DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO.
Financial Pillar
F1 – Financial Operations
Tuesday 26 August 2014
Instructions to candidates
You are allowed 20 minutes reading time before the examination begins
during which you should read the question paper and, if you wish, highlight
and/or make notes on the question paper. However, you will not be allowed,
under any circumstances, to open the answer book and start writing or use
your calculator during this reading time.
You are strongly advised to carefully read ALL the question requirements
before attempting the question concerned (that is all parts and/or subquestions).
ALL answers must be written in the answer book. Answers written on the
question paper will not be submitted for marking.
You should show all workings as marks are available for the method you use.
ALL QUESTIONS ARE COMPULSORY.
Section A comprises 10 sub-questions and is on pages 3 to 6.
Section B comprises 6 sub-questions and is on pages 8 to 11.
Section C comprises 2 questions and is on pages 12 to 15.
References to IFRS in this paper refer to International Financial Reporting
Standards or International Accounting Standards as issued or adopted by the
International Accounting Standards Board.
The country ‘Tax Regime’ for the paper is provided on page 2. Maths tables
and formulae are provided on pages 17 and 18.
The list of verbs as published in the syllabus is given for reference on page
19.
Write your candidate number, the paper number and examination subject title
in the spaces provided on the front of the answer book. Also write your
contact ID and name in the space provided in the right hand margin and seal
to close.
Tick the appropriate boxes on the front of the answer book to indicate the
questions you have answered.
F1 – Financial Operations
You are allowed three hours to answer this question paper.
TURN OVER
 The Chartered Institute of Management Accountants 2014
COUNTRY X - TAX REGIME FOR USE THROUGHOUT THE EXAMINATION PAPER
Relevant Tax Rules for Years Ended 31 March 2007 to 2014
Corporate Profits
Unless otherwise specified, only the following rules for taxation of corporate
profits will be relevant, other taxes can be ignored:
•
Accounting rules on recognition and measurement are followed for tax
purposes.
•
All expenses other than depreciation, amortisation, entertaining, taxes
paid to other public bodies and donations to political parties are tax
deductible.
•
Tax depreciation is deductible as follows:
o
50% of additions to property, plant and equipment in the
accounting period in which they are recorded;
o
25% per year of the written-down value (i.e. cost minus previous
allowances) in subsequent accounting periods except that in
which the asset is disposed of;
o
No tax depreciation is allowed on land.
•
The corporate tax on profits is at a rate of 25%.
•
No indexation is allowable on the sale of land.
•
Tax losses can be carried forward to offset against future taxable profits
from the same business.
Value Added Tax
Country X has a VAT system which allows entities to reclaim input tax paid.
In country X the VAT rates are:
Zero rated
Standard rated
Exempt goods
September 2014
0%
15%
0%
2
Financial Operations
SECTION A – 20 MARKS
[You are advised to spend no longer than 36 minutes on this section]
ANSWER ALL TEN SUB-QUESTIONS IN THIS SECTION
Instructions for answering Section A:
The answers to the ten sub-questions in Section A should ALL be written in your
answer book.
Your answers should be clearly numbered with the sub-question number and
then ruled off, so that the markers know which sub-question you are answering.
For multiple choice questions, you need only write the sub-question
number and the letter of the answer option you have chosen. You do not
need to start a new page for each sub-question.
Question One
1.1
Define the meaning of the term “a direct tax”.
(2 marks)
1.2
Under the current structure of regulatory bodies, which organisation is responsible for seeking
out the views of its members and passing them on in summary form to the International
Accounting Standards Board (IASB)?
A
B
C
D
IFRS Interpretations Committee
International Organisation of Securities Commissions
IFRS Foundation
IFRS Advisory Council
(2 marks)
1.3
MX suffered a major fire in its central warehouse on 14 March 2014. Inventory held in the
warehouse with a value of $700,000 was either damaged or destroyed. An external audit of
MX’s financial statements discovered that the loss had not been recognised in MX’s financial
statements. This is regarded as material but not pervasive.
What type of audit report should the auditor issue for MX’s financial statements for the year
ended 31 March 2014?
A
B
C
D
A modified report, with a qualified opinion based on insufficient appropriate evidence.
