Presentation is loading. Please wait.

Presentation is loading. Please wait.

Sunderland Fields Forever Ltd. Primary Indicators Prepare a consolidated statement of financial position at July 1, 2012 Prepare cashflow projections.

Similar presentations


Presentation on theme: "Sunderland Fields Forever Ltd. Primary Indicators Prepare a consolidated statement of financial position at July 1, 2012 Prepare cashflow projections."— Presentation transcript:

1 Sunderland Fields Forever Ltd

2 Primary Indicators Prepare a consolidated statement of financial position at July 1, 2012 Prepare cashflow projections for the next 18 months for the consolidated group Review the draft audit plan with a view to identifying how we can reduce the fee Will the audit cover the requirements of the ‘government audit’ for the grant and if not, what additional work is required

3 Primary Indicators What are the tax implications of the change in structure from a partnership to a company and what are the tax implications of the acquisition of BFI Have we correctly accounted for all of the accounting transactions? Evaluate the credit lines that have been made available

4 Cashflow forecast This is more important than the other PI’s and therefore ranked first See suggested solution

5 Prepare Group SOFP Correct the accounting errors first – Research and development (asset should be €45,000 – Government grants – Contingent liability – grant issue – Revenue recognition (Foodmart)

6 Business Combination Fair value of consideration Replace the investment with net assets and goodwill – show the journal Fair value of net assets at business combination date – Development costs – Accounts receivable – Foodmart – Land – 300,000

7 Business combination – Plants – fair value needed but we’ll use book value for the time being – Farm and research equipment - €70,000 – Hardware software and technology – same as plants; fair value needed but for the time being we’ll use book values – BFI development costs – project mothballed after acquisition; fair value is nil – Patents – same as plants; far value needed but for the time being we’ll use book values

8 Business combination Accounts payable – discount future cashflow to PV; assume book value equals fair value Notes payable – discount future cashflows to present value; interest charged is 3% but prime interest rate is 5% (300,000*1.03/1.05) BFI president severance -100,000 Deferred tax – we need the tax base of the net assets so for the moment we’ll use book value of €60,000

9 Goodwill Consideration - €650,000 Net assets at acquisition date; – Cash 6,000 – A/R100,000 – Land300,000 – Plants 40,000 – Farm equipment 70,000 – Info system 50,000 – Patents 60,000 – Accounts payable (17,000) – Notes payable (294,000) – Termination payment (100,000) – Deferred Tax(60,000)

10 Review the draft audit plan There are opportunities to achieve reductions in the audit fee; We could document the system and then they can simply review and test The financial statements of BFI don’t need to be audited as a stand alone entity – R&W are auditing the group financial statements The president of BFI is staying for 8 months as a consultant so he will be on hand to answer any queries

11 Review the draft audit plan We’ll already have fair valued the net assets of BFI so there’s hardly a need for another specialist to value plant etc… - they can rely on our valuations obtained from an independent third party My cashflow projections can be used to confirm that goodwill is not impaired We can assist in sending debtor circs etc…. Perhaps they can reduce some of the substantive testing in certain areas and replace with control tests

12 Scope of the audit work on government grants The audit is of our compliance with the terms of the biosearch grant programme The financial statement audit is probably not going to meet the needs of the government in this regard The auditors will consider compliance as pat of their tests but only in the context of the overall financial statements We could ask the government if they’d accept the assurances from our auditors

13 Scope of the audit work on government grants We should be prepared to ask R&W to perform a ‘limited scope’ audit engagement The report would be issued to the government and would document the specific procedures performed Procedures required will probably include; – Review of the programme and it’s requirements – Verify what costs are eligible (gross/net/director salary/BFI costs etc..) – Source records will have to be examined to ensure compliance including invoices, vouchers, bank debits etc.. – R&W will be required to examine expenditures back to 2008

14 Tax issues See the solution for a detailed list of the different tax issues

15 Consider the credit line optiions See the solution for a detailed examination of the pro’s and con’s of each


Download ppt "Sunderland Fields Forever Ltd. Primary Indicators Prepare a consolidated statement of financial position at July 1, 2012 Prepare cashflow projections."

Similar presentations


Ads by Google