Other Reports and Emerging Issues in Financial Reporting

August 2025

3 Questions

Question 3c

Explain THREE difficulties that a reporting entity might face in recognising and measuring the financial effects of environmental matters.

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Question 2a

You are a newly qualified accountant in your second year of employment in a medium-sized company. Your immediate supervisor is on sick leave and you are due for study leave. You have been informed by the Finance Director that you must complete a task which should have been completed by your immediate supervisor before you proceed on leave. The deadline for completion of the task appears unrealistic given the complexity of the task.

You feel that you are not sufficiently experienced to undertake the task alone and for this reason would need additional support and supervision to complete it to the required standard. The Finance Director appears unable or unwilling to offer the necessary support on this regard. Should you try to complete the task within the proposed time frame but fail to meet the expected quality standards, you could face grave consequences on your return from study leave.

You feel intimidated by the Finance Director and also feel pressured to do what you can for your employer.

Required:

Using the IFAC Code of Ethics as a guide, explain THREE ethical principles that would apply in the above scenario.

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Question 3a

IFRS 17 (Insurance Contracts), which has an effective date of 1 January 2023, establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts.

Required:

Explain any FOUR exemptions from the requirements of IFRS 17.

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April 2025

1 Questions

Question 1a

The Conceptual Framework for Financial Reporting states that financial information is only useful if it is relevant and a faithful representation of an entity’s transactions.

Required:

With reference to the above statement, discuss the TWO fundamental qualitative characteristics of useful financial information mentioned, citing how they are applied while preparing financial reports.

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December 2024

3 Questions

Question 1e

The choice of measurement basis should reflect the characteristics of the element and reduce measurement uncertainty. Measurement of insurance contracts affects the amount presented in the income statement and statement of financial position.

Required:

Evaluate THREE methods of measuring insurance contracts in the initial and subsequent measurements.

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Question 1d

to an understanding of the changes in financial position and performance of the entity since the end of the last annual reporting period.

Required:

Describe FIVE disclosures required as per interim reporting.

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Question 5b

Kristal Limited was established on 1 January 2023. The company prepares its financial statements based on historical cost basis as follows:

Opening statement of financial position

As at 1 January 2023:

Non-current assets:	Sh.“000”
Land at cost	105,000
Plant and equipment at cost	108,000
	213,000
Current assets:
Inventory	87,000
Cash at bank	60,000
Total assets	360,000
Equity and liabilities:
Ordinary share capital (Sh.10 par value)	270,000
Non-current liabilities:
Bank loan	90,000
Total equity and liabilities	360,000

Statement of profit or loss

For the year ended 31 December 2023:

	Sh.“000”	Sh.“000”
Revenue		175,000
Cost of sales:
Opening inventory	87,000
Add purchases	131,250
Goods available for sale	218,250
Less closing inventory	(161,875)	(56,375)
		118,625
Expenses:
Staff salaries	21,875
Depreciation	17,010
Other expenses	26,250	(65,135)
		53,490
Income tax expenses		(12,250)
Profit for the year		41,240

Additional information:

1.	On 1 April 2023, Kristal Limited purchased a new motor vehicle at a cost of Sh.5.4 million and paid in cash.
2.	On 30 September 2023, the company issued new ordinary shares at par value with cash proceeds being Sh.18 million.
3.	Staff salaries and other expenses were paid for in cash during the year ended 31 December 2023.
4.	During the year ended 31 December 2023, cash receipts from customers amounted to Sh.130 million while suppliers were paid Sh.100 million.
5.	Depreciation is provided as follows: Plant and equipment 15% per annum, reducing balance basis. Motor vehicles 20% per annum, straight line basis.
6.	The inventory held on 31 December 2023 was purchased when the retail price index averaged 185.
7.	The relevant general retail price indices (RPI) were as follows: Date RPI 1 January 2023 120 1 April 2023 135 30 June 2023 175 30 September 2023 180 31 December 2023 220
8.	Assume that incomes and expenses accrued evenly throughout the year and that all sales and purchases were made on credit basis during the year ended 31 December 2023.

Required:

(i) Inflation-adjusted statement of profit or loss for the year ended 31 December 2023.

(ii) Inflation-adjusted statement of financial position as at 31 December 2023.

