SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 1 of 9

ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5

Marks
Question No. 1
Excellent Limited
Consolidated Statement of Financial Position
As at December 31, 2015
Working
Rs. '000'
Notes
Non-Current Assets
Property plant and equipment (35,100 + 11,000) 46,100 0.5
Investment Creative Limited WN-4 700 0.5
Financial assets WN-5 8,017 0.5
54,817
Current Assets
Inventories (10,000 + 2,000) 12,000 0.5
Trade receivables (3,000 + 800) 3,800 0.5
Interest receivable WN-5 200 0.5
Cash and bank (2, 200 + 500) 2,700 0.5
18,700
Total Assets 73,517 0.5

Equity and Liabilities

Share capital @ Rs. 10 each 30,000 0.5
Reserves WN-2 29,142 0.5
59,142
Non-controlling interest WN-3 1,775 0.5
60,917
Current liabilities (10,000 + 1,800) 11,800 0.5
Contingent consideration (1,000 200) WN-2 800 0.5
Total Equity and Liabilities 73,517 0.5

Working Notes:
Date of acquisition October 1, 2015
Acquisition 80%
Rs. '000'
WN-1: Goodwill:
Immediate cash paid (23 x 500,000 x 80%) 9,200 0.25 + 0.25
Contingent consideration 1,000 0.5
Non-controlling interest (19 x 500,000 x 20%) 1,900 0.25 + 0.25
12,100
Net Assets:
Share capital 5,000 0.5
Reserves 7,500 0.5
Add: Post acquisition losses {(10,000 7,500) 4)} 625 13,125 0.25 + 0.25
Negative goodwill (1,025) 0.5

DISCLAIMER: These suggested answ ers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 2 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
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Rs. '000'
WN-2: Group Retained Earnings:
Excellent Limited 30,000 0.5
Loss on financial assets (2,392) 0.5
Interest on financial assets 609 0.5
Post-acquisition adjusted losses of Fair Limited {(2,500 x 80%) 4} (500) 0.25 + 0.25
Negative goodwill 1,025 0.5
Decrease in contingent consideration (1.0 m 0.8 m) 200 0.5
Share of profit from Creative Limited 200 0.5
29,142
WN-3: Non-Controlling Interest in Statement of Financial Position:
At date of acquisition 1,900 0.5
Post-acquisition losses (2,500 4 x 20%) (125) 0.25 + 0.25
1,775
WN-4: Investment in Creative Limited
Investment (50,000 x 10) 500 0.5
Share of profit for the year (400,000 x 50%) 200 0.5
700

WN- 5: Financial Assets: Rs. '000'

Dates Cash Flows Discount Factor @ 8% Present Value
January 1, 2015 10,000
January 1, 2016 200 0.926 185 0.25 + 0.25
January 1, 2017 200 0.857 171 0.25 + 0.25
January 1, 2018 200 0.794 159 0.25 + 0.25
January 1, 2019 200 0.735 147 0.25 + 0.25
January 1, 2020 10,200 0.681 6,946 0.25 + 0.25
7,608 0.25
2,392 0.25

Financial Assets at Year End: Rs. '000'

Financial Financial Asset
Interest @
Asset at Interest Balance as at
Date 2% Cash to
January 1, @ 8% December 31,
be received
2015 2015
December 31, 2015 7,608 609 200 8,017 01 (0.25 each)

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provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 3 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
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Question No. 2

(a) Fair Value Measurement of Financial Instruments: 06

According to IFRS-13 fair value measurement, it is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
An entity shall use valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
The IFRS establishes a three-level fair value hierarchy that categorizes into three levels the
inputs to valuation techniques used to measure fair value.
Level-1 Quoted prices in active markets for identical assets or liabilities that are available
at the measurement date.
Level-2 Inputs other than quoted prices included within Level-1 that are observable for
the asset or liability, either directly or indirectly. e.g. quoted prices for similar assets in
active markets of for identical or similar assets in non-active markets or use of quoted
interest rates for valuation purposes.
Level-3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall
be used to measure fair value to the extent that relevant observable inputs are not
available,
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable
inputs (Level 3 inputs).
All the financial markets are not liquid and stable. Where a market is illiquid, it is rather difficult
to apply fair value measurement because the relevant information will not be available.
Likewise, since fair value provides us measurement at a certain point in time, for volatile
financial markets this measure may not apply for long term, it needs to be considered whether
an asset is being actively traded or held for the long term.
Necessary disclosures would be helping to deal with such problems of fair value as it provides
an indicator of a companys risk profile.

(b) (i) Beej & Co.

