Matthew Black is well aware that the achievement of the growth targets for the 2005 to 2007 period will depend on

successful implementation of the strategy, affecting all parts of the company’s activities.

(c) Explain the key issues affecting implementation and the changes necessary to achieve Universal’s ambitious

growth strategy. (15 marks)

The town of Brighttown in Euraria has a mayor (elected every five years by the people in the town) who is responsible for, amongst other things, the transport policy of the town.

A year ago, the mayor (acting as project sponsor) instigated a ‘traffic lite’ project to reduce traffic congestion at traffic lights in the town. Rather than relying on fixed timings, he suggested that a system should be implemented which made the traffic lights sensitive to traffic flow. So, if a queue built up, then the lights would automatically change to green (go). The mayor suggested that this would have a number of benefits. Firstly, it would reduce harmful emissions at the areas near traffic lights and, secondly, it would improve the journey times for all vehicles, leading to drivers ‘being less stressed’. He also cited evidence from cities overseas where predictable journey times had been attractive to flexible companies who could set themselves up anywhere in the country. He felt that the new system would attract such companies to the town.

The Eurarian government has a transport regulation agency called OfRoad. Part of OfRoad’s responsibilities is to monitor transport investments and it was originally critical of the Brighttown ‘traffic lite’ project because the project’s benefits were intangible and lacked credibility. The business case did not include a quantitative cost/benefit analysis. OfRoad has itself published a benefits management process which classifies benefits in the following way.

Financial: A financial benefit can be confidently allocated in advance of the project. Thus if the investment will save $90,000 per year in staff costs then this is a financial benefit.

Quantifiable: A quantifiable benefit is a benefit where there is sufficient credible evidence to suggest, in advance, how much benefit will result from the project. This benefit may be financial or non-financial. For example, energy savings from a new building might be credibly predicted in advance. However, the exact amount of savings cannot be accurately forecast.

Measurable benefit: A measurable benefit is a benefit which can only be confidently assessed post-implementation, and so cannot be reliably predicted in advance. Increase in sales from a particular initiative is an example of a measurable benefit. Measurable benefits may either be financial or non-financial.

Observable benefit: An observable benefit is a benefit which a specific individual or group will decide, using agreed criteria, has been realised or not. Such benefits are usually non-financial. Improved staff morale might be an example of an observable benefit.

One month ago, the mayoral elections saw the election of a new mayor with a completely distinct transport policy with different objectives. She wishes to address traffic congestion by attracting commuters away from their cars and onto public transport. Part of her policy is a traffic light system which gives priority to buses. The town council owns the buses which operate in the town and they have invested heavily in buses which are comfortable and have significantly lower emissions than the conventional cars used by most people in the town. The new mayor wishes to improve the frequency, punctuality and convenience of these buses, so that they tempt people away from using their cars. This will require more buses and more bus crews, a requirement which the mayor presents as ‘being good for the unemployment rate in this town’. It will also help the bus service meet the punctuality service level which it published three years ago, but has never yet met. ‘A reduction in cars and an increase in buses will help us meet our target’, the mayor claims.

The mayor has also suggested a number of initiatives to discourage people from taking their cars into the town. She intends to sell two car parks for housing land (raising $325,000) and this will reduce car park capacity from 1,000 to 800 car spaces per day. She also intends to raise the daily parking fee from $3 to $4. Car park occupancy currently stands at 95% (it is difficult to achieve 100% for technical reasons) and the same occupancy rate is expected when the car park capacity is reduced.

The new mayor believes that her policy signals the fact that Brighttown is serious about its green credentials. ‘This’, she says, ‘will attract green consumers to come and live in our town and green companies to set up here. These companies and consumers will bring great benefit to our community.’ To emphasise this, she has set up a Go Green team to encourage green initiatives in the town.

The ‘traffic lite’ project to tackle congestion proposed by the former mayor is still in the development stage. The new mayor believes that this project can be modified to deliver her vision and still be ready on the date promised by her predecessor.

Required:

(a) A ‘terms of reference’ (project initiation document, project charter) was developed for the ‘traffic lite’ project to reduce traffic congestion.

Discuss what changes will have to be made to this ‘terms of reference’ (project initiation document, project charter) to reflect the new mayor’s vision of the project. (5 marks)

(b) The new mayor wishes to re-define the business case for the project, using the benefits categorisation suggested by OfRoad. Identify costs and benefits for the revised project, classifying each benefit using the guidance provided by OfRoad. (14 marks)

(c) Stakeholder management is the prime responsibility of the project manager.

Discuss the appropriate management of each of the following three stakeholders identified in the revised (modified) project.

(i) The new mayor;

(ii) OfRoad;

(iii) A private motorist in Brighttown who uses his vehicle to commute to his job in the town. (6 marks)

(iv) The stamp duty and/or stamp duty land tax payable by the Saturn Ltd group; (2 marks)

Additional marks will be awarded for the appropriateness of the format and presentation of the memorandum

and the effectiveness with which the information is communicated. (2 marks)

(b) Describe to the Beth Group the possible advantages of producing a separate environmental report.

(8 marks)

(b) Explain in the context of Flavours Fine Foods, what is meant by:

(i) responsibility; (4 marks)

Swim Co offers training courses to athletes and has prepared the following breakeven chart:

Required:

(a) State the breakeven sales revenue for Swim Co and estimate, to the nearest $10,000, the company’s profit if 500 athletes attend a training course. (2 marks)

(b) Using the chart above, explain the cost and revenue structure of the company. (8 marks)

Faithful representation is a fundamental characteristic of useful information within the IASB’s Conceptual framework for financial reporting.

Which of the following accounting treatments correctly applies the principle of faithful representation?

A.Reporting a transaction based on its legal status rather than its economic substance

B.Excluding a subsidiary from consolidation because its activities are not compatible with those of the rest of the group

C.Recording the whole of the net proceeds from the issue of a loan note which is potentially convertible to equity shares as debt (liability)

D.Allocating part of the sales proceeds of a motor vehicle to interest received even though it was sold with 0% (interest free) finance

(d) Sirus raised a loan with a bank of $2 million on 1 May 2007. The market interest rate of 8% per annum is to

be paid annually in arrears and the principal is to be repaid in 10 years time. The terms of the loan allow Sirus

to redeem the loan after seven years by paying the full amount of the interest to be charged over the ten year

period, plus a penalty of $200,000 and the principal of $2 million. The effective interest rate of the repayment

option is 9·1%. The directors of Sirus are currently restructuring the funding of the company and are in initial

discussions with the bank about the possibility of repaying the loan within the next financial year. Sirus is

uncertain about the accounting treatment for the current loan agreement and whether the loan can be shown as

a current liability because of the discussions with the bank. (6 marks)

Appropriateness of the format and presentation of the report and quality of discussion (2 marks)

Required:

Draft a report to the directors of Sirus which discusses the principles and nature of the accounting treatment of

the above elements under International Financial Reporting Standards in the financial statements for the year

ended 30 April 2008.