A modified report, with a qualified opinion, with a qualified “except for” opinion.
An unmodified report with an unqualified opinion.
An unmodified report with an emphasis of matter paragraph relating to the inventory.
(2 marks)
TURN OVER
Financial Operations
3
September 2014
1.4
Define the meaning of the term “tax gap”.
(2 marks)
1.5
The tax rules of Country X allow an entity ceasing to trade to carry back terminal losses
against the previous two years profits.
QT ceased trading on 31 March 2014, having incurred a trading loss of $122,000 for the year
ended 31 March 2014.
QT’s profits for the previous 3 years were:
Year to 31 March
2011
2012
2013
Taxable profit
$89,000
$62,000
$53,000
Assuming that QT had paid all tax due up to 31 March 2013, calculate how much tax refund
QT can claim for its terminal loss:
A
B
C
D
$28,750
$30,500
$115,000
$122,000
(2 marks)
1.6
ABC is registered for tax in Country X.
ABC purchases goods and services from suppliers, including VAT at standard rate and sells
goods to customers, including VAT at standard rate.
The formal incidence of the VAT is on:
A
B
C
D
ABC’s customers
ABC’s suppliers
ABC
Country X’s tax authority
(2 marks)
September 2014
4
Financial Operations
1.7
Country X is considering an excise duty of $1,000 per vehicle on all new motor vehicles sold.
(i)
(ii)
(iii)
(iv)
(v)
A progressive tax
An indirect tax
An ad valorem tax
A regressive tax
A unit tax
Which TWO of the above would be regarded as a correct description of the $1,000 excise
duty?
A
B
C
D
(i) and (ii)
(ii) and (v)
(iii) and (iv)
(iv) and (v)
(2 marks)
1.8
The IASB’s Conceptual Framework for Financial Reporting (2010) (Framework) lists four
enhancing characteristics of financial statements. Comparability and timeliness are two of the
enhancing characteristics, list the other two enhancing characteristics.
(2 marks)
1.9
PX is registered for VAT in Country X. PX is partially exempt for VAT purposes.
During the latest VAT period, PX purchased materials and services costing $661,250,
including VAT at standard rate.
These materials and services were used to produce both standard rated and exempt goods.
Goods sold to customers, excluding VAT were:
•
•
Standard rated goods
Exempt goods
$820,000
$205,000
Assume PX had no other VAT related transactions.
Input tax that PX can claim on its purchases in its VAT return for the period is:
A
B
C
D
$69,000
$86,250
$79,350
$99,188
(2 marks)
1.10
Describe the meaning of “underlying tax”.
(2 marks)
(Total for Section A = 20 marks)
Financial Operations
5
September 2014
Reminder
All answers to Section A must be written in your answer book.
Answers or notes to Section A written on the question paper will
not be submitted for marking.
End of Section A
Section B starts on page 8
September 2014
6
Financial Operations
This page is blank
TURN OVER
Financial Operations
7
September 2014
SECTION B – 30 MARKS
[You are advised to spend no longer than 9 minutes on each sub-question in this
section.]
ANSWER ALL SIX SUB-QUESTIONS IN THIS SECTION – 5 MARKS EACH
Question Two
(a)
Required:
(i)
Explain why the CIMA code of ethics is principles-based rather than rules-based.
(3 marks)
(ii)
Describe TWO of the principles of the CIMA code of ethics.
(2 marks)
(Total for sub-question (a) = 5 marks)
(b)
The IASB partially updated its Framework for the Preparation and Presentation of Financial
Statements, naming the revised version Conceptual Framework for Financial Reporting (2010).
Required:
Explain the purpose of the Conceptual framework for financial reporting.
(Total for sub-question (b) = 5 marks)
September 2014
8
Financial Operations
(c)
ACZ is a listed entity with six business segments, and reports segmental information under
IFRS 8 Operating Segments in its financial statements.
