I have been advised by the scheme actuary that at 31 May 2010 the fair value of the pension assets
was £2.08 million and the present value of pension obligations was £2.75 million at that date.
We conducted an impairment review of goodwill at the end of our accounting period and estimated
that goodwill arising on the acquisition of Dipper was worth £1.1 million. I have therefore debited
£400,000 to other comprehensive income. No other adjustments were required to goodwill.
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Exhibit 2: Draft consolidated statement of comprehensive income for year ended 31 May 2010
Income statement
2010
2009
£'000
£'000
Revenue
14,725
13,330
Cost of sales
(7,450)
(7,560)
Gross profit
7,275
5,770
Operating costs
(3,296)
(3,007)
Other operating income
150
-
Operating profit
4,129
2,763
Investment income
39
32
Finance costs
(452)
(468)
Profit before tax
3,716
2,327
Income tax expense
(1,003)
(628)
Profit after tax
2,713
1,699
Other comprehensive income
Goodwill impairment
(400)
-
Total comprehensive income for the year
2,313
1,699
NOTE:
All calculations should be to the nearest £’000
© The Institute of Chartered Accountants in England and Wales 2010
5 of 16
2.
You are Laura Craft and you work in the tax department of TTR chartered accountants. TTR
provides tax advisory services to Pepper Art plc.
Pepper Art is a company based in Manchester which designs and builds computer games. Pepper
Art bought 75% of the ordinary shares in Spaceway Ltd on 1 August 2009. Prior to this date, Pepper
Art did not have any subsidiaries. Pepper Art has a 30 June year end.
Spaceway is a non-trading company which owns and manages a number of commercial properties.
Spaceway’s corporation tax return has been submitted by its previous tax adviser. It shows a tax
loss (ie surplus management expenses) of £240,000 for the year to 31 May 2010.
Spaceway owns 100% of the shares in DeliverUK Ltd, a trading company which operates as a
delivery company. In January 2010, DeliverUK invested £900,000 in new fixed plant and machinery
to be used in the warehouse and has achieved a break-even position for tax purposes for the year
ended 31 May 2010.
TTR dealt with the direct tax compliance work for Pepper Art up to and including the year ended
30 June 2009. However, for later periods the compliance work for all group companies will be
handled by Pepper Art’s internal tax department. Jim Jones, the financial controller, is also the
acting head of the internal tax department of Pepper Art.
TTR’s engagement letter with PepperArt was revised to reflect the client’s responsibilities to file all
returns on behalf of the group and to communicate directly with HMRC. Under this revised
engagement letter, TTR has agreed to review, and adjust if necessary, Pepper Art’s corporation tax
return and those of Spaceway and DeliverUK, but it has no authority to communicate with HMRC on
behalf of the clients.
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- Winter '09
- NEUGEBOREN
- Balance Sheet, Income Statement, Wales, The Institute of Chartered Accountants
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