 in line with the requirements of IFRS 13 (Fair Value Measurements).        (8 marks)

 b) On 1 January 2022, Maiyo Ltd. granted 700 share appreciation rights (SARs) to each of its 400 employees. All of the rights vested on 31 December 2023 and could be exercised from 1 January 2024 up to 31 December 2025.

At the grant date, the value of each SAR was Sh.15 and it was estimated that 5% of the employees of Maiyo Ltd. would leave during the vesting period.

The fair values of the SARs were as follows:

Date	Fair Value of SARs (Sh.)
31 December 2022	14
31 December 2023	16
31 December 2024	17

 

At the employees who were expected to leave the employment did leave the company as expected before 31 December 2023. On 31 December 2024, 80 employees exercised their options when the intrinsic value of the right was Sh.15.5 and were paid in cash.

Required:

Advise Maiyo Ltd., with appropriate computations, on how the above transactions should have been accounted for in its financial statements up to 31 December 2024 in conformity with IFRS 2 (share – based Payment).               (12 marks)

QUESTION 2

December 2025 Question Three

Uzuri Limited, a public limited company whose financial year ends on 30 September, offers stock options to its full time employees.

On 1 October 2021, the company directors offered 5,000 stock options to each of its 300 employees on condition that they remain in employment until 30 September 2025.

The fair value of each option was Sh.16 at 1 October 2021. At the grant date, it was estimated that 10% of the employees would leave the company over the vesting period.

At 30 September 2022, ten (10) employees had left the company and the estimate of the leavers remained the same.

At 30 September 2023, another fifteen (15) employees left the company and the estimate of the possible leavers was revised to 15% over the vesting period.

At 30 September 2024, another eight (8) employees left the company and the estimate of leavers remained at 15% of the employees over the vesting period.

At the vesting date of 30 September 2025, additional seven (7) employees had left the company and therefore forfeited their stock options.

Required:

Analyse the accounting treatment of the above share-based payment transactions in the financial statements of Uzuri Limited for each of the years ended 30 September: 2022, 2023, 2024 and 2025 in line with International Financial Reporting Standard (IFRS) 2 “Share-based payments”. (8 marks)

(b) On 31 December 2023, Amasa Ltd. purchased Sh.10 million 5% bonds issued by Jamii Ltd. at par value. The bonds are repayable on 31 December 2026 and the effective rate of interest is 8%. Amasa Ltd.’s business model is to collect the contractual cash flows over the life of the asset.

As at 31 December 2023, the bonds were considered to be low risk and as a result, the 12-month expected credit losses were expected to be Sh.10,000. On 31 December 2024, Jamii Ltd. paid the coupon interest. However, as at that date, the risks associated with the bonds were deemed to have increased significantly.

The present value of the cash shortfall for the year ending 31 December 2025 was estimated to be Sh.462,963 and the probability of default is 3%. On 31 December 2024, it was also anticipated that no further coupon payments would be received during the year ending 31 December 2026 and only a portion of the nominal value of the bonds would be repaid. The present value of the bonds was assessed to be Sh.6,858,710 with a 5% likelihood of default in the year ended 31 December 2026.

Required:

With reference to the IFRS 9 (Financial Instruments), demonstrate the financial reporting treatment of the bonds, including any impairment losses, in the financial statements of Amasa Ltd:

(i) As at 31 December 2023. (4 marks)

(ii) For the year ended 31 December 2024. (8 marks)

 SAMPLE WORK

Complete copy of CPA Advanced Financial Reporting And Analysis Revision Kit (CPA Past Past Papers With Answers) is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APPS)  And in Hard copy (Printed and Bound)

Phone: 0728 776 317

Email: [email protected]

Android App Link – Click to Download 

PC/ IOS / Tablet / Android – Click to Access