Financial information is reported to ACZ’s chief operating decision maker on a geographical
basis. Each geographical region has separate risk characteristics. The results for the year
ended 31 March 2014 are as follows:
Product Group
Internal revenue
External revenue
Total revenue
Segment Profit
Segment Assets
A
$m
150
970
1,120
56
2,400
B
$m
0
320
320
29
510
C
$m
150
40
190
17
430
D
$m
20
1410
1,430
155
2,900
E
$m
0
310
310
37
590
F
$m
0
180
180
10
300
Total
$m
320
3,230
3,550
304
7,130
Required:
Explain with reasons which of ACZ’s geographical segments will be classified as reportable
operating segments in accordance with IFRS 8 Operating Segments.
(Total for sub-question (c) = 5 marks)
(d)
On 1 April 2013 XYK acquired 100% of EZ’s 500,000 $1 equity shares.
Cost of acquisition
Retained earnings at 1 April 2013
Retained earnings at 31 March 2014
EZ
$000
975
170
230
The fair value of net assets of EZ on 1 April 2013 was $140,000 more than its carrying value.
On 31 March 2014 goodwill arising on XYK’s investment in EZ had been impaired by 20%.
Required:
(i)
Calculate the goodwill that will be included in XYK’s statement of financial
position at 31 March 2014.
(ii)
Explain, with supporting calculations, how XYK’s consolidated interest in EZ
would affect its consolidated statement of financial position at 31 March 2014.
(Total for sub-question (d) = 5 marks)
Financial Operations
9
September 2014
Information for questions 2e and 2f
SMB is a small local corporate entity that operates a transport business in Country X.
On 1 April 2013 SMB acquired an additional vehicle that qualified for tax depreciation
allowances. The vehicle cost $46,000 and has an expected useful life of 7 years with a
residual value of $4,000.
The appropriate accounting entries for this vehicle have been included in the accounts.
Extracts from SMB’s financial statements:
SMB Statement of financial position as at 31 March 2013
$
Non-current liability
Deferred tax provision
155,000
Current liability
Tax payable
30,000
SMB’s Statement of profit or loss (extract) for year ended 31 March 2014
$
Revenue*
260,000
175,000
Expenses**
85,000
Profit before tax
SMB Statement of cash flows for year ended 31 March 2014
$
Tax paid
33,000
* Revenue includes a non-taxable government grant of $5,000.
** Expenses include:
• Depreciation charges of $19,000 for SMB’s other non-current assets. These assets
qualified for tax depreciation allowances of $22,000.
• Entertaining costs of $3,000.
(e)
Required:
Calculate SMB’s corporate income tax due for the year ended 31 March 2014.
(Total for sub-question (e) = 5 marks)
September 2014
10
Financial Operations
(f)
Required:
(i)
Calculate the deferred tax balance that will appear in SMB’s statement of financial
position under non-current liabilities at 31 March 2014.
(ii)
Calculate the amount of income taxes charged to SMB’s statement of profit or loss
for the year ended 31 March 2014.
(Total for sub-question (f) = 5 marks)
(Total for Section B = 30 marks)
End of Section B
Section C starts on page 12
TURN OVER
Financial Operations
11
September 2014
SECTION C – 50 MARKS
[You are advised to spend no longer than 45 minutes on each question in this section.]
ANSWER BOTH QUESTIONS FROM THIS SECTION – 25 MARKS EACH
Question Three
ZXC’s trial balance at 31 March 2014 is shown below:
Bank loan
Administrative expenses
Cash and cash equivalents
Deferred development expenditure
Deferred development expenditure amortisation at 1 April 2013
Distribution costs
Equity dividend paid
Finance lease payment
Income tax
Inventory at 31 March 2014
Land and buildings at cost
Bank loan interest
Equity shares $1 each, fully paid at 1 April 2013
Plant and equipment at cost at 1 April 2013
Provision for deferred tax at 1 April 2013
Accumulated depreciation at 1 April 2013:
- buildings
- plant and equipment
Cost of sales
Retained earnings at 1 April 2013
Sales revenue
Share premium at 1 April 2013
Trade payables
Trade receivables
Suspense account
Notes
(i)
(v)
(v)
(ii)
(vi)
(iii)
$000
240
64
210
42
130
97
28
11
285
2,545
32
1,200
(iv),(viii)
(vii)
615
76
(iii)
(iv)
322
355
2,154
173
3,700
120
319
(viii)
263
233
6,907
Additional information:
(i)
The bank loan is a 10 year 8% loan received in 2009 and repayable in 2019. Interest is
paid half yearly on 1 June and 1 December.