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August 2024

3 Questions

Question 5b

International Accounting Standard (IAS) 29 “Financial reporting in hyperinflationary economies”, identifies characteristics of hyperinflation in an economic environment.

Required:

Describe FIVE characteristics of the economic environment of a country which indicate the existence of hyperinflation.

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Question 5c

International Accounting Standard (IAS) 34 “Interim Financial reporting” prescribes the events and transactions for which disclosures are required if they are significant.

Required:

Highlight FIVE such events and transactions.

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Question 5d

Integrated Reporting helps companies shift the focus of their reporting from historical financial performance to longer-term value creation.

Required:

In light of the above statement, discuss SIX contents of an integrated report.

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April 2024

1 Questions

Question 3b

Integrated reporting advances the proposition that sustainability reporting and financial reporting are inherently linked and thus would benefit from merging.

Required:

Explain the THREE main aspects of an integrated report.

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December 2023

2 Questions

Question 4a

The annual report has evolved from providing information on an entity’s financial performance and position to including wider aspects of performance such as management commentaries, corporate social responsibility reports, corporate governance reports as well as sustainability reporting.

Required:

(i) Explain the term “sustainability reporting” as advanced by the Global Reporting Initiative (GRI).

(ii) Summarise FOUR limitations of financial reporting in the context of reporting the social and environmental impacts of corporate activity to users of financial statements.

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Question 3b

The purpose of the statement of profit or loss and other comprehensive incomes is to show an entity’s financial performance in a way that is useful to a wide range of users. However, the accounting treatment and guidance with respect to other comprehensive incomes has been criticised recently.

Required:

Discuss FOUR criticisms that have been raised in respect to the accounting treatment of other comprehensive incomes.

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August 2023

3 Questions

Question 2c

Explain SIX reasons why it was important for the International Accounting Standards Board (IASB) to develop a conceptual framework for financial reporting.

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Question 2b

Citing FOUR relevant points, explain the extent to which integrated reporting (IR) addresses the limitations of traditional financial reporting.

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Question 2a

In the context of International Accounting Standard (IAS) 24 “Related Party Disclosures”, explain THREE reasons why it is important for an entity to disclose related party transactions.

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April 2023

2 Questions

Question 4c

The sole mandate and responsibility for issuing International Financial Reporting Standards (IFRSs) lies with the International Accounting Standards Board IASB (The Board) which in conjunction with other regulatory bodies such as IFRS Foundation, the IFRS Advisory Council and IFRIC ensure the development of global accounting standards of high quality.

Required:

In view of the above statement, briefly describe the procedure for the development of an IFRS standard.

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Question 4a

The objective of International Accounting Standard (IAS) 29 “Financial Reporting in Hyperinflationary Economies” is to establish specific standards for entities reporting in the currency of a hyperinflationary economy so that the financial information provided is meaningful.

Required:

Discuss THREE limitations of historical cost accounting when used for assessing entity performance during periods of inflation.

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December 2022

2 Questions

Question 2d

Discuss the nature and contents of Management Commentary in the context of enhancing the usefulness of financial information to the users of financial statements.

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Question 2a

Explain TWO challenges that a business entity might face while preparing segmental reports.

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August 2022

1 Questions

Question 3c

The International Accounting Standards Board (IASB), has launched a project to improve communication in financial statements, with a particular emphasis on financial performance. Its proposals were outlined in the Exposure Draft “General Presentation and Disclosure”.

Required:

With reference to the Exposure Draft “General Presentation and Disclosure”, evaluate the Board’s proposals regarding disaggregating financial information in more useful ways.

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April 2022

2 Questions

Question 5d

Integrated Reporting (IR) is founded on integrated thinking that results in a periodic integrated report by an organisation about value creation over time and related communications regarding aspects of value creation.

Required:

In view of the above statement, evaluate the fundamental elements of Integrated Reporting (IR).

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Question 5c

The International Accounting Standards Board (IASB) has issued a practice statement called "Making Materiality Judgements". This provides non-mandatory guidance that may help preparers of financial statements when applying IFRS standards.

Required:

In the light of the above statement, explain four contents of the practice statement "Making Materiality Judgements".

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December 2021

1 Questions

Question 5a

Management commentary provides users of financial statements with more context through which to interpret the financial position, financial performance and cash flows of an entity.

