June+2023+BG+Examiner 27s+guide

BUSINESS
VALUE,
GOVERNANCE
AND RISK
PROFESSIONAL PROGRAMME
EXAMINER’S GUIDE:
JUNE 2023 EXAMINATION
The contents of this examiner’s guide are intended
as a guide and not professional advice. Although
every effort has been made to ensure that the
contents of this guide are correct for the
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©
Accounting and Corporate Regulatory Authority
2023
SINGAPORE CA QUALIFICATION | BUSINESS VALUE, GOVERNANCE & RISK
Contents
Page
Introduction 3
Section 1
Module Objective 5
Section 2
Marks Allocation and Examination Format 5
Section 3
Examiner’s Report 6
Section 4
Examination Questions 6
Section 5
Suggested Solutions for Individual Questions 7
Section 6
Common Examination Verbs 40
© 2023 Accounting and Corporate Regulatory Authority Page 2 of 47

INTRODUCTION
Disclaimer
The examination questions and suggested solutions in this publication have not been
updated for any changes in legislation, standards or syllabus. They must be used with
caution when preparing for any examinations.
Please also note that the solutions listed in this document are “suggested” solutions
only. Candidates who provide alternative, valid answers not covered in this document
will be awarded the appropriate credit.
For educational purposes, the suggested solutions are intended to be more

comprehensive and detailed than would be expected from a Candidate taking the
examination.
The Examiner’s Guide

The ACRA provides the Examiner’s Guide to help Candidates to be better prepared
for the Singapore CA Qualification examinations. The Examiner’s Guide provides the
examiner’s report and suggested answers to the June 2023 Examinations.
Candidates are advised to approach the Registered Learning Organisations (RLOs)

for tuition support and should they have any queries.
About the Accounting and Corporate Regulatory Authority (ACRA)

The Accounting and Corporate Regulatory Authority (ACRA) is the regulator of
business registration, financial reporting, public accountants, and corporate service
providers. ACRA is also responsible for developing the accountancy sector and setting
the accounting standards for companies, charities, co-operative societies, and
societies in Singapore. ACRA fosters a vibrant and trusted business environment that
enables innovation and growth and contributes towards making Singapore the best
place for business.
ACRA was formed as a statutory board on 1 April 2004, following the merger of the
Registry of Companies and Businesses (RCB) and the Public Accountants' Board
(PAB). This merger sought to achieve synergies between the monitoring of corporate
compliance with disclosure requirements and the regulation of public accountants
performing statutory audits.
On 1 April 2023, ACRA, the Singapore Accountancy Commission (SAC) and the
Accounting Standards Council (ASC) merged as one entity, taking on the name,
ACRA. The merger aimed to strengthen the effectiveness of regulation, standards-
setting, and sector development by harnessing synergies across complementary
accountancy-related functions.
For more information, please visit https://www.acra.gov.sg

About the Institute of Singapore Chartered Accountants (ISCA)

The Institute of Singapore Chartered Accountants (ISCA) is the national accountancy
body of Singapore. ISCA’s vision is to be a world-class accountancy body of trusted
professionals, contributing towards an innovative and sustainable economy. There are
over 33,000 ISCA members making their stride in businesses across industries in
Singapore and around the world.
Established in 1963, ISCA is an advocate of the interests of the profession.

Complementing its global mindset with Asian Insights, ISCA leverages its regional
expertise, knowledge, and networks with diverse stakeholders to contribute towards
the advancement of the accountancy profession.
ISCA is the Designated Entity to confer the Chartered Accountant of Singapore - CA
(Singapore) - designation.
ISCA is a member of Chartered Accountants Worldwide, a global family that brings

together the members of leading institutes to create a community of over 1.8 million
Chartered Accountants and students in more than 190 countries.
For more information, please visit www.isca.org.sg.

Section 1
Module Objective
Upon completion of the Business Value, Governance & Risk module, Candidates
will be able to demonstrate a sound understanding of the basis upon which
corporate value is created, maintained sustainably (e.g. sound investment
decisions) and protected (e.g. by avoidance of excessive concentration of power
and lack of scrutiny of management). Candidates will be able to assess how
governance arrangements may prevent long-term dysfunctional behaviour. The
module addresses risk management as a key factor in governance and strategy. It
develops skills from previous studies in asset valuation in the context of wider
considerations of capital investment appraisal, including strategic investment
decisions, taking into account underlying financial risk management concepts for
effective and responsible decision making.
Section 2
Marks Allocation and Examination Format
Question 1 – (a), (b) and (c) 31 marks

Question 4 – (a) to (f) 17 marks
This module is assessed by way of a 3-hour 15 minutes open-book, essay and case-
study based examination, and requires the use of a personal laptop. There are four
questions, and each question may have multiple parts requiring structured
responses. For instance, short answer questions, essay style questions,
computations, or standard format questions
In order to achieve a pass in this module, a Candidate must achieve at least 50% of
the available marks in the final examination.