(ii)
ZXC acquired a motor vehicle using a finance lease on 1 April 2013. The fair value and
present value of the minimum lease payments is $144,000. The lease terms are 6
annual payments of $28,000 due on 1 April commencing 1 April 2013. The rate of
interest implicit in the lease is 6.61%. Depreciation of vehicles should be included in
distribution costs. The only entry made for this transaction was to record the first rental
payment.
(iii)
Depreciation is charged on buildings using the straight line method at 2% per annum.
The cost of land included in land and buildings is $1,200,000. Buildings depreciation is
treated as an administrative expense. There were no sales of land and buildings during
the year ended 31 March 2014.
(iv)
Depreciation is charged on owned plant and equipment using the reducing balance
method at 25% per year. Plant and equipment depreciation should be charged to cost
of sales.
September 2014
12
$000
600
Financial Operations
6,907
(v)
(vi)
Deferred development expenditure incurred in the year to 31 March 2013, is being
amortised over 5 years.
The income tax balance in the trial balance is a result of the under provision of tax for
the year ended 31 March 2013.
(vii)
The tax due for the year ended 31 March 2014 is estimated at $125,000 and the
deferred tax provision should be decreased by $15,000.
(viii)
The suspense account is comprised of two items:
a. On 31 January 2014 ZXC purchased 240,000 of its own $1 equity shares at a
premium of 5% on the local stock exchange. At 31 March 2014 ZXC held the
shares with the intention to resell them.
b. $19,000 cash received from the disposal of some plant and equipment that had
an original cost of $75,000 and a carrying value of $32,000.
The only entries made in ZXC’s ledgers for these items was in cash and cash
equivalents and suspense account.
Required:
Prepare the statement of comprehensive income and a statement of changes in equity for
ZXC for the year ended 31 March 2014 and a statement of financial position at that date, in
accordance with the requirements of International Financial Reporting Standards.
Notes to the financial statements are not required, but all workings must be clearly shown.
Do not prepare a statement of accounting policies.
(Total for Question Three = 25 marks)
Section C continues on page 14
TURN OVER
Financial Operations
13
September 2014
Question Four
EBS’s financial statements for 2013/2014 include the following:
EBS Statement of profit or loss and other comprehensive income for the
year ended 30 June 2014
Note
$000
Revenue
2,610
Cost of sales
(vi),(viii)
(890)
Gross Profit
1,720
Administrative expenses
(180)
Distribution costs
(125)
Profit from operations
1,415
Finance cost
(57)
Profit before tax
1,358
Income tax expense
(160)
Profit for the period
1,198
Other comprehensive income – items that will
not be reclassified subsequently to profit or loss
Revaluation gain on properties
(ii)
345
1,543
EBS Statements of financial position at 30 June
Note
Non-current assets
Property, plant and equipment
Deferred development expenditure
Brand name
Current assets
Inventories
Trade receivables
Cash and cash equivalents
Total Assets
Equity and liabilities
Equity
Equity shares
Share premium
Revaluation reserve
Retained earnings
Total equity
Non-current liabilities
Long term loans
Deferred tax
Preferred shares
Current liabilities
Total equity and liabilities
(i),(ii),(iii)
(vi)
(vi)
2014
$000
$000
2013
$000
$000
5,200
184
45
4,890
76
60
130
273
169
(vii)
(vii)
(ii)
5,429
572
6,001
2,200
580
345
2,006
105
189
210
(vii)
(iv)
504
5,530
1,800
400
0
1,420
5,131
0
196
300
5,026
496
374
6,001
3,620
1,435
110
0
1,545
365
5,530
Additional information:
(i)
Non-current assets – property, plant and equipment, balances at 30 June were:
2014
2013
Cost or valuation:
$000
$000
Property
3,825
3,900
Plant
3,000
2,850
Equipment
1,235
1,120
8,060
7,870
Depreciation:
Property
45
420
Plant
2,000
1,700
Equipment
815
860
2,860
2,980
Net book value
5,200
4,890
September 2014
14
Financial Operations
(ii)
(iii)
(iv)
On 1 July 2013 property was revalued to $3,825,000. At that time the average
remaining life of property was 85 years. Property is depreciated on a straight line
basis.
