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SECTION A – CASE QUESTIONS (Total: 50 marks)

Answer 1(a)

To: Peter Chan, Director of PML


From: Accounting Manager of PML
c.c. Y. C. Lee, T. J. Cheung, Brian Cardew
Date: xxxx

I refer to your e-mail dated 18 June 2004 regarding your queries about the summary
consolidated financial statements for PML for the year ended 31 March 2004.

The explanation of the differences between the consolidated amounts and the combined
amounts are as follows:

The objective of preparing consolidated financial statements is to give a true and fair view
of the state of affairs and results of the group as if it were a single enterprise.

In order to achieve this objective, the financial statements of member companies of our
Group are combined (or added up, in simple terms) and certain adjustments are made to
the combined statements.

Because of these consolidation adjustments, in many cases the items in the consolidated
financial statements for our group will not be simply the sum of the corresponding items in
the individual financial statements of the member companies.

The principal adjustments are the elimination of PML’s investments in SML-A and SML-B
(“the subsidiaries”) of HK$600 million against PML’s interest in the equity of the two
companies at the date of acquisition (HK$650 million in total).

As a result of this elimination, the share capital and share premium of the subsidiaries
(HK$240 million) and the retained profits of the subsidiaries at the date of acquisition
(HK$410 million), or “pre-acquisition profit”, are eliminated from the consolidated balance
sheet.

The portion of the net assets of the subsidiaries attributed to the 30% equity of subsidiaries
that are not owned by PML (HK$650 million x 30% = HK$195 million) is treated as minority
interest.

The excess of the cost of the acquisition over PML's interest in the fair value of the
identifiable assets and liabilities of the subsidiaries as at the date of the exchange
transaction (HK$600 million – HK$650 million + HK$195 million = HK$145 million) was
treated as goodwill.

A number of adjustments relating to post acquisition operations of the Group have also
been made. These include:

Annual amortisation of the goodwill on a straight line basis (HK$145 million / 5 = HK$29
million).

Module A (September 2004 Session) 1


Elimination of intra-group transactions between SML-A and PML, reducing both the
consolidated revenue and consolidated cost of sales (by HK$40 million).

Elimination of intra-group transactions between SML-B and PML, reducing the amounts of
consolidated revenue (by HK$20 million), consolidated cost of sales (by HK$12 million) and
non-current assets (by HK$8 million).

Elimination of intra-group interest charges, reducing both other income and finance costs
(by HK$12 million).

Please refer to the annex for detailed reconciliation of other non-current assets and
retained earnings as at 31 March 2004.

The reasons for the presentation of diluted EPS are as follows:

Since the company’s ordinary shares are publicly traded on the Hong Kong Stock
Exchange, the company should follow the requirements of Hong Kong Accounting
Standard 33 Earnings Per Share (“HKAS 33”).

In accordance with HKAS 33, the company should calculate and present diluted EPS to
disclose the reduction in earnings per share resulting from the assumption that convertible
instruments are converted, that options or warrants are exercised, or that ordinary shares
are issued upon the satisfaction of specified conditions.

During the year, the 6% convertible debenture of HK$ 200 million and 5 million options to
the directors were in issue. The company should therefore calculate and present the
diluted EPS as a result of these potential ordinary shares.

The objective of presenting diluted earnings per share is to provide a measure of the
interest of each ordinary share of PML in the performance of the Group, giving effect to all
dilutive potential ordinary shares outstanding during the period.

The diluted EPS is calculated as follows:

For the purpose of calculating the dilution caused by the 6% convertible debenture, the
profit for the year attributable to ordinary equity holders of the company was increased by
the amount of the after-tax effect of the interest of HK$12 million (12 million x 82.5% = 9.9
million).

The number of ordinary shares was increased by the weighted average number of shares
that would be issued on the conversion of all the 6% convertible debenture into ordinary
shares of the company as at the beginning of the year ((200 million / 100) x 7 = 14 million)

For the purpose of calculating dilution caused by the options held by the directors, the
assumed proceeds from options should be regarded as having been received from the
issue of ordinary shares at the average market price of ordinary shares during the year
(5 million x HK$8 / HK$20 = 2 million).

The difference between the total number of ordinary shares to be issued and the number of
ordinary shares that would have been issued at the average market price of ordinary
shares during the period should be treated as an issue of ordinary shares for no
consideration. (5 million – 2 million = 3 million).

