(c) Briefly outline the corporation tax (CT) issues that Tay Limited should consider when deciding whether to

acquire the shares or the assets of Tagus LDA. You are not required to discuss issues relating to transfer

pricing. (7 marks)

5 Financial statements have seen an increasing move towards the use of fair values in accounting. Advocates of ‘fair

value accounting’ believe that fair value is the most relevant measure for financial reporting whilst others believe that

historical cost provides a more useful measure.

Issues have been raised over the reliability and measurement of fair values, and over the nature of the current level

of disclosure in financial statements in this area.

Required:

(a) Discuss the problems associated with the reliability and measurement of fair values and the nature of any

additional disclosures which may be required if fair value accounting is to be used exclusively in corporate

reporting. (13 marks)

(b) Discuss the view that fair value is a more relevant measure to use in corporate reporting than historical cost.

(12 marks)

5 Your manager has heard of Maslow’s hierarchy of needs theory and how it has some relevance to motivational techniques.

Required:

(a) Explain Maslow’s hierarchy of needs theory. (10 marks)

(ii) consignment inventory; and (3 marks)

(c) Critically discuss the likely effectiveness of standard questionnaires sent to other auditors as a means of

obtaining information required. (5 marks)

16 Which of the following statements about accounting concepts and conventions are correct?

(1) The entity concept requires that a business is treated as being separate from its owners.

(2) The use of historical cost accounting tends to understate assets and profit when prices are rising.

(3) The prudence concept means that the lowest possible values should be applied to income and assets and the

highest possible values to expenses and liabilities.

(4) The money measurement concept means that only assets capable of being reliably measured in monetary terms

can be included in the balance sheet of a business.

A 1 and 2

B 2 and 3

C 3 and 4

D 1 and 4