Critically discuss SIX causes of differences in accounting practices used in different countries. You must discuss, with relevant examples, how a particular factor contributes to or leads to a particular difference in accounting practices.

• This assignment is worth 100%.
• All questions are compulsory.
• The maximum word limit is 3000 words excluding tables and references.
• It must be completed individually.
• You are expected to present all your workings.
• You must use Harvard Referencing System to acknowledge the work you benefitted from and to evidence your wider reading around the relevant topics.
• Creativity in content and presentation will be rewarded. This is particularly relevant for questions 1,2 and 3 where tables, graphs and diagrams would be very useful.
Question 1
Segment disclosures are widely regarded as some of the most useful disclosures in financial reports because of the extent to which they disaggregate financial information into meaningful and often revealing groups.
(a) Discuss the objectives of segmental information and the requirements for the disclosure of segmental information in annual reports.
(5 marks)
(b) Obtain the most recent annual reports for TWO FTSE 100 companies of your choice (NOTE: you need to make sure the companies chosen have more than one operational segment and thus have meaningful segment notes for analysis). Examine the segmental disclosures provided in the segment notes of the annual reports by the selected two companies and comment on the following:
i. Based on extracts from the segment notes,
• how much and what segmental information is provided in the segment notes?
• discuss whether the companies are in compliance with the relevant accounting standard, and
• discuss the similarities and differences between their disclosure practices.
ii. Comment on whether the information is useful and sufficient to allow shareholders to make informed investment decisions.
iii. Discuss the implications of your analysis and findings, such as policy implications.
(25 marks)
Question 2
Critically discuss SIX causes of differences in accounting practices used in different countries.
You must discuss, with relevant examples, how a particular factor contributes to or leads to a particular difference in accounting practices.
(15 marks)
Question 3
Multinational enterprises design International Transfer Pricing (ITP) systems to achieve their global objectives.
Discuss both internal and external factors affecting the ITP systems.
(15 marks)
Question 4
On 1 January 2015, Star Ltd acquired 75% of the ordinary shares of Shimmer Ltd in Hong Kong to form Star-Shimmer Group (SSG). At that date the balance on the retained earnings of Shimmer Ltd was Hong Kong Dollars (HK$) 1,700,000. The non-controlling interest in Shimmer was measured as the proportionate share of the net assets of the subsidiary. No shares have been issued by Shimmer since acquisition. The summarised income statements and balance sheets of Star Ltd and Shimmer Ltd as at 31 December 2019 were as follows:
Income Statement for the year ended 31 December 2019
Star Shimmer
Sales 37,422,000 9,504,000
Opening inventories 4,158,000 1,259,280
Purchases 20,790,000 5,346,000
Closing inventories 1,485,000 1,021,680
Cost of sales 23,463,000 5,583,600
Gross profit 13,959,000 3,920,400
Depreciation 2,376,000 712,800
Other expenses 629,640 237,600
Interest paid 415,800 118,800
Total expenses 3,421,440 1,069,200
Profit before tax 10,537,560 2,851,200
Taxation 2,673,000 712,800
Profit after tax 7,864,560 2,138,400
Balance Sheet as on 31 December 2019
Star Shimmer
Non-current assets 8,316,000 5,464,800
Investment in Shimmer Ltd 267300 –
Current assets:
Inventories 1,485,000 1,021,680
Trade receivables 3,593,700 1,306,800
Shimmer Ltd 85,950 –
Cash 653,400 47,520
Total current assets 5,818,050 2,376,000
Total Assets 14,401,350 7,840,800
Current liabilities:
Trade payables 3,564,000 1,069,200
Star Ltd 880,988
Taxation 1,188,000 831,600
Total current liabilities 4,752,000 2,781,788
Debentures 2,970,000 950,400
Total assets less liabilities 6,679,350 4,108,612
Capital and reserves
Share capital 2,922,300 359,750
Retained earnings 3,757,050 3,748,862
6,679,350 4,108,612
The following further information is available:
(i) An amount of HK$ 200,000 was written off goodwill as an impairment charge in the current year and HK$ 140,000 in the previous year.
(ii) On 23 March 2019, Star Ltd sold goods £2,250,000 to Shimmer Ltd, making a profit of 20% on cost. At the year end, one third of these raw materials were still in the inventory of Shimmer Ltd, and the inter-company transactions have not been eliminated from the financial statements. The goods were recorded by Shimmer at the exchange rate ruling on 23 March 2019.
(iii) Exchange rates were as follows:
At 1 January 2015 GB£ 1= HK$ 15.52
Average for the year ending 31 December 2019 GB£ 1= HK$ 10.05
At 31 December 2018/ 1 January 2019 GB£ 1= HK$ 9.92
At 31 December 2019 GB£ 1= HK$ 10.25
(a) If the functional currency of Shimmer Ltd is HK$, which translation method is applicable to translate Shimmer’s financial statements to GB£ and why?
(b) Showing clearly all your workings:
(i) Calculate the goodwill arising from the acquisition of Shimmer Ltd in GB£.
(ii) Compute SSG’s retained earnings and non-controlling interest as at 31 December 2019.
(iii) Prepare SSG’s Consolidated Income Statement for the year ended 31 December 2019.
(iv) Prepare SSG’s Consolidated Balance Sheet for the year ended 31 December 2019.
(20 marks)
Question 5
Unique Plc has an issued share capital at 1 January 2019 of 1,000,000 ordinary shares of 20p each and 50,000 convertible preference shares of £1 each. The preference shares are classified as equity receiving a dividend of £2.50 per share. These shares are convertible in 2025 on the basis of one ordinary share for one preference share.
There is also loan capital of 10% convertible loan of £250,000. The loan is convertible in 2028 on the basis of 500 ordinary shares for each £1,000 of loan, and the tax rate is 40%.
Earnings after tax for the year ended 31 December 2019 are £5,000,000.
(a) Calculate the diluted EPS for 2019.
(b) Calculate the diluted EPS assuming that the convertible preference shares were receiving a dividend of £6 per share instead of £2.50.
(10 marks)
Question 6
Services Ltd incurred research and development costs of $10 million on a project to develop product A in 2018. The research phase can be clearly distinguished from the development phase of the project. Total costs in the research phase are $6 million, and in the development phase total costs are $4 million. All of the IAS 38 criteria have been met for recognition of the development costs as an asset. Product A was brought to market in Year 2019 and is expected to be marketable for five years. Total sales of Product A are estimated at more than $100 million.
(a) Explain the research and development expenditure related regulations of IAS and US GAAP.
(b) Determine the impact research and development costs have on Services Ltd in 2018 and 2019 income under (1) IFRS and (2) U.S. GAAP.
(c) Summarize the difference in income, total assets, and total shareholders’ equity related to Product A over its five-year life under the two different sets of accounting rules.
(10 marks)

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