Module A (September 2004 Session) 2


Please refer to the annex for detailed calculation of basic and diluted EPS.

The reasons for the segment reporting requirement are as follows:

Since the shares of the company are listed on the Hong Kong Stock Exchange, the
company should follow the requirements of Hong Kong Accounting Standard 14 Segment
Reporting# (“HKAS 14”).

HKAS 14 sets out detailed requirements for the determination of a reportable segment. A
reportable segment is a business segment or a geographical segment for which segment
information is required to be disclosed in accordance with HKAS 14.

In general, a business segment or geographical segment should be identified as a


reportable segment if a majority of its revenue is earned from sales to external customers
and its revenue from sales to external customers and from transactions with other
segments is 10 per cent or more of the total revenue, external and internal, of all segments.

Since the majority of the revenue of SML-A for the year was earned from sales to external
customers (380 / 420 = 90.5%) and its revenue is more than 10% of the total revenue of all
business segments (420 / (420 + 340 + 2,000) = 15.2%), the company is required to
present segment information in its financial statements.

(Candidates may also adopt the segment results test or the segment asset test.)

The objective of segment reporting is to provide information about the different types of
products and services an enterprise produces and the different geographical areas in
which it operates so as to help users of financial statements:

(a) better understand the enterprise's past performance;

(b) better assess the enterprise's risks and returns; and

(c) make more informed judgements about the enterprise as a whole.

Please refer to the annex for detailed workings for the segment report.

I hope the above explanation has answered your queries. Please feel free to contact me
if you have further queries.

Best regards

XXX

#
SSAP26 revised by HKASs 2, 8 and 16

Module A (September 2004 Session) 3


Answer 1 (b)
HK$ million
Consolidated retained earnings:

Combined amount (220 + 240 + 580) 1,040


Pre-acquisition profit of SML-A and SML-B (200 + 210) (410)
Minority interest in profit for the year (20 + 30) x 30% (15)
Amortisation of goodwill (145/5) (29)
Elimination of unrealised profit of goods sold from PML to SML-B (8)
(20 x 40%)
Consolidated amount 578

Non-current assets:

Combined amount (350 + 280 + 1,240) 1,870


Add: Goodwill on acquisition of SML-A and SML-B 145
Less: Investments in SML-A and SML-B (600)
Accumulated amortisation of goodwill (29)
Property, plant and equipment of SML-B (8)
Consolidated amount 1,378

Answer 1 (c)
HK$ million
Basic EPS for the year ended 31 March 2004:

Profit for the year in HK$ million 81


Minority interest in profit for the year in HK$ million (15)
(20 x 30% + 30 x 30%)
Profit for the year attributed to shareholders of PML 66

Weighted average number of ordinary shares in million 60

Basic EPS in HK$ (66/60) 1.10

Diluted EPS for the year ended 31 March 2004:

EPS diluted by the options is HK$1.05 [66/(60+3)]

EPS diluted by the options and convertible debenture:

Profit for the year attributed to shareholders of PML 66


Add: Interest saved, net of tax, if the 6% convertible debenture had been
converted on 1 April 2003
($200 million x 6% x (1–17.5%)). 9.9
75.9

Weighted average number of ordinary shares in million for basic EPS 60


Add: Conversion of convertible debenture at 1 April 2003 14
(200 x 7/100)
Number of shares in million deemed to be issued zero
consideration on exercise of the options granted to the directors at
1 April 2003 (5 – 5 x 8/20) 3
77
Diluted EPS in HK$(75.9/77) 0.99

Since both the options and convertible debentures are dilutive, the diluted
EPS for the year ended 31 March 2004 should be HK$0.99.

Module A (September 2004 Session) 4


Answer 2(a)

In accordance with HKAS 27, the income and expenses of operations of SML-A would be
included in the consolidated income statement of the Group until the date of disposal,
which is the date on which the company ceases to have control of SML-A.

The company would cease to have control of SML-A when the company loses the power to
govern SML-A’s financial and operating policies so as to obtain benefit from its activities.

The date on which the consideration is received will be an important indication of the date
on which SML-A is disposed of, although it will not be conclusive evidence of the date of
the cessation of control.

Where SML-A is disposed of, the difference between the proceeds from disposal and its
carrying amount as of the date of disposal will be recognised in the consolidated income
statement as the gain or loss on the disposal of the subsidiary.

