如何一举拿下国际注册会计师考试？

6 Alasdair, aged 42, is single. He is considering investing in property, as he has heard that this represents a good

investment. In order to raise the funds to buy the property, he wants to extract cash from his personal company, Beezer

Limited, whose year end is 31 December.

Beezer Limited was formed on 1 May 1998 with ￡1,000 of capital issued as 1,000 ￡1 ordinary shares, and traded

until 1 January 2005 when Alasdair sold the trade and related assets. The company’s only asset is cash of

￡120,000. Alasdair wants to extract this cash from the company with the minimum amount of tax payable. He is

considering either, paying himself a dividend of ￡120,000, on 31 March 2006, after which the company would have

no assets and be wound up or, leaving the cash in the company and then liquidating the company. Costs of liquidation

of ￡5,000 would then be incurred.

Since Beezer Limited ceased trading, Alasdair has been taken on as a partner at a marketing firm, Gallus & Co. He

estimates his profit share for the year of assessment 2005/06 will be ￡30,000. He has not made any capital disposals

in the current tax year.

Alasdair wishes to reinvest the cash extracted from Beezer Limited in property but is not sure whether he should invest

directly in residential or commercial property, or do so via some form. of collective investment. He is aware that Gallus

& Co are looking to rent a new warehouse which could be bought for ￡200,000. Alasdair thinks that he may be able

to buy the warehouse himself and lease it to his firm, but only if he can borrow the additional money to buy the

property.

Alasdair has a 25% shareholding in another company, Glaikit Limited, whose year end is 31 March. The remaining

shares in this company are held by his friend, Gill. Alasdair is considering borrowing ￡15,000 from Glaikit Limited

on 1 January 2006. He does not intend to pay any interest on the loan, which is likely to be written off some time

in 2007. Alasdair does not have any connection with Glaikit Limited other than his shareholding.

Required:

(a) Advise Alasdair whether or not a dividend payment will result in a higher after-tax cash sum than the

liquidation of Beezer Limited. Assume that either the dividend would be paid on 31 March 2006 or the

liquidation would take place on 31 March 2006. (9 marks)

Assume that Beezer Limited has always paid corporation tax at or above the small companies rate of 19%

and that the tax rates and allowances for 2004/05 apply throughout this part.

5 Jones and Cousin, a public quoted company, operate in twenty seven different countries and earn revenue and incur

costs in several currencies. The group develops, manufactures and markets products in the medical sector. The growth

of the group has been achieved by investment and acquisition. It is organised into three global business units which

manage their sales in international markets, and take full responsibility for strategy and business performance. Only

five per cent of the business is in the country of incorporation. Competition in the sector is quite fierce.

The group competes across a wide range of geographic and product markets and encourages its subsidiaries to

enhance local communities by reinvestment of profits in local educational projects. The group’s share of revenue in a

market sector is often determined by government policy. The markets contain a number of different competitors

including specialised and large international corporations. At present the group is awaiting regulatory approval for a

range of new products to grow its market share. The group lodges its patents for products and enters into legal

proceedings where necessary to protect patents. The products are sourced from a wide range of suppliers, who, once

approved both from a qualitative and ethical perspective, are generally given a long term contract for the supply of

goods. Obsolete products are disposed of with concern for the environment and the health of its customers, with

reusable materials normally being used. The industry is highly regulated in terms of medical and environmental laws

and regulations. The products normally carry a low health risk.

The Group has developed a set of corporate and social responsibility principles during the period which is the

responsibility of the Board of Directors. The Managing Director manages the risks arising from corporate and social

responsibility issues. The group wishes to retain and attract employees and follows policies which ensure equal

opportunity for all the employees. Employees are informed of management policies, and regularly receive in-house

training.

The Group enters into contracts for fixed rate currency swaps and uses floating to fixed rate interest rate swaps. The

cash flow effects of these swaps match the cash flows on the underlying financial instruments. All financial

instruments are accounted for as cash flow hedges. A significant amount of trading activity is denominated in the

Dinar and the Euro. The dollar is its functional currency.

Required:

(a) Describe the principles behind the Management Commentary discussing whether the commentary should be

mandatory or whether directors should be free to use their judgement as to what should be included in such

a commentary. (13 marks)

(ii) Advise Andrew of the tax implications arising from the disposal of the 7% Government Stock, clearly

identifying the tax year in which any liability will arise and how it will be paid. (3 marks)

3 Airtite was set up in 2000 as a low cost airline operating from a number of regional airports in Europe. Using these

less popular airports was a much cheaper alternative to the major city airports and supported Airtite’s low cost service,

modelled on existing low cost competitors. These providers had effectively transformed air travel in Europe and, in so

doing, contributed to an unparalleled expansion in airline travel by both business and leisure passengers. Airtite used

one type of aircraft, tightly controlled staffing levels and costs, relied entirely on online bookings and achieved high

levels of capacity utilisation and punctuality. Its route network had grown each year and included new routes to some

of the 15 countries that had joined the EU in 2004. Airtite’s founder and Chief Executive, John Sykes, was an

aggressive businessman ever willing to challenge governments and competitors wherever they impeded his airline and

looking to generate positive publicity whenever possible.

John is now looking to develop a strategy which will secure Airtite’s growth and development over the next 10 years.

He can see a number of environmental trends emerging which could significantly affect the success or otherwise of

any developed strategy. 2006 had seen fuel costs continue to rise reflecting the continuing uncertainty over global

fuel supplies. Fuel costs currently account for 25% of Airtite’s operating costs. Conversely, the improving efficiency of

aircraft engines and the next generation of larger aircraft are increasing the operating efficiency of newer aircraft and

reducing harmful emissions. Concern with fuel also extends to pollution effects on global warming and climate

change. Co-ordinated global action on aircraft emissions cannot be ruled out, either in the form. of higher taxes on

pollution or limits on the growth in air travel. On the positive side European governments are anxious to continue to

support increased competition in air travel and to encourage low cost operators competing against the over-staffed

and loss-making national flag carriers.

The signals for future passenger demand are also confused. Much of the increased demand for low cost air travel to

date has come from increased leisure travel by families and retired people. However families are predicted to become

smaller and the population increasingly aged. In addition there are concerns over the ability of countries to support

the increasing number of one-parent families with limited incomes and an ageing population dependent on state

pensions. There is a distinct possibility of the retirement age being increased and governments demanding a higher

level of personal contribution towards an individual’s retirement pension. Such a change will have a significant impact

on an individual’s disposable income and with people working longer reduce the numbers able to enjoy leisure travel.

Finally, air travel will continue to reflect global economic activity and associated economic booms and slumps together

with global political instability in the shape of wars, terrorism and natural disasters.

John is uncertain as to how to take account of these conflicting trends in the development of Airtite’s 10-year strategy

and has asked for your advice.

Required:

(a) Using models where appropriate, provide John with an environmental analysis of the conditions affecting the

low cost air travel industry. (12 marks)