Equipment with a carrying value of $60,000 (original cost $210,000) was sold during
the year for $25,000. Any gain/loss on disposal of property, plant and equipment is
included in profit or loss.
Current liabilities:
2014
$000
218
4
90
62
374
Trade payables
Loan interest payable
Tax payable
Other provisions (see viii)
Total current liabilities
(v)
(vi)
(vii)
(viii)
2013
$000
230
15
120
0
365
EBS paid a dividend on its equity and preferred shares during the year ended 30
June 2014.
Cost of sales includes $27,000 for development expenditure amortised during the
year and $15,000 for impairment of the purchased brand name.
On 1 November 2013, EBS issued $1 equity shares at a premium. On 1 July 2013
EBS issued 6% cumulative redeemable preferred shares at par. No other finance was
raised during the year.
Other provisions relate to legal claims made against EBS during the year ended 30
June 2014. The amount provided is included in cost of sales.
Required:
Prepare EBS’s Statement of cash flows, using the indirect method, for the year ended
30 June 2014 in accordance with IAS 7 Statement of Cash Flows.
Notes to the financial statements are not required, but all workings must be clearly shown.
(Total for Question Four = 25 marks)
(Total for Section c = 50 marks)
End of Question Paper
Maths Tables and Formulae are on Pages 17 and 18
Financial Operations
15
September 2014
This page is blank
September 2014
16
Financial Operations
MATHS TABLES AND FORMULAE
Present value table
Present value of $1, that is (1 + r)-n where r = interest rate; n = number of
periods until payment or receipt.
Periods
(n)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
1%
0.990
0.980
0.971
0.961
0.951
0.942
0.933
0.923
0.914
0.905
0.896
0.887
0.879
0.870
0.861
0.853
0.844
0.836
0.828
0.820
2%
0.980
0.961
0.942
0.924
0.906
0.888
0.871
0.853
0.837
0.820
0.804
0.788
0.773
0.758
0.743
0.728
0.714
0.700
0.686
0.673
3%
0.971
0.943
0.915
0.888
0.863
0.837
0.813
0.789
0.766
0.744
0.722
0.701
0.681
0.661
0.642
0.623
0.605
0.587
0.570
0.554
Interest rates (r)
4%
5%
6%
0.962
0.952
0.943
0.925
0.907
0.890
0.889
0.864
0.840
0.855
0.823
0.792
0.822
0.784
0.747
0.790
0.746
0.705
0.760
0.711
0.665
0.731
0.677
0.627
0.703
0.645
0.592
0.676
0.614
0.558
0.650
0.585
0.527
0.625
0.557
0.497
0.601
0.530
0.469
0.577
0.505
0.442
0.555
0.481
0.417
0.534
0.458
0.394
0.513
0.436
0.371
0.494
0.416
0.350
0.475
0.396
0.331
0.456
0.377
0.312
7%
0.935
0.873
0.816
0.763
0.713
0.666
0.623
0.582
0.544
0.508
0.475
0.444
0.415
0.388
0.362
0.339
0.317
0.296
0.277
0.258
8%
0.926
0.857
0.794
0.735
0.681
0.630
0.583
0.540
0.500
0.463
0.429
0.397
0.368
0.340
0.315
0.292
0.270
0.250
0.232
0.215
9%
0.917
0.842
0.772
0.708
0.650
0.596
0.547
0.502
0.460
0.422
0.388
0.356
0.326
0.299
0.275
0.252
0.231
0.212
0.194
0.178
10%
0.909
0.826
0.751
0.683
0.621
0.564
0.513
0.467
0.424
0.386
0.350
0.319
0.290
0.263
0.239
0.218
0.198
0.180
0.164
0.149
Periods
(n)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
11%
0.901
0.812
0.731
0.659
0.593
0.535
0.482
0.434
0.391
0.352
0.317
0.286
0.258
0.232
0.209
0.188
0.170
0.153
0.138
0.124
12%
0.893
0.797