Deferred Taxation
As at June 30, 2015 Rupees
Carrying
Tax Base Difference
Value
Assets
Property plant and equipment 12,500,000 9,250,000 3,250,000 1.5(0.5 each)
Interest receivable 800,000 - 800,000 01(0.5 each)
Trade receivable 1,200,000 1,200,000 - 01(0.5 each)
Taxable temporary difference 4,050,000 0.5
Tax rate 33%
Deferred tax liability 1,336,500 0.5

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stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 4 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
Rupees
Carrying
Tax Base Difference
Value
Liabilities
Provision for warranty 2,000,000 - (2,000,000) 01(0.5 each)
Advance interest 250,000 - (250,000) 01(0.5 each)
Accrued fines and penalties 1,000,000 1,000,000 - 01(0.5 each)
Deductible temporary difference (2,250,000) 0.5
Tax rate 33%
Deferred tax assets (742,500) 0.5
Deferred tax liability as on June 30, 2015 594,000 0.5
Opening balance of liability 300,000 0.5
Deferred tax expense for the year ended June 30, 2015 294,000 0.5

(ii) A provision for unrealised profit on the unsold inventory will be made in the consolidated
accounts. The amount of provision will be calculated as:
Rs. 5,000,000 x 25 125 x 70% = Rs. 700,000 1.5
Since tax has already been recorded on such profit in the financial statements of Beej. In
the following year when the stock is sold outside the group, the provision will be released,
but the profit will not be taxed. Due to the timing difference deferred tax asset will be
calculates as: 01
33% x Rs. 700,000 = Rs. 231,000 1.5
Deferred tax assets are recognised to the extent that they are recoverable. This will be the
case if it is more likely than not that suitable tax profits will exist from which the reversal of
the timing difference giving rise to the asset can be deducted. The asset is carried forward
on this assumption. 01

Question No. 3

(a) Group Structure:

Parent's Interest 75%
Non-Controlling Interest 25%
Goodwill:
SGD Rate Rupees
Cost of Investment (50,000 x 70) 50,000 70 3,500,000
Non-Controlling Interest Proportionate Share at
Acquisition {(40,000 + 8,000) x 25%) x 70} 12,000 70 840,000
62,000 70 4,340,000 0.5+0.5
Less: Fair Value of Net Assets at acquisition (40,000 +
8,000) (48,000) 70 (3,360,000)
Goodwill at Acquisition 14,000 70 980,000 0.5+0.5
Goodwill impaired (2,000) 75 (150,000) 0.5+0.5
Foreign Exchange gain on Retranslation of Goodwill
(Balancing Figure) - 70,000 01
12,000 75 900,000 0.5+0.5

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stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 5 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
(b) Challenger Limited
Consolidated Statement of Profit or Loss and Other Comprehensive
Income for the Year ended June 30, 2015
Working
Rupees
Notes
Revenue (10,200,000 + 5,437,500 432,000) WN-3 15,205,500 01(0.5 each)

Cost of Sales (6,375,000 + 2,900,000 432,000 86,400) WN-2 (8,929,400) 01(0.25 each)
WN-3
Gross Profit 6,276,100
Admin and Selling Cost (1,836,000 + 1,450,000) WN-3 (3,286,000) 0.5
Impairment of Goodwill (2,000 x 75) (150,000) 0.5
Operating Profit 2,840,100
Financial Charges (102,000 + 217,500) WN-3 (319,500) 0.5
Foreign Exchange Loss recognized WN-1 (7,685) 0.5
Profit before tax 2,512,915
Tax (566,100 + 348,000) WN-3 (914,100) 0.5
Profit after Tax 1,598,815 0.5
Other Comprehensive Income (Items that may be
subsequently be reclassified to Profit or Loss):
Exchange Differences on Foreign Operations WN-4 327,735 0.5
Total Comprehensive Income for the Year 1,926,550 0.5
Profit for the year Attributable to:
Owners of the Parent 1,470,236 0.5
Non-Controlling Interest
(514,315 x 25%) WN-4 128,579 0.5
1,598,815
Total Comprehensive Income for the year Attributable to:
Owners of the Parent 1,733,537 0.5
Non-Controlling Interest [(514,315 x 25%) + 64,434] WN-4 193,013 0.5
1,926,550

Working Notes:
WN-1: Intercompany Sales by Challenger Limited:
Exchange
SGD Rupees
Rate
Sale as on January 1, 2015 (432,000 72) 6,000 432,000 72.00 0.5
Payment made on June 30, 2015 (432,000 75) (6,106) 432,000 70.75 0.5
Foreign exchange loss (106)
Exchange gain/ (loss) to be recognized in Consolidated Statement of Profit or Loss:
Foreign exchange loss on intercompany sale (106) 72.50 (7,685) 0.5