Section 3
Examiner’s Report
The Examiner’s Reports for the past examination sessions are available for download
on the ACRA website (https://www.acra.gov.sg/accountancy/professional-
development/singapore-chartered-accountant-qualification/professional-programme).
Please click here (https://www.acra.gov.sg/docs/default-source/default-document-

library/accountancy/singapore-chartered-accountant-qualification/bg-examiner's-
report-(jun-2023).pdf) to download the Business Value, Governance & Risk June 2023
Examiner’s Report.
Section 4
Examination Questions
The Examination Questions for the past examination sessions are available for
download on the ACRA website (https://www.acra.gov.sg/accountancy/professional-
development/singapore-chartered-accountant-qualification/professional-programme)
Please click here (https://www.acra.gov.sg/docs/default-source/default-document-

library/accountancy/singapore-chartered-accountant-qualification/bg-exam-paper-
(jun-2023).pdf) to download the Business Value, Governance & Risk June 2023
Examination Questions.

Section 5
Suggested Solutions for Individual Questions
Question 1 – (a), (b) and (c) (Total: 31 marks)
(a) Calculate a suitable risk-adjusted discount rate for Singing Sauces for the
purpose of valuing Food Express. (9 marks)
Similar food processing company with Malaysian interests is 2.28.
Step 1: Ungear proxy company equity beta

ßg = ßu [1 + (1 – t) VD/VE] therefore, 2.28 = ßu [1 + (1 – 0.17) x 1/2]
ßu = 1.611
This is the ungeared beta to be applied by Singing Sauces when valuing Food
Express.
Step 2: Regear the asset beta to Singing Sauces gearing level

Value of Equity of Singing Sauces (VE) = S$’ 70,000m (S$3.5 x 20,000m shares)
Value of Debt of Singing Sauces (VD) at par value = S$’ 20,000m
ßg = ßu [1 + (1 – t) VD/VE] = 1.611 x [1 + (1 – 0.17) 20,000 / 70,000] = 1.993
Step 3: Calculate the cost of equity (Ke%) using CAPM

Ke = Rf + ßg (Rm – Rf) = 2.0 + 1.993 (6.25 – 2.00) = 10.47%

Step 4: Calculate the after-tax cost of debt (Kd%) using credit rate tables
Rating 1 year 2 years 3 years 5 years 7 years 10 years 20 years
AAA 24 30 34 39 49 63 85
AA 34 43 49 61 69 81 109
A 59 77 83 97 102 109 143
BBB 73 119 139 159 167 175 213
BB 249 284 296 319 326 343 390

B 468 485 516 543 568 585 643
CCC+ 594 630 652 691 721 742 764
Current Singing Sauces debt is S$20,000 million with average 15 years to maturity.
The expected yield of the bond = risk free bond rate + credit risk premium.
Expected yield on Singapore government bonds, which equates to risk free, is 2.0%.
Calculation of Credit Risk Premium

The table of credit risk premiums provided does not include credit spreads for 20-
year bonds therefore an adjustment, using linear interpolation, is required for 15-
year maturities between 10 and 20 years.
1 per cent = 100 basis points, and the table is quoted in basis points
• The credit risk premium on a 10-year A rated bond is 109 basis points.
• The credit risk premium on a 20-year A rated bond is 143 basis points.
Credit risk premium for 15 years = 10-year credit risk premium + additional 5-year
bond maturity.
Evaluate the additional risk premium per year = (143 – 109) / (10 years) = 3.4 basis
points per year.

Estimate additional 5 years of risk premium = 5 years x 3.4 = 17 basis points.
Credit risk premium for 15 years = 10-year credit risk premium + additional 5-year
bond maturity = 109 + 17 = 126 basis points (1.26%)
The expected yield of A rated 15-year bond = risk free bond rate + credit risk premium
= 2.00 + 1.26 = 3.26%
This is quoted before corporation tax, so deduction tax relief on interest.
The estimated post-tax cost of debt (KD%) = 3.26% x (1 - 0.17) = 2.71%
Step 5: Determine the WACC of Singing Sauces for the purpose of valuing
Food Express
VE = 70,000
VD = 20,000
Ke = 10.47 %
Kd = 2.71 %
WACC = VE % x Ke + VD % x Kd = 8.75%