0.712
0.636
0.567
0.507
0.452
0.404
0.361
0.322
0.287
0.257
0.229
0.205
0.183
0.163
0.146
0.130
0.116
0.104
13%
0.885
0.783
0.693
0.613
0.543
0.480
0.425
0.376
0.333
0.295
0.261
0.231
0.204
0.181
0.160
0.141
0.125
0.111
0.098
0.087
Interest rates (r)
14%
15%
16%
0.877
0.870
0.862
0.769
0.756
0.743
0.675
0.658
0.641
0.592
0.572
0.552
0.519
0.497
0.476
0.456
0.432
0.410
0.400
0.376
0.354
0.351
0.327
0.305
0.308
0.284
0.263
0.270
0.247
0.227
0.237
0.215
0.195
0.208
0.187
0.168
0.182
0.163
0.145
0.160
0.141
0.125
0.140
0.123
0.108
0.123
0.107
0.093
0.108
0.093
0.080
0.095
0.081
0.069
0.083
0.070
0.060
0.073
0.061
0.051
17%
0.855
0.731
0.624
0.534
0.456
0.390
0.333
0.285
0.243
0.208
0.178
0.152
0.130
0.111
0.095
0.081
0.069
0.059
0.051
0.043
18%
0.847
0.718
0.609
0.516
0.437
0.370
0.314
0.266
0.225
0.191
0.162
0.137
0.116
0.099
0.084
0.071
0.060
0.051
0.043
0.037
19%
0.840
0.706
0.593
0.499
0.419
0.352
0.296
0.249
0.209
0.176
0.148
0.124
0.104
0.088
0.079
0.062
0.052
0.044
0.037
0.031
20%
0.833
0.694
0.579
0.482
0.402
0.335
0.279
0.233
0.194
0.162
0.135
0.112
0.093
0.078
0.065
0.054
0.045
0.038
0.031
0.026
Financial Operations
17
September 2014
Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n years
1− (1+ r ) − n
r
Periods
(n)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
1%
0.990
1.970
2.941
3.902
4.853
5.795
6.728
7.652
8.566
9.471
10.368
11.255
12.134
13.004
13.865
14.718
15.562
16.398
17.226
18.046
2%
0.980
1.942
2.884
3.808
4.713
5.601
6.472
7.325
8.162
8.983
9.787
10.575
11.348
12.106
12.849
13.578
14.292
14.992
15.679
16.351
3%
0.971
1.913
2.829
3.717
4.580
5.417
6.230
7.020
7.786
8.530
9.253
9.954
10.635
11.296
11.938
12.561
13.166
13.754
14.324
14.878
Interest rates (r)
4%
5%
6%
0.962
0.952
0.943
1.886
1.859
1.833
2.775
2.723
2.673
3.630
3.546
3.465
4.452
4.329
4.212
5.242
5.076
4.917
6.002
5.786
5.582
6.733
6.463
6.210
7.435
7.108
6.802
8.111
7.722
7.360
8.760
8.306
7.887
9.385
8.863
8.384
9.986
9.394
8.853
10.563 9.899
9.295
11.118 10.380 9.712
11.652 10.838 10.106
12.166 11.274 10.477
12.659 11.690 10.828
13.134 12.085 11.158
13.590 12.462 11.470
7%
0.935
1.808
2.624
3.387
4.100
4.767
5.389
5.971
6.515
7.024
7.499
7.943
8.358
8.745
9.108
9.447
9.763
10.059
10.336
10.594
8%
0.926
1.783
2.577
3.312
3.993
4.623
5.206
5.747
6.247
6.710
7.139
7.536
7.904
8.244
8.559
8.851
9.122
9.372
9.604
9.818
9%
0.917
1.759
2.531
3.240
3.890
4.486
5.033
5.535
5.995
6.418
6.805
7.161
7.487
7.786
8.061
8.313
8.544
8.756
8.950
9.129
10%
0.909
1.736
2.487
3.170
3.791
4.355
4.868
5.335
5.759
6.145
6.495
6.814
7.103
7.367
7.606
7.824
8.022
8.201
8.365
8.514
Periods
(n)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
11%
0.901
1.713
2.444
3.102
3.696
4.231
4.712
5.146
5.537
5.889
6.207
6.492
6.750
6.982
7.191
7.379
7.549
7.702
7.839
7.963
12%
0.893
1.690
2.402
3.037
3.605
4.111
4.564
4.968
5.328
5.650
5.938
6.194
6.424
6.628
6.811
6.974
7.120
7.250
7.366
7.469
13%
0.885
1.668
2.361
2.974
3.517
3.998
4.423
4.799
5.132
5.426
5.687
5.918
6.122
6.302
6.462
6.604
6.729
6.840
6.938
7.025
Interest rates (r)
14%
15%
16%
0.877
0.870
0.862
1.647
1.626
1.605
2.322
2.283
