ICAN 2026 Strategic Business Reporting | Mixed

NaijaTel Plc acquired 30% of Royal Networks Limited on January 1, 2023 for N4.5billion when the fair value of Royal Networks’ net assets was N15billion. On July 1, 2024, NaijaTel Plc acquired a further 50% stake in Royal Networks Limited, thereby obtaining control. The fair value of NaijaTel’s pre-existing 30% interest at the acquisition date was N6.5billion. The non-controlling interest (NCI) was measured at a fair value of N5.5billion. Deferred consideration of N2billion is payable on June 30, 2025 (discount rate 10%). Royal Networks Limited owns 100% of ConnectNow Limited, a regional subsidiary based in Northern Nigeria. The group reporting date is December 31, 2024 and the presentation currency is the Nigerian Naira (N). Extract of statement of profit or loss for the year ended December 31, 2024 NaijaTel Plc (N’m) Royal Networks Limited (N’m) ConnectNow Limited (N’m) Revenue 40,000 20,000 8,000 Cost of sales (25,000) (12,000) (4,800) Gross profit 15,000 8,000 3,200 Operating expenses (6,000) (3,500) (1,400) Operating profit 9,000 4,500 1,800 Finance costs (1,200) (800) (300) Profit before tax 7,800 3,700 1,500 Income tax expense (2,400) (1,100) (500) Profit for the year 5,400 2,600 1,000

As the finance director, you have just been informed by the group managing director of your company, Agbaye Plc, that your company is planning to make another acquisition. The target company is Arugungu Limited, a private limited liability company that has recently had its application for additional loan rejected by its bankers on the basis that there are insufficient assets to offer as security. However, the financial analyst of your company has been asked to provide more information about Arugungu Limited. Find below the email of the financial analyst to the group MD on Arugungu Limited: From: Financial analyst To: Group MD Date: January 31, 2025 Dear Sir, Find attached (Appendix 1) the most recent financial statements of Arugungu Limited for the year ended December 31, 2024. For the last eight years, the company has been manufacturing and selling its own brand of antibiotic drugs known as ARUGMOXIN. Over the last fifteen months, the company has invested in developing an online presence. The sales director of Arugungu Limited has also used his extensive contacts to secure a deal with a chain of wholesale pharmaceutical companies. The contract was set up on July 1, 2024 and has generated revenue of N34million and a strong profit margin. The managing director of Arugungu Limited now wishes to build on the work of the sales director to develop further sales opportunities. However, Arugungu’s Limited bankers that currently provides them with long-term loan and overdraft facilities has rejected Arugungu Limited’s application for additional funding. If you need further information don’t hesitate to contact me Thanks. Mohammed.

Organisations or reporting entities could be related to one another in different ways. To ensure proper accountability and reliability of information in annual reports, there are guiding principles, rules and regulations on related party transactions.

Omolewa Nigeria Plc operates a defined benefit pension plan for its employees. The company’s actuarial information received for the year ended December 31, 2024, revealed that the present value of defined benefit obligation (DBO) at January 1, 2024, was N180million, while the fair value of the plan’s assets was N160million. The previous (due to benefit change) and current service costs were N10million and N25million respectively. Interest cost on obligation was 6% while interest income on plan assets was 5%. The company paid N20million employer contributions during the year while, benefits paid to retired employees was N15million. At December 31, 2024, the present value of DBO amounts to N210million and a fair value of plan assets of N175million.

The importance of compliance with accounting standards cannot be over emphasised. Accountants who are responsible for the preparation of financial information must ensure that the information they prepare is technically correct, reports the substance of the transaction and is adequately disclosed, otherwise their actions would be unethical.

You are a senior financial analyst at Nexus Plc. The company plans to enhance its sustainability and real-time reporting processes. The board is considering adopting blockchain for audit trail transparency and machine learning for predictive analysis.

You are the Financial Controller of Fiwajoye Plc, a bottling company with diverse products. The accountant responsible for preparing the 2024 annual financial statements is considering the accounting treatment of the following and has approached you for guidance.