Thinking Process

Using Exhibit 2, explain, with suitable workings, how the ten-year 7% loan provided by Alexandra should be accounted for in Alexandra’s financial statements for the year ended 30 April 20X1. (5 marks)

Using exhibit 1, discuss the ethical issues arising for the financial controller and the financial accountant. Your answer should outline appropriate actions which should be taken to resolve these issues. (10 marks) Professional skills marks will be awarded in part (a) for the relevance of the ethical principles and actions identified. (2 marks)

Using exhibit 1, and in accordance with IFRS Accounting Standards: (i) explain why Carroll should recognise the convertible loan notes as a liability and the convertible preference shares as a compound instrument; and (ii) explain, with calculations, the amounts which Carroll should recognise in its financial statements for the year ended 31 December 20X8 in relation to both instruments. (11 marks)