2.246
2.914
2.855
2.798
3.433
3.352
3.274
3.889
3.784
3.685
4.288
4.160
4.039
4.639
4.487
4.344
4.946
4.772
4.607
5.216
5.019
4.833
5.453
5.234
5.029
5.660
5.421
5.197
5.842
5.583
5.342
6.002
5.724
5.468
6.142
5.847
5.575
6.265
5.954
5.668
6.373
6.047
5.749
6.467
6.128
5.818
6.550
6.198
5.877
6.623
6.259
5.929
17%
0.855
1.585
2.210
2.743
3.199
3.589
3.922
4.207
4.451
4.659
4.836
4.988
5.118
5.229
5.324
5.405
5.475
5.534
5.584
5.628
18%
0.847
1.566
2.174
2.690
3.127
3.498
3.812
4.078
4.303
4.494
4.656
4.793
4.910
5.008
5.092
5.162
5.222
5.273
5.316
5.353
19%
0.840
1.547
2.140
2.639
3.058
3.410
3.706
3.954
4.163
4.339
4.486
4.611
4.715
4.802
4.876
4.938
4.990
5.033
5.070
5.101
20%
0.833
1.528
2.106
2.589
2.991
3.326
3.605
3.837
4.031
4.192
4.327
4.439
4.533
4.611
4.675
4.730
4.775
4.812
4.843
4.870
FORMULAE
Annuity
Present value of an annuity of $1 per annum, receivable or payable for n years, commencing in one year, discounted
at r% per annum:
PV =
1
1
1 −
n
r 
[1 + r ]



Perpetuity
Present value of $1 per annum, payable or receivable in perpetuity, commencing in one year, discounted at r% per
annum:
PV =
1
r
September 2014
18
Financial Operations
LIST OF VERBS USED IN THE QUESTION REQUIREMENTS
A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for
each question in this paper.
It is important that you answer the question according to the definition of the verb.
LEARNING OBJECTIVE
Level 1 - KNOWLEDGE
What you are expected to know.
Level 2 - COMPREHENSION
What you are expected to understand.
VERBS USED
DEFINITION
List
State
Define
Make a list of
Express, fully or clearly, the details/facts of
Give the exact meaning of
Describe
Distinguish
Explain
Communicate the key features
Highlight the differences between
Make clear or intelligible/State the meaning or
purpose of
Recognise, establish or select after
consideration
Use an example to describe or explain
something
Identify
Illustrate
Level 3 - APPLICATION
How you are expected to apply your knowledge.
Apply
Calculate
Demonstrate
Prepare
Reconcile
Solve
Tabulate
Level 4 - ANALYSIS
How are you expected to analyse the detail of
what you have learned.
Level 5 - EVALUATION
How are you expected to use your learning to
evaluate, make decisions or recommendations.
Financial Operations
Analyse
Categorise
Compare and contrast
Put to practical use
Ascertain or reckon mathematically
Prove with certainty or to exhibit by
practical means
Make or get ready for use
Make or prove consistent/compatible
Find an answer to
Arrange in a table
Construct
Discuss
Interpret
Prioritise
Produce
Examine in detail the structure of
Place into a defined class or division
Show the similarities and/or differences
between
Build up or compile
Examine in detail by argument
Translate into intelligible or familiar terms
Place in order of priority or sequence for action
Create or bring into existence
Advise
Evaluate
Recommend
Counsel, inform or notify
Appraise or assess the value of
Advise on a course of action
19
September 2014
Financial Pillar
Operational Level Paper
F1 – Financial Operations
September 2014
Tuesday
September 2014
20
Financial Operations