Since SML-A is a separate major line of business that can be distinguished operationally
and for financial reporting purpose, its disposal pursuant to a single plan would constitute a
discontinuing operation under HKAS 35 (SSAP33 revised by HKASs 1, 8 and 10). The
Group is therefore required to comply with the disclosure requirements set out in HKAS 35.

Answer 2(b)

Gain or loss on disposal of SML-A $ million $ million

Proceeds from the disposal of the subsidiary 400

ƒ Fair value of net assets of SML-A acquired 252


(160 + 200) x 70%
ƒ Goodwill on acquisition (145 x 60%) 87
Cost of acquisition of SML-A 339
ƒ Post acquisition profit attributable to shareholders of PML (20 14
x 70%)
ƒ Amortisation of goodwill (87/5) (17.4)

Net asset of SML-A as at 31 March 2004 attributable to shareholders 335.6*


of PML

ƒ Profit for the six months ended 30 September 2004 7


attributable to shareholders of PML (20 x 6/12 x 70%)

ƒ Amortisation of goodwill (87/5/2) (8.7)


Net asset of SML-A as at 30 September 2004 attributable to 333.9**
shareholders of PML
Gain on disposal of SML-A 66.1

Module A (September 2004 Session) 5


* Alternatively $ million

Equity of SML-A as at 31 March 2004 380


Minority interest in equity of SML-A (380 x 30%) (114)
Balance of amortised goodwill (87 – 87/5) 69.6

Net asset of SML-A as at 31 March 2004 attributable to shareholders


of PML 335.6

** Alternatively $ million

Net assets of SML-A at 31 March 2004 380


Post acquisition Profit for the six month ended
30 September 2004 10
390
Less minority interest (117)
Share of net assets of SML-A 273
Unamortised goodwill (87 – 87/5 x 1.5) 60.9
333.9

* * * END OF SECTION A * * *
(ANSWERS)

Module A (September 2004 Session) 6


SECTION B - ESSAY / SHORT QUESTIONS (Total: 50 marks)

Answer 3

Legal considerations

A director has legal duties and responsibilities under common law and statues. They
include:

Fiduciary duties - for examples, a director must act honestly and in good faith for the benefit
of the company. In particular, directors must act in good faith in what they believe to be
the best interests of the company.

Duty to exercise skill and care - A director must exercise reasonable care and skill in the
performance of his duties. If employed as having particular skills, for example as a
certified public accountant, a director should display the skill or ability expected from a
person of that profession.

Statutory duty - The Hong Kong Companies Ordinance imposes a number of duties on
directors, such as the preparation of annual accounts to give a true and fair view.

All directors should be aware of their legal responsibilities at all times, including selecting
accounting policies for the company.

Ethical considerations

As a certified public accountant, he or she also has duties to comply with the Statements of
Professional Ethics of the Hong Kong Institute of Certified Public Accountants.

The Fundamental Principles of Professional Ethics are:

A certified public accountant should always have regard to any factors that might reflect
adversely upon his/her integrity and objectivity in relation to his/her professional assignment
or occupation.

A certified public accountant should carry out his/her professional work with a proper regard
for the technical and professional standards expected of a certified public accountant and
should not undertake professional work that he/she is not competent to perform.

A certified public accountant should conduct him/herself with courtesy and consideration
towards all with whom he/she comes into contact in the course of his/her professional work.

In circumstances not provided for by the ethical guidelines, a certified public accountant
should conduct him/herself in a manner consistent with the good reputation of the
profession and the HKICPA.

All directors should be aware of their ethical responsibilities at all times, including selecting
accounting policies for the company, if they are certified public accountants.

Module A (September 2004 Session) 7


Professional considerations

There is a presumption in HKAS 1 that the appropriate application of Hong Kong Financial
Reporting Standards (“HKFRSs”), with additional disclosure where necessary, results in
financial statements that give a true and fair view in virtually all circumstances. Therefore,
a director should ensure that financial statements of the company comply with all the
relevant HKFRSs.

In particular, the directors should refer to HKAS 8 Accounting policies, Changes in


Accounting Estimates and Errors when selecting accounting policies for the company.

HKAS 8 requires that when a HKFRS specifically applies to a transaction, event or


condition, the accounting policy applied to that item should be determined by applying the
HKFRS and considering any relevant Implementation Guidance issued by the HKICPA for
the HKFRS.