Question 1 cont.
(b) Calculate an estimated valuation for Food Express using the free cash flow to the firm valuation method. Your valuation should
be for 100% of Food Express shares.
(15 marks)
Note: Candidates are required to ignore ALL potential synergy which may arise on acquisition. Apply year end discount factors
throughout and show cash flow clearly by year.
2023 Annual 2024 2025 2026 2027 2028 and

beyond
S$'m growth S$'m S$'m S$'m S$'m S$'m
Revenue 6,941.1 5.0% 7,288.2 7,652.6 8,035.2 8,437.0
Expenditure
Staff costs (1,406.5) 2.5% (1,441.7) (1,477.7) (1,514.6) (1,552.5)
Production materials (2,071.8) 3.5% (2,144.3) (2,219.4) (2,297.0) (2,377.4)
Depreciation of property, plant and (485.0) (540.0) (472.8) (419.9) (378.3)
equipment
Other manufacturing costs (394.3) 4.0% (410.1) (426.5) (443.5) (461.3)
Distribution expenses (960.4) 5.0% (1,008.4) (1,058.8) (1,111.8) (1,167.4)
Marketing and administration expenses (242.6) 2.0% (247.5) (252.4) (257.4) (262.6)
Research and development costs (144.9) 2.0% (147.8) (150.8) (153.8) (156.8)

Other operating expenses (427.7) 2.5% (438.4) (449.4) (460.6) (472.1)

Total expenditure (6,133.2) (6,378.1) (6,507.7) (6,658.7) (6,828.5)
Operating Profit 807.9 910.0 1,144.9 1,376.5 1,608.5
Finance charges (62.5) 2% (63.8) (65.0) (66.3) (67.7)
Profit before taxation 745.1 846.3 1,079.8 1,310.2 1,540.8
Taxation at 25% (211.6) (270.0) (327.5) (385.2)
Profit after taxation 634.7 809.9 982.6 1,155.6 1,178.7
Adjust for:
Add back: 47.8 48.8 49.7 50.7 51.8
Finance charges (1-tax)
Add back: Depreciation 540.0 472.8 419.9 378.3 385.9
(See Working 1)
Capex (investment in new production (200.0) (204.0) (208.1) (212.2) (216.5)
equipment)
Increase in working capital (See Working 2) (52.1) (54.7) (57.4) (60.3) (61.5)
Enterprise Free Cash Flows (Cashflows 970.5 1,072.8 1,186.8 1,312.2 1,338.4
before interest after tax)
Terminal Value 19,839.7
(See Working 3)
Discount factor at WACC 8.75% 0.920 0.846 0.778 0.715 0.715

Present Value 892.4 907.2 922.8 938.3 14,186.6

Free Cash Flow Valuation of Food 17,847.4
Express (debt plus equity)
Deduct: Value of Food Express Debt (1,500.0)
Free Cash Flow Valuation of Food $S 16,347.4 million
Express

Working 1: Depreciation calculation

2024 2025 2026 2027
$S’m $S’m $S’m $S’m
Balance brought forward 2,500.0 2,160.0 1,891.2 1,679.4
Annual capital expenditure 200.0 204.0 208.1 212.2
Total (assume full year of depreciation of additions in the year) 2,700.0 2,364.0 2,099.3 1,891.7
Depreciation 20% 540.0 472.8 419.9 378.3
Balance carried forward 2,160.0 1,891.2 1,679.4 1,513.3
Working 2: Additional cash flows resulting from an increased working capital requirement
Assume working capital cash flows occur in same year as increased revenue.
2023 2024 2025 2026 2027
S$'m S$'m S$'m S$'m S$'m
Revenue 6,941.1 7,288.2 7,652.6 8,035.2 8,437.0
Change in revenue 347.1 364.4 382.6 401.8
Increase in working capital (15%) 52.1 54.7 57.4 60.3
Increase in working capital cashflow (52.1) (54.7) (57.4) (60.3)
Working 3: Terminal value for years 2024 and onwards

Terminal Value = Annual net cash flow / (WACC - annual growth) = (1,338.4) / (0.0875 - 0.02) = 19,839.7

Question 1 cont.
(c) Calculate the change in valuation of Food Express calculated in part (b) if the
following changes to the assumptions made by the Directors of Singing Sauces
occur simultaneously and explain your result.
Change in assumptions:
• The proxy beta used to determine the WACC in part (a) rises by 20% due
to increased risk expectations.
• Singing Sauces credit rating falls from A to BBB due to market credit risk
concerns of the expanded company.
• The risk free rate rises by 1%.
• Revenue annual growth rates decrease from 5% to 4% in the years from
30 June 2024 to 2027. (7 marks)
• Increase the beta in the WACC calculated by 20% from 2.28 to 2.736. (2.28 x 1.2
= 2.736)
• Increase risk free rate from 2% to 3% in the Ke calculation.
• Adjust credit risk premium from A to BBB as follows:

− The credit risk premium on a 10-year BBB rated bond is 175 basis points
− The credit risk premium on a 20-year BBB rated bond is 213 basis points
• Increase risk free rate from 2% to 3% in Kd calculation.
• Apply revised WACC of 9.3% to free cash flow valuation of Food Express.
• State the new valuation and numerical change in valuation.
A higher return of 9.3% per annum (WACC) is required by Singing Sauces for the
acquisition of Food Express due to the higher risk expectation, lower revenue growth
expectation and inflationary pressures. This can only be delivered if Singing Sauces
pays less for Food Express which is reflected in the lower valuation evidenced.

