Question One

$($a$)$ The IASB Conceptual Framework provides the underlying rules, conventions and definitions

that underpin the preparation of all financial statements prepared under International Financial

Reporting Standards $($IFRS$)$ and;

i$)$ Ensures standards developed within a conceptual framework

ii$)$ Provide guidance on areas where no standard exists

iii$)$ Aids process to improve existing standards

iv$)$ Ensures financial statements contain information that is useful to users

v$)$ Helps prevent creative accounting

However, the Conceptual Framework has several notable omissions. For example, it does not

include an explicit reference to substance over form. The International Accounting Standards

Board has also removed prudence from its framework and has attracted criticism from the

academic and practitioner communities for doing so$.$

Required:

$($i$)$ Discuss the features of the concept of prudence and the arguments for and against its reintroduction into the Conceptual Framework. $(6$ marks$)$

$($ii$)$ Explain the important of guidance in the Conceptual Framework as it relates to the role

of fundamental and enhancing qualitative characteristics of financial reporting

information in financial reporting. $(8$ marks$)$

$($b$).$ Yamikani Limited owns $90\%$ of the shares in Lemekani Limited. Yamikani originally acquired

$25\%$ of the Lemekani shares many years ago. On $1$st January $2021$ year Yamikani acquired a further

$55\%$ to take its holding to $80\%.$ In the year $2022,$ Yamikani acquired a further $10\%$ to take its

holding to $90\%.$

Required:

Explain how the accounting treatment for Lemekani Ltd should have been accounted for

each time Yamikani Ltd acquired shares. $(6$ marks$)$

$[$Total: $20$ marks