In the absence of a HKFRS that specifically applies to a transaction, event or condition, the
director should use his/her judgement in developing and applying an accounting policy that
results in information that is relevant to the economic decision-making needs of users and
is reliable.

Answer 4

Revenue recognition

HKAS 18 (SSAP 18 revised by HKAS 39) sets out revenue recognition criteria for
transactions including sale of goods and rendering of services.

Revenue from sale of goods should be recognised when all of the following criteria have
been satisfied:

• The enterprise has transferred to the buyer the significant risks and rewards of
ownership of the goods;

• The enterprise retains neither continuing managerial involvement to the degree


usually associated with ownership nor effective control over the goods sold;

• The amount of revenue can be measured reliably;

• It is probable that the economic benefits associated with the transaction will flow to
the enterprise; and

• The costs incurred or to be incurred in respect of the transaction can be measured


reliably.

When the outcome of a transaction involving the rendering of services can be estimated
reliably, revenue associated with the transaction should be recognised by reference to the
stage of completion of the transaction at the balance sheet date.

Module A (September 2004 Session) 8


The outcome of a transaction can be estimated reliably when all the following conditions
are satisfied:

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to
the enterprise;

• the stage of completion of the transaction at the balance sheet date can be measured
reliably; and

• the costs incurred for the transaction and the costs to complete the transaction can be
measured reliably.

In a situation where sales and services are bundled into one contract, revenue recognition
criteria should be applied to the separately identifiable components of each single
transaction in order to reflect the substance of the transaction.

In this case, the contract has two separately identifiable components - sale of equipment
and provision of services.

Sale of equipment

The revenue from sale of equipment should be recognised in the financial statements for
the year ended 31 December 2003 because all conditions for recognition of revenue from
sale of goods are met.

1. The customer acknowledged receipt on the delivery note after Oriental Network
Limited delivered and installed the equipment during the year ended
31 December 2003. Oriental Network Limited had completely transferred to its
customer the significant risks and rewards of ownership of the equipment.

2. Oriental Network Limited did not retain any control over the network equipment as the
customer subsequently integrated the network equipment into its management
information systems.

3. The fair value of the equipment sold can be estimated from the contract value based
on the historical information.

4. All costs for sale of equipment, including installation costs, were incurred during the
year ended 31 December 2003.

Module A (September 2004 Session) 9


Provision of development services

Revenue from provision of services can also be recognised during the year ended 31
December 2003 because-

1. The fair value of the services can be estimated based on past experience.
2. The stage of completion at 31 December 2003 can be determined reliably.
3. Costs incurred at the year ended 31 December 2003 and total project costs can be
estimated.
4. The customer can enjoy the economic benefits the system generated when it was
completed on 30 June 2004.

As historical information indicated workload and relevant costs of the services were evenly
spread over the development period and 50% of the work was completed as at 31
December 2003, half of the service revenue together with half of the total estimated project
cost should be recognised in the profit and loss account for the year ended 31 December
2003.

Answer 5(a)

General conditions for recognition of government grants

HKAS 20 (SSAP 35 revised by HKAS 8) defines government grants as assistance by


government in the form of transfers of resources to an entity in return for past or future
compliance with certain conditions relating to the operating activities of the entity.

HKAS 20 requires that government grants, including non-monetary grants at fair value,
should not be recognised until there is reasonable assurance that the enterprise will
comply with the conditions attaching to them, and that the grants will be received.

HKAS 20 states that receipt of a grant does not of itself provide conclusive evidence that
the conditions attaching to the grant have been or will be fulfilled.

In this case, there are at least four dates on which the grant may be recognised initially in
the Thomas Group’s financial statements. They are (1) when JML made the application to
the Bureau; (2) when JML purchased the machinery from the Mainland China
manufacturers; (3) when JML received the grant; (4) 1 January 2006 when the 5 year
period lapses.

It is obvious the grant should not be initially recognised when JML made the application
since none of the conditions required by HKAS 20 had been satisfied.

Upon JML’s purchase of the machinery, no formal reply had been received from the
Bureau, so there was no reassurance that JML would receive the grant. Therefore, the
grant should not be initially recognised at that moment.

When JML received the grant from the Bureau, all the conditions set out by HKAS 20 had
been satisfied. Therefore, the grant should be recognised initially at 31 December 2003.