(a) For each of the EIGHT risks identified in Philip Chan’s email to the Board,
describe each risk further for the purpose of inclusion in Singing Sauces’ risk
register. (8 marks)
(b) Discuss the potential consequences of each risk described in part (a) which
will aid the evaluation of risk at the next Board meeting.
(8 marks)
(c) Determine a suitable risk mitigation strategy which will address the potential
consequences of each risk discussed in part (b).
(8 marks)

Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

Description Impact Strategy
1. Compliance with Food Safety Regulations
Food safety regulation is Food safety is a critical Singing Sauces must
essential to ensure there concern for stakeholders, confirm that Food
are minimal standards in as failure to comply and Express has satisfactory
place which food meet the required procedures in place to
producers need to meet in standard can result in ensure compliance with
order to be allowed to unsafe food which can Malaysian food safety
continue to operate and to cause illness or death in laws and regulations and
protect food consumers. consumers. This would has a proven and
Currently, Singing Sauces result in severe documented history of
has little or no knowledge reputational brand compliance in order to
of Malaysia food safety damage, expensive proceed with the
regulations and financial exposure to acquisition. To achieve
possesses no knowledge litigation and the food this, Singing Sauces
of the standard of` Food safety regulator in compliance team should
Express’ compliance with Malaysia may issue fines also receive training to
food safety standards. or prevent Food Express become familiar with
from operating until Malaysian food safety
improvements are made. standard. If Food Express
products are to be
imported into Singapore,
then Singing Sauces will
need to confirm that the
manufacturing processes
and ingredients comply
with Singapore food
safety laws and
regulations.

Question 2 cont.

2. Supply chain disruption (logistics)
Singing Sauces could This risk could impact on It is vital that Singing
experience an event (or Singing Sauces production Sauces has business
simultaneous multiple capability and its ability to continuity plans with its
events) which result in meet its current orders or significant suppliers which
supply chain disruption accept new orders in the are ready to be
causing delivery delays short term. A more severe implemented with agreed
which may be due to event may result in actions to minimise the
supplier production or temporary production impact of a disrupting
capacity issues, poor reductions (i.e. 5 day to 3 event. Additionally,
harvest of raw ingredients day week) or stoppages. Singing Sauces needs to
resulting in scarcity, This would affect Singing include a list of alternative
transport issues, workers Sauces’ ability to supply local suppliers to call on
strikes or pandemic its markets and in such events and
health issues, natural customers and consider holding a buffer
disasters and extreme restaurants may be forced of non-perishable
weather. to use alternative supplies in storage which
products. The long-term is sufficient to continue
impact may be that production for say 2-4
customers do not switch weeks, depending on
back to Singing Sauces lead time analysis.
once the disruption has
ended.

Question 2 cont.

3. Availability of suppliers
This is a risk that Singing Customers are increasingly Singing sauces needs to
Sauces fails to develop a requiring that food take a long-term approach
transparent, resilient products use ingredients in its supply chain
supply chain with from sustainable and management and develop
sustainable suppliers ethical sources and will a strategy to implement a
who are equipped to switch from food products sustainable food sourcing
navigate the impact of that lack transparency on programme which focuses
climate change and other sustainable and ethical on regenerative food
geo-political factors suppliers used. Also, a sources, selecting
which damages Singing long-term product suppliers which can cope
Sauces ability to meet shortage caused by better with the impacts of
long-term future demand prolonged supply chain climate change and
for its products. difficulties will impact extreme weather
negatively on the Singing changes. Singing sauces
Sauces brand as trust in can also consider a
the products’ on-demand vertical integration
availability at retailers is a strategy for ingredients
fundamental component which are most likely to
for long-term customer become scarce to
brand loyalty. Brand guarantee supply by direct
erosion due to prolonged control. This may include
difficulties in maintaining acquiring key suppliers,
long-term suppliers will setting up farms to grow
allow competitor products specific crops or have
and substitute products to other supply vendors in
take hold in the market place so these are ready
to be used.


and reduce Singing
Sauces’ market share.

Question 2 cont.

4. Supplier ethics non-compliance
There is risk that a Stakeholders now Singing Sauces needs to
supplier fails to comply perceived the actions of define its minimum ethical
with environmental suppliers who operate as standards for its own
legislation or meet part of a supply chain operations and for all of its
Singing Sauces reflect on the suppliers. Measures
stakeholders’ manufacturer and include requiring all
expectations concerning supplier of the end suppliers to sign up to
environmental, social and products. As a result of ethics and regulation
governance standards, unethical or poor compliance standards set
such as air emissions, sustainability practices at out by the company as a
waste discharge, and its suppliers, Singing condition of continuing
harmful or unsafe Sauces could face public with contracts to supply.
employment conditions or criticism which would This should be supported
terms. negatively impact its with ethics and regulatory
reputation and brand compliance audits at its
value. Singing Sauces production facilities and its
could also be exposed to suppliers.
fines or face other
regulatory penalties for
the unethical or non-
compliant actions by its
suppliers. This would
include restrictions to
operate, and lose of
commercial licenses to
water which is vital in
food production.

