QUESTION TWO

$($a$)$ With reference to International Public Sector Accounting standard $($IPSAS$)21$ "Impairment of Non$-$Cash$-$Generating

Assets", explain three matters in respect of which an entity should disclose each material impairment loss recognised or

reversed during the reporting period.

$(6$ marks$)$

On $1$ January $2014,$ R Lid. 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. $$ s at

I January $2014,$ the market price of the share was Sh$\mathrm{.}50$ and the par value of one share was Sh$\mathrm{.}10.$ The bonus was to be

the equivalent of $100$ shares.

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

Year ended

$31$ December $2014$

$31$ December $2015$

$31$ December $2016$

Number uf employeess leaving

$10$

$15$

$15$

Market price of a share $($Sli$.)$

$55$

$58$

$60$

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 $2016.$

$($c$)$ The following information was extracted from the books of Comlior Retirement Benefit Scheme for the years ended

$31$ October $2016$ and $31$ October $2017$:

Discount rate on I November

Expected rate of return on plan assets $-1$ November

Average remaining service life $($years$)$

$2016$

Sh$.$ "million"

$96$

$100$

Fair value of plan assets $-$ I November

Present value of plan obligations $-1$ November

Current service cost

Benefits paid

Contributions to the scheme

Past service cost

$2017$

Sh$.$ "million"

$110$

$125$

$10$

$12$

$11$

Additional information:

As at I November $2015,$ the present value of plan obligations and the tair value of plan assets were both

Sh$.100$ million.

Assume all transactions occurred at the year end.

Required:

For each of the years ended $31$ October $2016$ and $31$ October $2017,$ determine:

$($i$)$ The actuarial gains or losses.

$($ii$)$ The net pension cost to be charged in the income statement for each of the two years.

$($iii$)$ Balances to be reflected in the statement of financial position as at the end of each year.