Required:

In view of the above statement, describe four elements of management commentary in a set of financial statements of an entity.

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September 2021

2 Questions

Question 5a

Explain four limitations of the IASB's Conceptual Framework for Financial Reporting.

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Question 2b

Tandaza Ltd. is a conglomerate whose equity shares are quoted on the National Securities Exchange. The group manufactures, distributes and retails food products. The group also operates a hotel chain for purposes of diversifying its revenues. The group's Financial Controller wishes to know if IFRS 8 (Operating Segments) applies to the entity and if so, what segments should be reported on. He informs you that the operating results of each of the divisions presented below are internally reported separately to the chief operating decision maker.

The following information is available:

Business	Revenue (External)	Revenue (Internal)	Profit (loss)	Assets
	Sh."million"	Sh."million"	Sh."million"	Sh."million"
Manufacturing	460	250	32	1,450
Distribution	5	42	3	250
Retailing	750	15	75	375
Hotel chain	150	3	(14)	100

Required:

By applying the requirements of IFRS 8 to the above information, explain which of the above businesses of Tandaza Ltd. are reportable segments.

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May 2021

2 Questions

Question 5a

The IASB's Conceptual Framework for Financial Reporting sets out the concepts that underlie the preparation and presentation of financial statements for external users.

Required:

Discuss the aims of the Conceptual Framework clearly stating how a conflict between it and a particular accounting standard could be resolved.

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Question 5b

Explain how the following might address the limitations of financial reporting and improve the usefulness of the annual report:

(i) Sustainability reporting.

(ii) Integrated reporting.

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November 2020

2 Questions

Question 1d

Discuss two benefits that an organisation might derive from providing social and environmental reports.

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Question 1b

Professional accountants are expected to follow the guidance contained in the fundamental principles in the ethical code in all their courses of action. The ethical code sets out five fundamental principles of ethics comprising: Integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, the spirit of which must be complied with.

Required:

With reference to the ethical code, discuss three circumstances that may potentially threaten the professional accountant's compliance with the fundamental principles of ethics.

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November 2019

4 Questions

Question 3a

Explain two factors which encourage reporting entities to disclose social and environmental information.

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Question 1c

Integrated reporting (IR) is a concept that urges reporting entities to focus on the value creators within their business with a focus on the longer-term success of a business rather than the short-term focus on results.

Required:

Explain three objectives of integrated reporting (IR).

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Question 1b

Many countries have adopted international financial reporting standards (IFRSs) issued by the International Accounting Standards Board (IASB). However, due to local requirements and other challenges, some countries still prefer to use their own local standards.

Required:

(i) Summarise five reasons why reporting entities would prefer to adopt IFRSs.

(ii) Identify five challenges that reporting entities are likely to encounter while implementing IFRSs.

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Question 1a

International Financial Reporting Standards (IFRSs) are developed by the International Accounting Standards Board (IASB) through a formal system of due process and broad international consultation involving accountants, financial analysts, financial statements users and regulatory bodies from around the world.

The overall agenda of the IASB will initially be set by discussion with the IFRS Advisory Council.

Required:

Explain the steps that are followed in the process of setting International Financial Reporting Standards.

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May 2019

3 Questions

Question 1c

Sustainability reporting is one of the current reporting requirements for voluntary disclosure which has become the norm for quoted companies.

Required:

Briefly describe three main objectives of sustainability reporting.

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Question 1b

International Financial Reporting Standards (IFRSs) are primarily designed for public limited companies. It has been argued that the same IFRSs should be used by all entities or alternatively, a different body of standards should apply to small and medium-sized entities (SMEs).

Required:

Discuss any two reasons why there is need to develop a set of IFRSs specifically for SMEs.

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Question 1a

A significant number of entities and countries have adopted International Financial Reporting Standards (IFRSs) as their basis for financial reporting. While the advantages of a common set of global reporting standards are recognised, there are a number of implementation challenges at the international and national levels if the objective of an improved and harmonised reporting system is to be achieved.

Required:

Discuss three implementation challenges that are faced by the International Accounting Standards Board (IASB) in its push towards a successful move to IFRSs.

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November 2018

2 Questions

Question 1a

Highlight four fimitations of financial reporting in the context of reporting on the social and environmental impacts of corporate activity.