Question 2 cont.

5. Competition and changing consumer preferences and competition
The risk that Singing A failure of Singing The Board should
Sauces fails to Sauces’ product range to implement a policy of
adequately anticipate adapt to changing tastes consumer-led innovation
future changes in or new competitor which links sales, external
consumer food tastes products which may be market analysis and
and changes in seen as more exciting, feedback from customer
competition such as modern or greater value focus groups directly into
price, new entrants, new for money, or flex its product innovation, product
product launches, pricing policy to match its marketing and product
marketing and competitors could lead to pricing strategies. It is vital
promotional activities an inability to meet short that new products are
which result in failure at and long-term revenue developed and market-
Singing Sauces to rapidly and growth targets and tested in readiness to meet
react with innovation, lose market share to its changes in consumer
product research and competitors. tastes to safeguard
product updates. sustainable brand value
and retain its market
share.
6. Production quality issues
A major event during the A manufacturing incident Quality must be the centre
manufacturing process of is likely to result in of every part of the Singing
Singing Sauces’ food financial loss and long- Sauces manufacturing
products triggers a lasting damage to the process. The entire
serious food Singing Sauces brand as manufacturing process
contamination or results it may require an should be regularly
in product quality issues expensive product recall, appraised for hygiene and
which potentially could production shut down and compliance with all food
harm the health of significant marketing safety requirements.
expenses may be Quality product testing

Singing Sauces required to reassure should be carried out

customers. customers that the extensively, on every
product safety issue has production batch, to test
been properly dealt with for contamination.
and will not reoccur. Products should only be
released to market once
each batch has passed all
quality inspections and
testing.
7. Product packaging
A packaging risk includes As a result of a regulatory Singing Sauces should
failure to comply with breach, Singing Sauces expand its compliance
packing regulations which may be fined or team so that they have the
include sufficient and prohibited from selling its capacity to undertake
accurate information such products until packaging ongoing regulatory review
as a full list of ingredients issues have been which include packaging
or failure to comply with withdrawn. This may requirements and work
current or future involve a costly product with its research and
regulations on the use of recall as non-compliant development team to
plastic packaging instead packaged products are ensure full compliance. It is
of finding environmentally taken from the shelves of also strategically
friendly packaging stores and there is a advantageous for Singing
alternatives which production and sales Sauces to research
environmentally minded shutdown due to the time entirely degradable and
stakeholders and required to develop a waste free packaging, thus
customers now expect. compliant packaging leading the market in this
solution or source a areas and market itself as
compliant packaging a sustainable and
supplier. There may also environmentally
be an adverse responsible food brand.
reputational impact from
environmentally
concerned stakeholders.

8. Global cost inflation

The predicted global Due to competitive The risk of inflation in the
scarcity of resources pressures, it may not be global supply chain
such as water and lower possible to pass on all impacts all food suppliers
food crop yields caused inflationary cost which means it is likely that
by climate change, increases to consumers competitor prices will also
extreme weather events, by increasing product rise with inflation which is a
increased demand due to prices. This will lower mitigation as it will also
rising global populations product profit margins allow Singing Sauces to
and living standards, and may be so severe as increase its prices and
deforestation and to result in losses or maintain its margins.
pollution, political commercial unfeasibility However, Singing Sauces
instability resulting in in the longer term. needs to consider active
trade tariffs, embargoes Additionally, consumers price risk management
or increased trade may be priced out and so strategies such as the use
barriers all contribute to seek out cheaper of commodity forward
increasing, long-term products alternatives or contracts to fix the future
inflationary forces which go without non-essential price of essential
will increase all costs of foods such as sauces ingredients. It is also
production (raw altogether. This could essential that Singing
materials, employment significantly reduce future Sauces develops rapid
and distribution costs). market share and mechanisms to flex its
profitability at Singing product pricing so price
Sauces. increases do not lag
behind inflationary cost
rises, which will reduce
short term profit margins.
To achieve this, Singing
Sauces should improve its
understanding of revenue
and cost drivers as well as
the company's anticipated
response to the drivers i.e.

Inflation rates, currency

movements, price
sensitivities, cost volume
sensitivities.