WN-2: Unrealized Profit in Inventory of Titans Limited: Rupees

Sales to Titans 432,000
Cost of goods sold (432,000 x 100 125) 345,600 0.5
Unrealized profit 86,400 0.5

DISCLAIMER: These suggested answ ers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 6 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
WN-3: Translation of Statement of Profit or Loss and Other Comprehensive Income of
Titan:
SGD Rate Converted in Rs.
Revenue 75,000 72.5 5,437,500 0.5
Cost of sales (40,000) 72.5 (2,900,000) 0.5
Gross profit 35,000 72.5 2,537,500
Admin and selling cost (20,000) 72.5 (1,450,000) 0.5
Operating profit 15,000 72.5 1,087,500
Financial charges (3,000) 72.5 (217,500) 0.5
Exchange loss (106) 72.5 7,685 0.5
Profit before tax 11,894 72.5 862,315
Tax (4,800) 72.5 (348,000) 0.5
Profit for the year 7,094 72.5 514,315 0.5

WN-4: Group Exchange Difference:

Foreign Non-
Exchange Group Controlling
SGD Rate
Difference Interest
(Rupees) (Rupees) (Rupees)
Net Assets:
At acquisition rate 48,000 70.0 3,360,000
At closing rate 48,000 75.0 3,600,000
240,000 180,000 60,000 0.5(0.25 each)
Profit for the year:
At average rate 7,094 72.5 514,315
At closing rate 7,094 75.0 532,050
17,735 13,301 4,434 0.5(0.25 each)
Goodwill:
At acquisition rate 14,000 70.0 980,000
At closing rate 14,000 75.0 1,050,000
70,000 70,000 0.25
327,735 263,301 64,434 0.75(0.25 each)

Question No. 4

(a) Problems of 'Management Approach': 05

IFRS-8 Operating Segments adopts Management Approach to identify reportable segment
verses Risk and Return approach of the IAS-14 (superseded). However, the Management
Approach is subject to criticism as this approach has some disadvantages as follows:
(i) This approach has left the segment identification process much dependent on the
discretion of the entity.
(ii) The financial statements of different entities may not be comparable as the internal
policies of the entities may be different from one another.
(iii) Segment determination is subjective as the directors of an entity assume responsibility for
the same.
(iv) The management may report segments which are not consistent for internal reporting and
control purposes, thus its usefulness is questionable.
(v) There is no defined measure of segment profit or loss.
(vi) Geographical information has been downgraded. It could be argued that this breaks the
link between a company and its stakeholders.
DISCLAIMER: These suggested answ ers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 7 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
(b) (i) Basic Earning Per Share (EPS): Rupees
1,250,000
Earning per share = = 2.5 0.5
500,000
Incremental Earning Per Share for 12% Convertible Bonds
Dividend on preference shares (50,000 x 100 x 12%) 600,000 0.5
Increase in number of shares (50,000 x 3) 150,000 0.5

600,000
Earning per share = = 4.00 1.0
150,000

Incremental Earning Per Share for 8% Convertible Preference Shares

Dividend on preference shares (400,000 x 50 x 8%) 1,600,000 0.5
Increase in number of shares (400,000 x 2) 800,000 0.5

1,600,000
Earning per share = = 2.00 1.0
800,000

Number of shares issued under option 100,000

Number of shares if issued at fair value (100,000 x 15 20) (75,000) 0.5
Number of shares deemed to have issued for no Cost 25,000 0.5

Diluted Earning Per Share

Profit for the year 1,250,000
Incremental income after conversion of 8% preference shares 1,600,000
Total profit after conversion of 8% preference shares 2,850,000 0.5
Weighted Average Number of Shares
Shares outstanding at the year end 500,000
Incremental shares against option 25,000 0.5
Incremental shares against conversion of preference shares 800,000
1,325,000 0.5

2,850,000
Diluted earning per share = = 2.15 1.0
1,325,000

(ii) The effect of converting the 12% convertible preference shares has resulted to increase
the EPS since the incremental EPS Rs. 4.00 is greater than the basic EPS Rs. 2.50. The
12% preference shares is not dilutive hence is excluded from diluted EPS calculation. The
8% preference shares is dilutive as calculated above. 2.0

DISCLAIMER: These suggested answ ers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 8 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
Question No. 5

(a) (i) Environmental Reporting is the disclosure of information in the published annual report 03
or elsewhere, of the effect that the operations of the business have on the natural
environment.
The sustainability report combines environmental, social and economic reporting in one
report. Environmental reports were the first step in reporting an entitys impact on its
environment. There are two main vehicles that companies use to publish information
about the ways in which they interact with the natural environment:
The published annual report (which includes the financial statements).
A separate environment report (either as a paper document or simply posted on the
company website).

