represents a change of accounting policy and therefore wish to treat the write off as a prior period

adjustment.
(e) A provision for income tax for the year to 31 March 20X1 of $15 million is required.
Required
(a) Prepare the statement of profit or loss of Winger for the year to 31 March 20X1. (9 marks)
(b) Prepare a statement of financial position as at 31 March 20X1 in accordance with International
Accounting Standards as far as the information permits. (11 marks)
(Total = 20 marks)
Note. As you have not yet covered IAS 1 Presentation of Financial Statements, you do not need to comply
with its detailed requirements.

11 Global Konstruckshen
Global Konstrukshen Co is a civil engineering company. It started work on two long-term projects during
the year ended 31 December 20X0. The following figures relate to those projects at the reporting date.
Alpine bypass World Ecology Centre
$'000 $'000
Contract price 9,000 8,000
Costs incurred to date 1,400 2,900
Estimated costs to completion 5,600 5,200
Value of work certified to date 2,800 3,000
Cash received from contractee 2,600 3,400
An old mineshaft has been discovered under the site for the World Ecology Centre and the costs of dealing
with this have been taken into account in the calculation of estimated costs to completion. Global's
lawyers are reasonably confident that the customer will have to bear the additional costs which will be
incurred in stabilising the land. If negotiations are successful then the contract price will increase to $10m.
Global recognises turnover and profits on long-term (construction) contracts on the basis of work certified
to date.
Required
(a) Calculate the figures which would appear in Global Konstrukshen's financial statements in respect
of these two projects.
(b) It has been suggested that profit on construction contracts should not be recognised until the
contract is completed. Briefly explain whether you believe that this suggestion would improve the
quality of financial reporting for long-term contracts.

12 Provisions 45 mins
IAS 37 Provisions, contingent liabilities and contingent assets was issued in 1998. Prior to its publication,
there was no International Accounting Standard that dealt with the general subject of accounting for
provisions.
Extract prepares its financial statements to 31 December each year. During the years ended 31 December
20X0 and 31 December 20X1, the following event occurred.
Extract is involved in extracting minerals in a number of different countries. The process typically involves
some contamination of the site from which the minerals are extracted. Extract makes good this
contamination only where legally required to do so by legislation passed in the relevant country.
The company has been extracting minerals in Copperland since January 20W8 and expects its site to
produce output until 31 December 20X5. On 23 December 20X0, it came to the attention of the directors
of Extract that the government of Copperland was virtually certain to pass legislation requiring the making
good of mineral extraction sites. The legislation was duly passed on 15 March 20X1. The directors of

488 Exam question bank