(a) Explain why each of the FOUR issues included in the internal audit report may
impact on the effectiveness of Singing Sauces strategic or sustainability
performance. (8 marks)
(b) For each issue explained in part (a), recommend TWO actions that will help to
improve or resolve the issue. (8 marks)
(a) Issue (b) Recommendations

Non-Executive Directors Non-Executive Directors
• It appears that the five Non-Executive • The Chair should require full
Directors of Singing Sauces are not attendance at all full Board meetings,
fulfilling their full responsibility as set record attendance and follow up on
out in the Singapore Code of the non-attendance of Executive and
Governance as there is evidence of Non-Executive Directors.
regular lack of attendance at • The Chair should speak with each
scheduled Board meetings and Non-Executive Director and enquire if
contributions during Board meetings. there are any specific reasons or
• Non-Executive Directors provide a concerns why they are not
vital safeguarding role for Singing contributing during Board meetings or
Sauces shareholders. By not attending for non-attendance. Any reasons
or contributing at Board meetings, provided should be corroborated with
there is a lack of effective challenge to other Directors and then addressed
Executive Directors’ views or by the Chair.
decisions and a lack of scrutiny of • Non-Executive Directors’ attendance
company performance and at meetings and contributions during
governance. meetings, should be monitored by the
• The consequence of this is poor Chair on a continual and ongoing
strategic decision-making, which is basis. Attendance will be improved by
especially concerning as Singing pre-confirmation by Directors and
Sauces is considering its first scheduling of meeting dates by the
company secretary with each

acquisition and expansion into an Director. Singing Sauces could

international market. publish director attendance at
meetings in the annual report. Should
there be no improvement, the Chair
must consider if it is appropriate to
replace Non-Executive Directors who
are not willing to perform their duties
under the Singapore Code of
Corporate Governance.
Strategic decision making Strategic decision making
• It has been independently observed • The Chair must take steps to help the
that the CEO, Chen Yew, has a regular CEO improve her behaviour so it is
habit of interrupting or talking over more collaborative and consultative
other Directors at the Board meetings during meetings in order to improve
and stating that a decision has been strategic decision making. This may
made without all Directors having had include the Chair holding initial
the opportunity to speak and present discussions with the CEO who may
view and opinions, which is evidence not be fully aware of the impact of her
of the CEO’s dominant leadership behaviour and is willing to change.
style. • It is the responsibility of the Chair to
• Corporate Governance is designed to ensure the effectiveness of Board
specifically address the impact of meetings and the Chair can
dominant CEO by requiring an implement procedures during
independent Chair and a balanced meetings to police interrupting and to
Board of Executive and Non-Executive ensure all Directors have allocated
Directors to counter the potential for time to speak before moving on to the
dominant behaviour. next agenda point.
• Whilst Singing Sauces is currently • The CEO could be required to
compliant with the Corporate undergo externally provided
Governance requirements as it has a leadership training and ongoing
separate Chair and a Board, it is clear coaching in order to improve the
this is not sufficient to counter the CEO’s ability to see the value of
CEO’s personality tendencies to

dominate and make sole decisions including others in strategic decision

without consultation or collaboration making.
with the other Directors. • If there is no notable change in the
• This could be potentially damaging for CEO’s behaviour during Director
Singing Sauces’ future performance meetings then the Chair and the
and strategic direction, as the views of remaining Board must consider if it is
the CEO and her decisions appear to necessary to replace the CEO in
go unchallenged. order to fulfil their fiduciary duty to
protect the long-term interests of
Singing Sauces’ shareholders.
Code of Ethical Conduct Code of Ethical Conduct
• Internal Audit have concluded that • All employees should undergo ethics
there is evidence of general training which includes emphasising
unawareness of Singing Sauces’ Code the importance of compliance with
of Ethical Conduct amongst all its Singing Sauces’ Code of Ethical
employees and there is a lack of formal Conduct. This training may be
monitoring of compliance and completed online to minimise the cost
enforcement by the human resources impact and supplemented with follow-
department, by the procurement team up training annually, or as required.
or the separate compliance team. • All employees should be required to
• Philip Chan is the Legal and confirm they understand the contents
Compliance Director, so he should be of the Code of Ethical Conduct and to
responsible for ensuring compliance confirm their future compliance with
with the Singing Sauces Code of all aspect of the code. This could be
Ethical Conduct. confirmed on an annual basis.
• It is clear the existence of the Code of • Responsibility for enforcement of
Ethical Conduct is not known by most compliance with the Code of Ethical
employees and is not routinely used in Conduct should be considered by the
the course of day-to-day operations. Audit Committee, who can make a
This raises the possibility that an recommendation to the Board of
employee breaches the ethical code Directors. This may require the
which he/she is unaware is setting up of a separate Ethics and
Compliance committee at Singing

