Semester 2 Week 5 Tutorial 4

Question 1

Name the two types of pension and briefly describe the differences between them.

Answer 1

Question 2

Cole Ltd. operate a defined contribution pension scheme for their employees. Total gross wages for the month of November 20X3 are £2,300,000. Related to this is employee’s NI of £330,000, employer’s NI of £370,000 and PAYE of £670,000.

Cole have made pension contributions for the month of £270,000. Employee pension contributions for the same period are £320,000.

Showing workings prepare the necessary journals for November and December 20X3.

Answer 2

Question 3

Briefly outline the problem to employers of a defined benefit pension scheme.

Answer 3

As the employer is responsible for ensuring that a pension of a certain amount is paid this can work out as being extremely expensive for the employer. The employer could be potentially responsible for guaranteeing a large pension regardless of the performance of the assets or other financial activities.

This can potentially lead to the company having a very high pension liability, which could severely impact on their business performance.

Question 4

Briefly outline some of the criticisms/limitations of traditional financial statements.

Answer 4

Traditional financial statements have often been criticised for the following:
a. Traditionally financial statements gave numbers without context. This has made it difficult to understand how the business is performing.
b. Traditional financial statements are often concentrated on financial amounts. This can make it difficult to get a full understanding of the business as many things cannot be measured in financial terms.
c. Measuring items purely in financial/numerical terms can give a misleading view of the business. Without context this can be difficult to determine.

Question 5

Outline the requirements of the directors’ report.

Answer 5

The directors’ report should contain:
a. Name of all the people who acted as director in the year
b. Details of any dividends declared or paid
c. If the company is audit exempt, details that the company is entitled to the exemption.
d. If the company is not audit exempt, confirmation that the auditors have received all the information they require.

Question 6

The strategic report aims to provide greater context as to a company’s performance. Outline the common contents of the strategic report and whether you feel it meets these aims.

Answer 6

Question 7

Integrated reporting makes reference to several forms of capital. Outline each of these forms.

Answer 7

7. The IIRC framework identifies six forms of capital:
   Financial capital -money available for investment in the business.
   Manufactured capital – physical items produced or bought by the business for use (e.g. machinery, vehicles etc.)
   Intellectual capital – the “know-how” of intellectual knowledge (e.g. patents, copyrights, policies and procedures.
   Human capital – People’s competencies, skills and knowledge
   Social and relationship capital – Relationships with key stakeholders and communities
   Natural capital – Natural resources (e.g. forests, water, minerals etc.)

Question 8

Without a statutory requirement integrated reporting is of no use. Critically discuss.

Answer 8