FINANCIAL REPORTING AND ANALYSIS ______________________________________________________________________________






Time allowed:    24 hours.

Time to spend on your assessment:  3 hours

Maximum word count for assessment: 3000 words

Please see your exam timetable or check on FASER for the deadline to upload your answer.

The times shown on your timetable are in UK Time. Please check online for a conversion to your local time if you will be undertaking your assessment outside the United Kingdom

Candidates are permitted to use:
Calculator – Casio FX-83GT PLUS/X or Casio FX-85GT PLUS/X only

The paper consists of SIX questions.


THREE in Section A

THREE in Section B


Candidates must answer THREE questions.


At least ONE question from each Section, and one additional question from either Section


Each question carries 33 marks.


1 mark will be reserved for presentation, layout etc.


You can add hand written answers for equations/mathematical questions (take a photo/scan and add to your document).  You may also use Excel for equations and take screenshots (Ctrl+Alt+PrtScn) then paste into your document.

If you have a query with the content of this exam paper contact

If you have a technical problem with FASER, or any other query, please go to Exams Website to find contact details of the teams that can help you.

Please note that the time allocated for this assessment includes time for you to download this question and answer paper and to upload your question and answers paper to FASER.

Please allow at least 30 minutes within your exam time to upload your work. Once you have completed the assessment do not leave it to the last minute to upload.

Please save your work throughout the examination to avoid losing your work.

Please do not communicate with any other candidate in any way during this assessment.  Your response must be your own work.  Procedures are in place to detect plagiarism and collusion.



















































SECTION A – Candidates must answer at least one question





Epping Ltd. is a listed company based in Essex County. The company prepares its financial statements as at 31 December each year. The following trial balance is for the period ending 31 December 2019:


  £000 £000
Revenues   2,550
Wages for distribution staff 146  
Trade payables   164
Trade receivables 228  
Inventory as at 1 January 2019 50  
10% Debentures   300
Bank 220  
Dividend paid 50  
Debenture interest paid 45  
Manufacturing wages 100  
Office heating and lighting 20  
Administrative staff salaries 40  
Directors salaries 70  
Vehicle running costs 150  
Proceeds from disposal of delivery vehicle   25
Retained earnings at 1 January 2019   450
Repairs to machinery 60  
Factory rent 55  
Administration office rent 65  
Purchases 900  
Ordinary shares at £1   1,600
Machinery at cost 1,100  
Accumulated depreciation for machinery at 1 Jan. 2019   370
Warehouse premises at cost 1,550  
Accumulated depreciation for warehouse premises at 1 Jan. 2019   200
Computers at cost 600  
Accumulated depreciation for computers at 1 Jan. 2019   120
Delivery vehicles at cost 480  
Accumulated depreciation for delivery vehicles at 1 Jan. 2019   150
  5,929 5,929






The following information is also to be considered:


  1. The computers are used solely for administration work.


  1. A stock count performed on 31 December 2019 revealed that the closing inventory had a value of £60,000.


  1. The directors of Epping Ltd. revalued the warehouse premises on 31 December 2019 to £1,800,000 after charging depreciation for the year.


  1. Epping Ltd. uses the following depreciation policies:
    1. Depreciation of machinery: 12% straight-line method.
    2. Depreciation of warehouse premises: 4% straight-line method.
    3. Depreciation of computers: 18% straight-line method.
    4. Depreciation of delivery vehicles: 20% reducing balance method.


  1. Epping Ltd. purchased an item of machinery on 1 March 2019 for £32,000. This transaction was erroneously included in the repairs for machinery account and has not yet been corrected. Note: The company’s policy is to charge full year’s depreciation on its assets in the year of acquisition.


  1. The disposal of delivery vehicle included in the trial balance pertains to a vehicle that was originally bought for £65,000. This delivery vehicle had been depreciated by £35,000. None of these amounts have been accounted for in the books of Epping Ltd.




Prepare the following financial statements for Epping Ltd. for the year ended 31 December 2019 in accordance with IAS 1, Preparation of Financial Statements. Show all workings.


  1. A statement of comprehensive income for the year ending 31 December 2019.

(14 marks)


  1. A statement of changes in equity for the year ending 31 December 2019.

(7 marks)


  1. A statement of financial position as at 31 December 2019.

(12 marks)












The statements of comprehensive income for the year ending 31 December 2019 and the statements of financial position at 31 December 2019 of Parker Ltd and Spencer Ltd are as follows:


Statements of comprehensive income at 31 December 2019


  Parker   Spencer
  £   £
Sales         720,000           130,000
Cost of sales           490,000             63,000
Gross profit 230,000   67,000
Expenses 61,500   43,000
Dividends received from Spencer 3,500  
Profit before tax         172,000             24,000
Income tax expense         15,500             6,500
Profit for the period           156,500   17,500


