ANWSER
Question 1
a. Accounting Regulation:
– Germany: Governed by the German Commercial Code (HGB). Strongly influenced by tax law, emphasizing prudence and creditor protection. Regulatory bodies include the German Accounting Standards Committee (DRSC).
– USA: Regulated by the Financial Accounting Standards Board (FASB) via GAAP. Focuses on investor transparency and market-driven principles.
b. Financial Reporting:
– Germany: Financial statements are tax-driven, conservative, and prioritize statutory reserves. Consolidated reports follow IFRS for listed companies.
– USA: Emphasizes fair value, detailed disclosures, and relevance to investors. Follows GAAP for all entities.
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Question 2 (Translate Ghana Branch Financial Statements):
Translation Process:
– Non-current assets: Translate at historical rate (N1 = c4).
– Current assets/liabilities: Translate at closing rate (N1 = c4).
– Income/expenses: Use average rate (N1 = c4).
– Retained earnings: Opening balance (N24,000) + Current year profit (N40,000 translated at average rate).
Translated Financial Statements (Summary):
– Total Assets: N68,000 (cedis 272,000 ÷ 4).
– Retained Earnings: N24,000 (opening) + N10,000 (current profit) = N34,000.
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Question 3 (Consolidated Financial Position for ABC and XYZ):
Steps:
1. Translate XYZ’s financials to Naira:
– Tangible Assets: 292m cedis ÷ 4.2 = N69.52m.
– Retained Earnings: 40m cedis ÷ 4.2 = N9.52m.
2. Calculate Goodwill:
– Purchase Price: 240m cedis ÷ 5.0 = N48m.
– FV of Net Assets at Acquisition: 160m cedis ÷ 5.0 = N32m.
– Goodwill = N48m – (75% × N32m) = N24m.
3. Consolidate:
– Total Assets = ABC’s N594m + XYZ’s N69.52m + Goodwill N24m = N687.52m.
– NCI = 25% × XYZ’s equity (N69.52m) = N17.38m.
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Question 1 (Double Taxation Relief for Atake Laceco):
Taxable Profit Calculation:
– Nigerian Profit: N2,900,000 + Capital Allowance (N1,125,000) = N4,025,000.
– Foreign Income (Canada): N1,200,000 – Tax Credit (N360,000).
– Total Taxable Profit = N4,025,000 + N840,000 = N4,865,000.
– Tax Payable = 30% × N4,865,000 = N1,459,500.
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Question 1 (Tax Payable for Herbert Incorporated):
Adjusted Profit:
– Contract Income: $12m × N90 = N1,080,000,000.
– Allowable Expenses:
– Foreign Experts: N120.5m (capped) vs. N156.785m → Disallow N36.285m.
– Total Adjusted Expenses = N951,533,250.
– Taxable Profit = N1,080,000,000 – N951,533,250 – N74,221,750 = N54,245,000.
– Tax Payable = 30% × N54,245,000 = N16,273,500.
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Question 2a (Petroleum Profits Tax for Ogijo Petroleum):
Adjusted Profit:
– Add Back: Unexpensed Royalties (N6.55m) + Customs Duty (N0.5m) = N7.05m.
– Chargeable Profit = Adjusted Profit – Loss B/F (N25m) – Capital Allowances (N24.32m).
– Tax Payable = 85% × Chargeable Profit = N5,345,650 (as submitted).
Disallowed Items:
1. Political donations.
2. Non-productive rents.
3. Capital expenditures.
4. Unexpensed royalties.
5. Customs duties.
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Question 3 (CGT for Mr. Iyobong):
House Sale:
– Cost: N5.5m + N2.35m = N7.85m.
– Proceeds: N14.5m – Fees (N1.528m) = N12.972m.
– Gain = N12.972m – N7.85m = N5.122m.
Warehouse Sale:
– Cost: N4m + N1.5m = N5.5m.
– Proceeds: N8m – N0.8m = N7.2m.
– Gain = N7.2m – N5.5m = N1.7m.
Total CGT Liability:
– Total Gain = N6.822m × 10% = N682,200.
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Question 4 (Dual Residence & DTA):
a. Dual Residence: Resolved via tie-breaker rules in DTA (e.g., permanent home, center of vital interests).
b. Purposes of DTA:
1. Avoid double taxation.
2. Prevent tax evasion.
3. Allocate taxing rights.
c. Juridical vs Economic DT:
– Juridical: Same taxpayer taxed twice on same income.
– Economic: Income taxed in different hands (e.g., corporate profits and dividends).
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Question 5 (CGT for Happy Days Ltd):
Chargeable Gain:
– Proceeds: N575,000 – Expenses (N15k) = N560,000.
– Cost: N720,000 (pro-rated).
– Gain = N560k – (N720k × 0.5) = N200,000.
New Cost of Remaining Asset: Market Value = N925,000.
Exempt Assets:**
1. Personal residence.
2. Government securities.
3. Life insurance policies.
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