It is not appropriate to defer recognition of the grant to 1 January 2006, unless the Thomas
Group planned to shut down the plant before that date, or had other possibilities that the
conditions attaching to the grant would not be satisfied until that date.

Module A (September 2004 Session) 10


Answer 5(b)

Measurement subsequent to initial recognition

HKAS 20 requires that an entity should recognise government grants as income over the
periods necessary to match them with the related costs which they are intended to
compensate, on a systematic basis. They should not be credited directly to shareholders'
interests.

HKAS 20 requires that government grants related to depreciable assets should be


recognised as income over the periods and in the proportions in which depreciation on
those assets is charged.

HKAS 20 states grants are sometimes received as part of a package of financial or fiscal
aids to which a number of conditions are attached. In such cases, care is needed in
identifying the conditions giving rise to costs and expenses which determine the periods
over which the grant will be earned. It may be appropriate to allocate part of a grant on
one basis and part on another.

Presentation of grant related to assets

In this case, the government grant is related to an asset and should be presented in the
balance sheet either by (i) setting up the grant as deferred income or (ii) by deducting the
grant in arriving at the carrying amount of the asset.

When the grant is set up as deferred income, it is recognised as income on a systematic


and rational basis over the useful life of the asset.

When the grant is deducted against the carrying amount of the asset, it is recognised as
income over the life of a depreciable asset by way of a reduced depreciation charge.

Answer 5(c)

Carrying amounts of the government grant

As at and for the year ended 31 December 2002: -

The government grant should not be recognised as there was no reasonable assurance
that it would be received because the application had not been approved by the Bureau.
The carrying amount would be zero under both methods of presentation.

As at and for the year ended 31 December 2003: -

Since there was reasonable assurance that the Thomas Group would comply with all
conditions attaching to the grant which was received on 31 December 2003, the
government grant of Rmb5,000,000 can be recognised as deferred income. Therefore,
the carrying amount would be Rmb5,000,000. Alternatively, the entire amount can be
deducted against the carrying amount of the machinery acquired. Therefore, the carrying
amount would be zero.

Module A (September 2004 Session) 11


As at and for the year ended 31 December 2004: -

If the grant is set up as deferred income, Rmb555,555 (Rmb5,000,000/9) of the grant


should be recognised as income in the consolidated profit and loss account to reduce the
annual depreciation charge of the machinery. The remaining useful life of the machinery
is 9 years as at 31 December 2003. The carrying value of the deferred income should be
Rmb4,444,445 as at 31 December 2004.

If the entire amount had been deducted in 2003 against the carrying amount of the
machinery acquired, the carrying amount would be zero.

Carrying amounts of the machinery

As at and for the year ended 31 December 2002: -

The machinery should be stated at cost less accumulated depreciation of Rmb6,000,000


(Rmb6,000,000 – Rmb0) under both methods of presentation.

As at and for the year ended 31 December 2003: -

The machinery should be stated at cost less accumulated depreciation of Rmb5,400,000


(Rmb6,000,000 – Rmb600,000)) if the grant is recognised as deferred income or
Rmb400,000 (Rmb5,400,000 – Rmb5,000,000) if the grant is deducted against the carrying
amount of the machinery.

As at and for the year ended 31 December 2004: -

The machinery should be stated at cost less accumulated depreciation of Rmb4,800,000


(Rmb6,000,000 – (2 x Rmb600,000)) if the grant is recognised as deferred income or
Rmb355,556 (Rmb400,000 – (Rmb400,000/9)) if the grant is deducted against the carrying
amount of the machinery. The remaining useful life of the machinery is 9 years as at 31
December 2003.

Answer 6

Short term benefits

The basic salary and annual paid leave to which Mr. Edward Chan is entitled are examples
of short term benefits, which are employee benefits that fall due wholly within twelve
months after the end of a period in which the employees render the related service.

HKAS 19 (SSAP 34 revised by HKAS 8) requires that when an employee has rendered
service to a reporting entity during an accounting period, the entity should recognise the
undiscounted amount of short-term employee benefits expected to be paid in exchange for
that service as an expense, unless another Standard or Interpretation requires or permits
the inclusion of the benefits in the cost of an asset.

In particular, HKAS 19 requires an enterprise to recognise untaken annual leaves


(accumulating compensated absences) as a liability and an expense when the employees
render service that increases their entitlement to future compensated absences.