Statements of financial position at 31 December 2019


  Parker   Spencer
ASSETS £   £
Non-current assets         300,000           100,000
Depreciation           110,000             33,500
          190,000           66,500
Investment in Spencer Ltd 92,500    —
Current assets      
Inventories         105,000             31,000
Trade receivables         80,000             45,000
Current account – Spencer Ltd           11,500  
Bank 16,000   8,000
  212,500   84,000
Total assets         495,000           150,500
Capital and reserves      
Common shares of £1 each         98,000           40,000
General reserve         120,000           15,500
Retained earnings 117,000   61,000
          335,000             116,500
Current liabilities      
Trade payables         144,500           16,000
Taxation 15,500   6,500
Current account – Parker Ltd               11,500
  160,000   34,000
Total equity and liabilities         495,000           150,500






  1. Parker Ltd acquired 75% of the shares in Spencer Ltd on 1 January 2015 when Spencer Ltd’s retained earnings were £30,000 and the balance on Spencer’s general reserve was £8,000.


  1. In the consolidated statement of financial position, non-controlling interests are measured as the proportionate share of the subsidiary’s net assets.


  1. During the year Parker sold Spencer goods for £9,000 plus a mark-up of one-third. Half of these goods were still in inventory at the end of the year.




  1. Prepare a consolidated statement of comprehensive income for the year ending on 31 December 2019 and a consolidated statement of financial position as at 31 December 2019. Show all your workings and clearly state any assumptions you make.

(25 marks)


  1. Explain joint control, joint operations and joint ventures under IFRS 11 Joint Arrangements.

(8 marks)






























The financial statements of Cup plc as at 31 December 2019 (with comparatives for 2018) are as follows:


Statement of comprehensive income (extract) for the year to 31 December 2019

Profit before taxation 162,000
Taxation   15,000
Profit for the year 147,000



Statement of financial position as at 31 December 2019

2019     2018
£’000 £’000     £’000 £’000
Non-current assets    
Property, plant and equipment at cost 670     600
Less: Accumulated depreciation 437 233     350 250
Investments at cost 45     66
278     316
Current assets    
Inventory 568     245
Trade receivables 545     204
Less: Provision for doubtful receivables 55 490     12 192
Cash on 10-day deposit     90
Cash at bank and in hand  – 1,058     105 632
1,336     948
Ordinary Share capital 540     340
Preference Share Capital 30     30
Share premium 30    
Retained earnings 407     340
1,007     710
Current liabilities    
Trade payables 239     186
Amount owing re property, plant & equip 20    
Corporation tax payable 15     52
Bank overdraft 55 329      – 238
1,336     948




  1. Equipment bought in February 2017 for £40,000 was sold, in April 2019, for £20,000. The company depreciates equipment at 15% per annum on cost with a full charge in the year of acquisition and none in the year of disposal.


  1. Non-current asset investments which had originally cost £21,000 were sold during the year for £30,000.


  1. Dividends received during the year were £30,000.


  1. Dividends totaling £80,000 were paid during the year.


  1. In March 2019, the company issued 200,000 £1 ordinary shares at a premium of 15p per share.


  1. The cash on 10-day deposit ranks as a cash equivalent.




  1. Prepare a cash flow statement for Cup plc for the year ended 31 December 2019 in accordance with the requirements of IAS 7 Cash Flow Statements, (using the indirect method).
  • marks)


  1. Explain why we do adjustments for depreciation and a loss made on disposal of a non-current asset when it comes to calculating the net cash flow from operating activities.

 (5 marks)























SECTION B – Candidates must answer at least one question.





IAS 38 Intangible Assets prescribes the accounting treatment for intangible assets that are not dealt with in another standard. This standard also specifies the criteria for recognition of an intangible asset.




  1. Explain the recognition criteria of an intangible asset.

(10 marks)


  1. Explain the subsequent accounting treatment of intangible assets that satisfy the recognition criteria of IAS 38.

(10 marks)


  1. Explain the distinctive features of Research expenditure and Development expenditures and the accounting treatment for Research and Development expenditures under IAS 38.

(13 marks) 


             [TOTAL: 33 MARKS]




With reference to IAS 2, Inventories:

  1. Define the term “inventories”.

                                                                                                                                        (5 marks)


  1. Explain how to determine the cost of inventories at their initial recognition.

                                                                                                                                        (8 marks)


  1. Define the term “net realisable value”.

                                                                                                                                        (5 marks)


  1. Explain the reasons for which inventories should be measured at the lower of cost and net realisable value.

                                                                                                                                      (15 marks)











Ratio analysis is a widely used technique for evaluating the financial performance of companies for purposes of making investment decisions. It aids investors in making comparisons of one accounting period with another for the same business entity or to compare one business entity with another. However, it is subject to a number of limitations and caution should therefore be exercised when basing economic decisions upon the result of ratio analysis.



  1. Discuss the most commonly used ratios for the purpose of financial analysis. Use examples where necessary to illustrate your
  • marks)
  1. Discuss the limitations of ratios in analysing financial performance.

(8 marks)
































(please use as many sheets as you need to)


Please enter your Student Registration number here: