Question 1 (25 marks)
In general terms, fair value refers to the market price of an asset or a liability. Some people have the view that all the items in the financial statements should be prepared based on fair value.
Discuss to what extend you agree with the above opinion. Support your views with reference to The Conceptual Framework of Financial Reporting and examples.
Question 2 (35 marks)
According to the annual report of 2020 of Cathay Pacific Airway (Stock code: 0293), there is an item in the consolidated statement of profit or loss and other comprehensive income called “Impairment and related charges” which was over HK$4,000 million.
a.With reference to the appropriate accounting standards and the annual report of Cathay Pacific Airway, explain the rationale behind for reporting this item. Identify and explain the impairment indicators for each affected asset. (15 marks)
b.Discuss and explain the key financial reporting issue in assessing the amount of impairment. Assume that you are the compliance manager of Cathay Pacific Airway to review the amount of impairment prepared by the Finance Department,advise the management how you would validate the amount and what further information you would need. (20 marks)
Question 3 (40 marks)
Good Game Ltd (“GG Ltd”) is a running a computer game business in Hong Kong. Details of its non-current assets as at 31 December 2021 and 2022 were:
The office had been used by GG Ltd as back office. From 1 November 2022, the office was let to GG Ltd’s subsidiary HH Company and charged $100,000 each month. The fair value of the Office on 1 November 2022 was $70 million. Certain building management services such as day-to-day cleaning and security were provided.
Cyber game centre
The game centre covers an area of 6,000 square feet and had been operated by GG Ltd for many years. The area of the game centre could not be sold separately. The business of cyber game had not been growing as expected due to fierce market competition.
On 1 May 2022, GG Ltd decided to let the game centre to an unrelated company Pineapple Limited which sells smart phones, computer hardware and software. Meanwhile, GG Ltd retained 100 square feet for selling its own game products. The fair value of the game centre on 1 May 2022 was $60 million.
GG Ltd adopts cost model for its property, plant and equipment and intangible assets whereas fair value model for investment property. Depreciation is calculated based on 5% per annum based on cost for the office, the game centre and the equipment. It requires full-month depreciation and no depreciation is necessary for the month when the asset is derecognized.
a.参考适当的会计准则和国泰航空的年度报告，解释报告此项目的理由。 识别并解释每项受影响资产的减值指标。 （15 分）
b.讨论并解释评估减值金额时的关键财务报告问题。 假设您是国泰航空公司的合规经理，负责审查财务部门准备的减值金额，并建议管理层您将如何验证该金额以及您需要哪些进一步信息。 （20 分）
Good Game Ltd（“GG Ltd”）是一家在香港经营电脑游戏业务的公司。 截至2021年12月31日及2022年12月31日的非流动资产详情如下：
该办公室曾被GG Ltd用作后台办公室。 从2022年11月1日起，该办公室出租给GG Ltd的子公司HH Company，每月收费10万美元。 2022 年 11 月 1 日，该办公室的公允价值为 7000 万美元。 提供某些建筑管理服务，例如日常清洁和保安。
该游戏中心占地6,000平方尺，由GG Ltd经营多年。 游戏中心的面积不能单独出售。 由于市场竞争激烈，网络游戏业务并未达到预期增长。
2022 年 5 月 1 日，GG Ltd 决定将游戏中心出租给一家不相关的公司 Pineapple Limited，该公司销售智能手机、计算机硬件和软件。 同时，GG Ltd保留100平方英尺用于销售自己的游戏产品。 该游戏中心于 2022 年 5 月 1 日的公允价值为 6,000 万美元。
GG Ltd的物业、厂房及设备和无形资产采用成本模式，投资性房地产采用公允价值模式。 折旧根据办公室、游戏中心和设备的成本每年按5%计算。 要求全月计提折旧，资产终止确认当月无需计提折旧。
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