undesirable or damaging unethical Sauces to ensure there are sufficient

behaviour. resources for this to be done
• Singing Sauces procurement team effectively.
may be contracting with suppliers who • The procurement team should update
do not meet the ethical standards set their supplier selection procedures to
out in the code, as the Code of Ethical ensure ethical due diligence is
Conduct is not applied during the performed on each supplier, initially,
supplier selection processes, or to and on an ongoing basis, to ensure
undertake routine due diligence for ethical behaviour and standards of
continuing suppliers, which may lead the company’s suppliers are within
to reputational issues if unethical the required minimum standards set
supplier behaviour is revealed in the out in Singing Sauces Code of Ethical
public domain and associated with Conduct.
Singing Sauces. • Singing Sauces procurement team
can also formally establish a whistle-
blowing policy and hotline for supplier
employees to report non-compliance
or any other concerns on supplier
ethics. Singing Sauces can then
investigate and resolve, should
evidence on unethical practices be
found.
Sustainability Report Sustainability Report
• The publication of Singing Sauces • The delay of a mandatory report is
sustainability report is delayed and will highly concerning and therefore the
not be published with the Singing Audit Committee should be
Sauces 2023 Annual Report. This has immediately tasked with
been attributed by the Board to understanding the reasons for the
managing other priorities. However, delay, its current status and the work
delayed publication of this mandatory which is required to complete it. The
report is a breach of the Singapore Audit Committee should then
listing rules as Singing Sauces is listed implement a plan to minimise the

company on the Singapore Exchange delay in publication of the

(SGX). sustainability report to the market.
• The lateness of the report is certain to • A plan to collect all outstanding report
fall short of market expectations and content such as ESG key
signal internal difficulties which may performance indicator data and
result in a fall in the company share director narratives explaining
price as some investors sell their sustainability performance against its
shares quickly to avoid a perception of objectives and other mandatory
impeding trouble. disclosures, needs to be actioned.
• The SGX may also discipline Singing Resources will need to be assigned to
Sauces for non-compliance either by address this and reallocated where
shaming the company by criticising necessary so this work is completed
this delay through a public disclosure expediently. If necessary, internal
statement issued by the stock audit, or help from Singing Sauces’
exchange or by issuing a financial external auditors, can be engaged to
penalty. speed up completion.
• The delay of the report reduces the • It is vital that Singing Sauces manage
transparency of Singing Sauces’ market’s and SGX’s expectations and
sustainability performance against its issue a communication to the stock
stated objectives as many investors exchange and a press release to the
now make investment portfolio market which sincerely apologises for
decisions based on a company’s ESG the sustainability report delay,
performance. Some institutional and explains the reasons for the delay
private investors may move away from and provides a revised publication
Singing Sauces if there is a lack of deadline. This will minimise adverse
trust in its ability to accurately report its stock exchange and investor reaction
sustainability performance on a timely to the delay.
basis.

Question 3 cont.
(c) Identify ONE example of each form of capital at Singing Sauces listed below.
• Natural capital
• Human capital
• Intellectual capital
• Social capital
• Manufactured capital
• Financial capital
For each example, explain how Singing Sauces can apply corporate governance
mechanisms to ensure its continual and sustainable supply.
(12 marks)
Natural Capital
For Singing Sauces, natural capital includes ingredients for their sauces such as
spices and some fruits and vegetables and fossil fuels required to transport it and
provide energy for the manufacturing and distribution processes.
Singing Sauces should invest in a sustainable supply chain using suppliers that apply
environment protection techniques and sustainable farming techniques which
minimise the use of chemicals that pollute the natural world. Singing Sauces should
also locate its manufacturing site as close as possible to its food suppliers so that it
reduces energy consumption by minimising “food miles”. A further option is to
investigate the possibility of installing solar panels on the roof of its production
facilities to create a renewable energy source.
Human Capital
For Singing Sauces, human capital consists of people with knowledge, skills and
experience in manufacturing its products and those who work to market the sauces
based on their expert knowledge of the product range and the domestic and
commercial markets for its sauces.

To maintain or enhance human capital over the long term, the Board of Singing
Sauces might consider a programme of succession planning to maintain specific
product knowledge and skills in producing its sauces by training its younger
workforce. They can develop a recruitment and career development programme to
attract young workers who are entering employment for the first time. For this
programme to be successful, it must incorporate fair remuneration for employees.
Intellectual capital
For Singing Sauces, intellectual capital represents its range of ingredients required
by its secret product recipes and production methods, which is an important source
of Singing Sauces’ brand value and competitive advantage.
It is critical that the Board of Singing Sauces has very effective governance of who
has access to its secret product recipes, how and when product recipes are passed
on as the workforce changes to ensure its product recipes remain secret. One
method employed by companies such as Coca-Cola is to entrust only partial recipes
with specific people so no one person has access to the entire recipe, and closely
restrict access to certain manufacturing processes where key quantities of
ingredients are measured and added. Additionally, discussions with Legal on areas
or items that could be patented may result in additional protection.
Social capital
For Singing Sauces, social capital is the value added by the relationships the
company has nurtured over the past five years with its customers on social media
platforms, by posting product news and promotions on a monthly basis.
Its social capital could be further enhanced by employing a dedicated social media
manager whose role is to expand Singing Sauces on existing social media platforms,
and to new attract new international followers to increase brand recognition to
support a strategy of higher product exports. The frequency and variety of social
media posts could increase from once a month to weekly, with amusing posts and
videos, recipes and images of prominent Singaporeans and businesses enjoying
Singing Sauces. A social media manager will also ensure Singing Sauces has an