Module A (September 2004 Session) 12


An enterprise should measure the expected cost of accumulating compensated absences
as the additional amount that the enterprise expects to pay as a result of the unused
entitlement that has accumulated at the balance sheet date.

Total salary payable to Mr. Edward Chan for the year ended 31 December 2004 of
HK$480,000 (HK$40,000 x 12) should be recognised as an expense in Golden Dragon
Limited’s financial statements for the year ended 31 December 2004.

The 5 days annual paid leave carried forward from 2003 should have already been
recognised as an expense in the financial statements for the year ended
31 December 2003 in accordance with HKAS 19.

If the 10 days entitlement for 2004 is vesting, total compensation payable to Mr. Edward
Chan for the year ended 31 December 2004 of HK$18,462 [HK$480,000 x 10/(52x5), or
other reasonable method of computation] should be recognised as an expense in Golden
Dragon Limited’s financial statements for the year ended 31 December 2004.

Post employment benefits – defined contribution plan

The Mandatory Provident Fund (“MPF”) to which Mr. Edward Chan is entitled is a form of
post-employment benefit plan, or a defined contribution plan to be exact, under which an
entity pays fixed contributions into a separate entity, normally a retirement fund, and will
have no legal or constructive obligation to pay further contributions if the fund does not hold
sufficient assets to pay all employee benefits relating to employee service in the current
and prior periods.

According to HKAS 19, when an employee has rendered service to an entity during a
period, the entity should recognise the contribution payable to a defined contribution plan in
exchange for that service as an expense, unless another Standard or Interpretation
requires or permits the inclusion of the contribution in the cost of an asset.

Total MPF contributions payable by Golden Dragon Limited for the year ended 31
December 2004 of HK$12,000 (HK$1,000 x 12) should be recognised as an expense in
Golden Dragon Limited’s financial statements for the year ended 31 December 2004.

Termination benefits

Termination benefits are employee benefits payable as a result of either an entity's decision
to terminate an employee's employment before the normal retirement date, or an
employee's decision to accept voluntary redundancy in exchange for those benefits.

An entity should recognise termination benefits as a liability and an expense when and only
when the entity is demonstrably committed to either terminate the employment of an
employee before their normal retirement date; or provide termination benefits as a result of
an offer made in order to encourage voluntary redundancy.

Module A (September 2004 Session) 13


Long Service Payment

Under the Hong Kong Employment Ordinance, an employer should make a long service
payment (“LSP”) to an employee or his/her relatives if the employee has been employed
for not less than 5 years and the employee is dismissed and the employer is not liable to
pay a severance payment.

Since Mr. Chan will have worked for Golden Dragon Limited for 6 years at 31 December
2004 when dismissed by Golden Dragon Limited (and he is unlikely to be entitled to any
severance payment), Mr. Chan is entitled to LSP.

The long service payment payable in these circumstances is a termination benefit under
HKAS 19 since it is payable as a result of Golden Dragon Limited's decision to terminate
Mr. Edward Chan's employment before his normal retirement date (which is presumably 65
years under the Hong Kong Employment Ordinance).

Because Mr. Edward Chan’s actual monthly salary of HK$40,000 exceeded the cap as
stipulated by the Hong Kong Employment Ordinance, the cap of HK$22,500 should be
used for LSP computation.

Under the Hong Kong Employment Ordinance, If the employee is also entitled to
occupational retirement scheme benefits, mandatory provident fund scheme benefits or
gratuities based on length of service, the amount of long service payment may be reduced
by benefits arising from these retirement scheme.

The amount of long service payment is to be reduced by the total amount of all of the
gratuities and benefits that relate to the employee’s years of service.

The accumulated MPF contributions made by Golden Dragon Limited can therefore be
utilised to reduce the LSP liability.

Total LSP payable by Golden Dragon Limited on termination of Mr. Edward Chan of
HK$41,000 (6x (HK$22,500 x 2/3) – HK$49,000) should be recognised as an expense in
Golden Dragon’s financial statements for the year ended 31 December 2004.

For the purpose of these suggested solutions, earlier adoptions of all Hong Kong Accounting
Standards in issue as at 28 June 2004 are assumed.

* * * END OF EXAMINATION PAPER * * *


(ANSWERS)

Module A (September 2004 Session) 14