Ican 2025 Corporate Reporting Question 7

Daramson is a Limited Liability Company whose financial statements are prepared using International Financial Reporting Standards. The company has the following transactions. Transaction 1: Daramson has outsourced its waste collection to a private sector provider called Urban Waste and Co and pays an annual amount for its services. Urban Waste and Co buys vehicles and uses them for Daramsons waste collection only. The vehicles are painted with the Daramson Company Limited’s name and colours. Daramson can use the vehicles and the vehicles are used for waste collection for nearly all of the asset's life. In the event of Urban Waste and Co's business ceasing, Daramson can obtain legal title to the vehicles and carry on the waste collection service. Transaction 2: Daramson owns a warehouse which it leased to Agroallied Limited used as a storage facility for pesticides and chemicals. The government has announced its intention to enact a legislation requiring property owners to accept liability for environmental pollution. As a result, Daramson has introduced a hazardous chemical policy and has begun to apply the policy to its properties. Daramson had received report that the chemicals from Agroallied Limited have contaminated the land surrounding the warehouse. Daramson has no recourse against Agroallied or its insurance company for the clean-up costs of the pollution. At October 31, 2021, it has become certain that the draft legislation requiring a cleanup of land already contaminated will be enacted shortly after the year end. Transaction 3: On November 1, 2010, Daramson purchased an equipment at a cost of N10 million. The estimated useful life of the equipment was 20 years. On October 31, 2016, the equipment was abandoned because of changes in technology. The equipment in its current state can be used in another line of business. The current replacement cost for the equipment equivalent size is N4.2 million. Because of the nature of the noncurrent asset, value-in-use and net selling price are unrealistic estimates of the value of the equipment. The change in use would have no effect on the estimated life of the equipment.