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Academic Year 2020/21
INTERNATIONA L FINANCIAL REPORTING
BF2269 Coursework Portf olio
You are required to provide a coursework portfolio (submitted as one
document) which brings together 2 separate task elements as follows:
Word Limit Guide
Discuss and apply IFRS to a series of
transactions and prepare a set of f inancial
Appraise the perf ormance and position of an
entity in comparison to the sector average.
The word count split between tasks 1 & 2 is a guide only.
Word limits can be f lexed by +10%
Module Learning Outcomes Assessed:
1. Apply the Conceptual Framework f or Financial Reporting and International
Financial Reporting Standards (IFRS) to enable an accurate assessment of
accounting issues and be able to of f er a solution, with justif ication to f inancial
reporting issues. Be able to articulate these complex issues in varied f ormats
including those commonly used in prof essional communication - letters, emails
2. Develop the ability to use prof essional judgement on subjective areas of the
f inancial statements in readiness f or placement and f inal year studies.
3. Critically assess the impact of judgement on f inancial statements and other repo rt s
taking into consideration the dif f erent perspectives of the users of the f inancial
statements and their inf ormation needs.
4. Prepare f inancial statements.
Word Count: See detail per task. Overall limit of 2,000 words on the narrative
requirements (all calculations and f inancial statements do not count towards word count).
Font Style: Arial or Calibri
Font Size: 11 or 12
Line Spacing: 1.5 lines
Submission Date & Time:
Monday 11 January 2021 (12:00)
Assessment Weighting for the Module:
The coursework assignment makes up 40% of the overall module mark f or BF2269.
For each task you will be required to provide answers (and assumptions and workings
where applicable) to the questions set. Please ref er to the requirements f or guidance on
the calculations and written analysis that is required f or each task. In particular
requirement 2 will require f eedback (via a report) to the Finance Director on company
perf ormance and position. As such, you are required to produce a prof essional document,
incorporating clear business English and an appropriate f ormat is required.
No essential reading for this coursework task is required.
The following trial balance has been extracted from the records of Flora Plc
(Flora) as at 31 May 2020:
Trade and other receivables
Trade and other payables
Cost of sales
Property, plant and equipment (note (i))
Ordinary share capital (£1)
8% Loan notes
6% Bank loan
The following information is also relevant:
Flora received a £10 million 6% loan from a bank on 1 December
2019. The funds which were used towards the construction of a
new property have been correctly capitalised as part of the property,
plant & equipment above. Six months interest has been paid an d is
included within finance costs in the trial balance. Construction of th e
property was incomplete at the financial year end and is expected to
be completed in September 2020.
Flora decided to revalue an item of property on 1 June 2019 for the
first time. The carrying amount of the asset at this date was £4.3
million (included in property, plant and equipment above). The
directors accepted the report of an independent surveyor who
valued the property at £5.1 million on that date. The remaining life
of this property is 20 years at the date of the revaluation. It is
Flora’s policy to make an annual transfer to retained profits in
respect of the excess depreciation arising from the revaluation
surplus. No adjustments have been made relating to this property
during the year.
Apart from the notes above, all other assets have been correctly
accounted for and included in property, plant & equipment in the trial
balance. No further adjustments are required in respect of these.
Development costs of £9 million were incurred evenly between 1
June 2019 and 28 February 2020 (on a pro-rata basis) and have
been included in cost of sales. IAS 38 development criteria were met
on 1 September 2019. The project was completed and the product
was launched on 28 February 2020. The product is expected to
generate revenue over the next five years.
Flora sold and delivered goods to a major customer on 1 December
2019. Under the terms of the agreement, Flora will receive payment
of £3 million on 30 November 2020. Flora has recorded £3 million in
revenue and trade receivables at 31 May 2020. The costs of this
sale have been accounted for correctly in the financial statements
for the year ended 31 May 2020. Market rates of interest available to
this particular customer are 7%.
An inventory count was performed at the year-end and has been
included in the trial balance at cost. Included in this count is some
inventory that was damaged. This inventory originally cost
£800,000. Following the damage it is expected that the inventory
will be sold for £900,000 but will need to be repaired before it can be
sold at a cost of £230,000.
On 16 March 2020 a legal claim was made against Flora by an exemployee. Flora’s lawyers believe that there is a 75% chance that
Flora will lose the case and pay damages of £95,000. They also
believe that there is a 15% chance that the payout will be £120,000
and a 10% chance that the case will be dismissed. The case is due
to go to court in September 2020.
A tax estimate of £1.8 million for the year ended 31 May 2020 is
(a) Justify and explain the appropriate accounting treatment with respect
to the matters in notes (i) to (v) in accordance with relevant
International Financial Reporting Standards (IFRS) and the IFRS
Conceptual Framework for Financial Reporting.
(b) Using the above trial balance and your accounting treatment outlined in
part (a) prepare a statement of profit or loss and other comprehensive
income, a statement of financial position and a statement of changes in
equity for Flora for the year ended 31 May 2020.
(Provide workings for all calculations and present results to the nearest
Flora wants to expand and diversify its activities and is considering the
acquisition of another entity to help do this. Following extensive research,
Flora has identified two potential acquisition targets Nevea and Autz. B oth
companies operate in the same industry and have the same financial year
end. Nevea primarily sells to retail stores whereas Autz sells to internet
retailers. Both Nevea and Autz can be purchased at approximately the
Extracts of the financial statements of Nevea and Autz for the year ended
31 May 2020 are shown below:
Extract from the statements of profit or loss
Cost of sales
Profit from operations
Profit before tax
Extract from the statements of financial position
Property, plant & equipment
Cash at bank
Non-current liabilities (loan)
The following information is relevant:
(i) Nevea has an established, loyal customer base whereas Autz sells to
numerous customers on a less regular basis.
(ii) Nevea accounts for its property using the cost model per IAS 16
Property, Plant & Equipment, whereas Autz uses the revaluation
(iii) Nevea disposed of property during the year resulting in a loss on
disposal of £1.2 million (included in the profit or loss extracts above).
(iv) Included within Autz’s non -current liabilities is a £3 million loan note
that is due to be repaid in July 2021.
(a) Calculate the following ratios for both companies:
Return on capital employed
Gross profit margin
Operating profit margin
Inventory turnover period (days)
Receivables collection period (days)
(b) Prepare a report for the directors of Flora that analyses the
performance and position of Nevea & Autz using the ratios calculated
in part (a) and the information available in the scenario.
You should reach a conclusion and make a recommendation to Flora
which company it should invest in.
(c) Using relevant research identify and explain the potential limitation s in
using ratio analysis for comparison purposes between entities.
(TOTAL: 50 marks)