(ii) Environment issues Pertinent to the Entity and Industry:

The entitys policy towards the environment and any improvements made since first 08
adopting the policy.
Whether the entity has a formal system for managing environmental risks.
The identity of the director(s) responsible for environmental issues.
The entitys perception of the risks to the environment from its operations.
The extent to which the entity would be capable of responding to a major
environmental disaster and an estimate of the full economic consequences of such a
future major disaster.
The effects of, and the entitys response to, any government legislation on
environmental matters.
Details of any significant infringement of environmental legislation or regulations.
Material environmental legal issues in which the entity is involved.
Details of any significant initiatives taken, if possible linked to amounts in financial
statements.
Details of key indicator s (if any) used by the entity to measure environmental
performance. Actual performance should be compared with targets and with
performance in prior periods.
Financial Information:
The entitys accounting policies relating to environmental costs, provisions and
contingencies.
The amount charged to profit or loss during the accounting period in respect of
expenditure to prevent or rectify damage to the environment caused by the entitys
operations. This could be analysed between expenditure that the entity was legally
obliged to incur and other expenditure.
The amount charged to profit or loss during the accounting period in respect of
expenditure to protect employees and society in general from the consequences of
damage to the environment caused by the entitys operations. Again, this could be
analysed between compulsory and voluntary expenditure. Details (including amounts)
of any provisions or contingent liabilities relating to environmental matters.
The amount of environmental expenditure capitalised during the year.
Details of fines, penalties and compensation paid during the accounting period in
respect of non-compliance with environmental regulations.

DISCLAIMER: These suggested answ ers including write-ups, tables, charts, diagrams, graphs, figures etc., are uploaded for the use of ICMA Pakistan members, students and faculty members only. No part of it can be reproduced,
stored in a retrieval system or transmitted in any physical/ or electronic form or by any other means including electronic, mechanical, photocopying, recording or otherwise without prior written permission of the ICMA Pakistan. The
suggested answers provided on and made available through the ICMA Pakistans website may only be referred, relied upon or treated as general guidelines and NOT a substitute for professional advice. The ICMA Pakistan has
provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.
 SUGGESTED SOLUTIONS/ ANSWERS FALL 2015 EXAMINATIONS 9 of 9
ADVANCED FINANCIAL ACCOUNTING AND CORPORATE REPORTING SEMESTER-5
Marks
(b) (i) Re-measurement Component:
Rs. 000
Net obligation at July 1, 2014 60,000 0.5
Net interest component expense (9.25% 60) 5,550 01
Service cost:
Current service cost 15,000 0.5
Past service cost Additional contribution 8,000 23,000 0.5
Contributions made during the Year (10,000) 0.5
Benefits paid (Rs. 5 m assets Rs. 5 m obligation) - 01
Re-measurement gain (bal fig) (3,550) 01
Net obligation as of June 30, 2015 75,000

(ii) Iceberg Limited

Statement of Financial Position
As at June 30, 2015 (Extract) Rs. 000
Long-Term Liabilities
Pension plan obligation (net) 75,000 01

Iceberg Limited
Extract from the Statement of Comprehensive Income
For the year ended on June 30, 2015 Rs. 000
Profit or Loss:
Service Cost (23,000) 0.5
Net Interest Component (5,550) 0.5
(28,550) 0.5
Other Comprehensive Income:
Net Re-measurement Component 3,550 0.5
Total Charge for the Year (25,000) 01

(iii) Explanation: 03
The discount rate has been applied to the opening balance of the net obligation
Rs. 60 m. The net interest expense is calculated @ 9.25% p.a. and charged to
profit or loss.
In this case the service cost will consist of current service cost Rs. 15 m and the
past service cost being additional contribution of Rs. 8 m as a result of the
amendment in the pension scheme. This will also be charged to profit or loss.
Any difference in return on assets in excess of the amount identified by application
of the discount rate to the fair value of plan assets. This will be part of the re-
measurement component.
Contribution paid into the plan of Rs. 10 m will reduce the net obligation.
Benefits paid of Rs. 5 m will impact the both plan assets and obligation hence will
have no impact on the net obligation.
The statement of financial position as at June 30, 2015 will show net plan
obligation (liability) amount of Rs. 75 m.

THE END

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provided suggested answers on the basis of certain assumptions for general guidance of the students and there may be other possible answers/ solutions based on different assumptions and understanding. The ICMA Pakistan and its
Council Members, Examiners or Employees shall not be liable in respect of any damages, losses, claims and expenses arising out of using contents of these suggested answers. It is clarified that the ICMA Pakistan shall not be liable
to attend or receive any comments, observations or critiques related to the suggested answers.