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Question 3a

In the context of the IFRS for Small and Medium-sized Entities (SMEs), identify any four areas where the SMEs standard differs from the IFRSs and IASs adopted by public limited entities.

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May 2018

3 Questions

Question 1d

Under certain circumstances, non compliance with the detailed provisions of an accounting standard might be justified.

Required:

Highlight four disclosures that an entity that has elected not to comply with an accounting standard must make in order to explain the circumstances of the non compliance.

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Question 1c

The IASB framework for the preparation and presentation of financial statements sets out the concepts that underlie the development of accounting standards.

Required:

Discuss two challenges that might be encountered in the practical application of the above framework.

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Question 1a

The Global Reporting Initiative (GRI) has a mission to develop glòbal sustainability reporting guidelines for voluntary use by organisations reporting on the three linked elements of sustainability namely; the economic, environmental and social dimensions of their activities, products and services:

Required:

Describe four social indicators that might be reported under the social dimension.

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December 2017

4 Questions

Question 5a

Highlight six examples of unethical behaviour by the management of business entities which professional accountants should report about.

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Question 1a

Explain three benefits of integrated reporting to both an organisation and the users of financial statements.

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Question 2b

On 1 January 2014, R Ltd. promised to pay its 200 employees a bonus in cash that would be based on how the company's share performed on the securities exchange. The bonus was to be paid on 31 December 2016 as long as the market price of the company's share was Sh.55 and above and the employee was still working for the company. As at 1 January 2014, the market price of the share was Sh.50 and the par value of one share was Sh.10. The bonus was to be the equivalent of 100 shares.

The following information in relation to the three years was availed:

Year ended	Number of employees leaving	Market price of a share (Sh.)
31 December 2014	10	55
31 December 2015	55	58
31 December 2016	55	60

All the employees who were in employment as at 31 December 2016 were paid the bonus.

Required:

Show how the bonus would be accounted for and reported over the three-year period ended 31 December 2016.

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Question 3a

Citing three reasons, explain the rationale behind the inclusion of an environmental report in a reporting entity's annual report.

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May 2017

3 Questions

Question 5c

To maintain or create a good corporate image to the society within which a company operates, there is need to take responsibility for any actual or potential social impact caused by the company's activities. This should be reported through a social responsibility report.

Required:

Comparing conventional financial reporting with social responsibility reporting, explain two practical challenges peculiar to social responsibility reporting.

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Question 5a

Summarise three main reasons for developing a conceptual framework for the preparation and presentation of financial statements.

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Question 4a

The management commentary (management discussion and analysis) provides users with integrated information that provides a context for the related financial statements.

Required:

Discuss three contents of a management commentary in an entity's financial statements.

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November 2016

3 Questions

Question 4c

As part of its staff motivation programme, Better Ltd. decided to grant each of its 600 employees 100 options to purchase the company's shares effective from 1 April 2016. These options were conditional upon one still being in employment as at 31 March 2020.

The following additional details were provided with respect to the scheme:

Year ended	Number of employees expected to terminate or leave employment	Fair value of each option Sh.
31 March 2017	25	20
31 March 2018	15	16
31 March 2019	10	16
31 March 2020	10	12

The fair value of the option was Sh.25 as at 1 April 2016. The exercise price of the option will be Sh.12 and the par value of the company's share is Sh.6. The average market price of the share over the four years to 31 March 2020 is expected to be Sh.25.

Required:

Show how Better Ltd. should report the transactions of the above scheme as per the requirements of IFRS 2 (Sharebased Payment) over the four years ending 31 March 2020. Assume that all the eligible employees will exercise their rights on 31 March 2020.

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Question 5b

(i) Define the term "social responsibility accounting".

(ii) Explain three advantages of social responsibility accounting.

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Question 5a

Functions of International Financial Reporting Interpretations Committee (IFRIC)

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May 2016

3 Questions

Question 5a

Discuss the rationale for a regulatory framework in financial reporting.

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Question 5b

Explain how the International Accounting Standards Board (IASB) approaches the task of producing a standard, with particular reference to the development and publication of an exposure draft.

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Question 5c

In the context of recent trends in financial accounting and reporting, explain why "social accounting and reporting" has gained prominence.

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Other Reports and Emerging Issues in Financial Reporting

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