early adopter approach to new social media platforms as these emerge, such as
TikTok.
Manufactured capital
Manufactured capital is the actual production machinery and distribution
infrastructure used by Singing Sauces to manufacture its products and distribute
them to its domestic and commercial markets in Singapore. Manufactured capital
also includes methods to dispose of production waste which Singing Sauces seeks
to minimise.
In order to remain competitive in the long term and to address rising global
commodity and labour costs, Singing Sauces will need to develop a sustainability
strategy. The sustainability strategy will include updating its production equipment to
improve energy efficiency and to minimise wastage by switching to more flexible
manufacturing machinery and techniques where production capacity can be
increased or decreased in line with order based demand or quickly reset to
manufacture new products.
Financial capital
Singing Sauces financial capital consists of its existing shares and corporate
debentures which are traded on the Singapore Exchange, its capacity to generate
cashflow and profits from its future operations and its capacity to raise new equity
and debt capital to fund growth, product development, and market development into
other countries in South-East Asia.
Therefore, it is vital that Singing Sauces has governance in place to ensure ethical
practices with its employees, suppliers and customers in order to manage risks to its
reputation, to provide sustainable brand value and customer loyalty which will
maintain sales demand and continue to generate sustainable profits. This approach
will also increase trust with investors and lenders. The Board of Singing Sources
also need to consider its strategy to protect or improve its current ‘A’ credit rating to
minimise the cost of future issues of corporate debentures to fund expansion.

Question 4 – (a) to (f) (Total: 17 marks)
(a) Explain TWO impacts of foreign exchange risk which Singing Sauces will be
exposed to as a result of acquiring Food Express.
(2 marks)
• The value of Food Express’s profit which will be repatriated to the parent
company (Singing Sauces) in Singapore as dividends may increase or decrease,
depending on whether there is appreciation or depreciation of the Malaysian
Ringgit against the Singapore Dollar. The downside of this risk is lower returns
than anticipated in the acquisition price and by Singing Sauces shareholders.
• The long-term value of investment on Food Express may increase or decrease

as a result of a long-term appreciation or depreciation of the Malaysian Ringgit
against the Singapore Dollar. The downside is this may negatively impact on the
value of Food Express disclosed in the financial statements and if Singing Sauces
decides to divest itself of Food Express. It may receive less than its acquisition
value due to a fall in value when translated into Singapore Dollars.
• This may also affect the financial statements of Singing Sauces going forward as
Food Express is consolidated and it might cause volatility to the consolidated
financial statements.

Question 4 cont.
(b) Explain the impact following the implementation of exchange controls by the
Malaysian Government and recommend ONE measure which the Board of
Singing Sauces could implement to counter the impact.
(2 marks)
If the Malaysian Government seeks to control the quantity of Malaysian Ringgits

which Singing Sauces is able to repatriate to Singapore from its subsidiary, Food
Express, then any amount above the maximum limit will be delayed. As this cash will
not be available to Singing Sauces either to pay to shareholders as a dividend or to
reinvest in Singapore, then this amount will decrease in value as any interest earned
on surplus cash in Malaysia will be less than the opportunity cost of reinvestment by
Singing Sauces or its shareholders.
One strategy to minimise the impact is for Singing Sauces to apply management
charges to Food Express which will lower Malaysian profits and facilitate the return
of cash to the Singapore parent in the form of fees. This will reduce the amount of
profit which is affected by Malaysian exchange control regulations. Alternatively,
Singing Sauces can provide a parent company loan to Food Express on which
interest is payable, which will have the same effect.

Question 4 cont.
(c) Explain FOUR ways how the regulatory framework for mergers and
acquisitions for listed companies in Singapore aims to protect the shareholders
of Singing Sauces and the shareholders of Food Express.
(4 marks)
Shareholders of Singing Sauces (buyer) perspective

• Ensures serious bids only. Merger and acquisition regulations required a listed
company, such as Singing Sauces, to issue an offer document, arrange bid
finance and appoint an independent financial advisor as well as legal advisors.
This is expensive and time-consuming which acts as a deterrent for not serious
or speculative offers with little chance of success but would initially raise Singing
Sauces shareholder expectations and add to share price volatility when an offer
fails to proceed.
• Limited timeframe to make an offer. Once Singing Sauces has announced an

intention to make an offer for another listed company, then it only has a short
timeframe in which to make an offer or confirm to the market it will not be making
an offer. If Singing Sauces withdraws, it cannot make an offer for the same
company for a set period of time. These rules protect Singing Sauces
shareholders from the management making a succession of bids which leads to
uncertainty and share price volatility as acquisition expectations fail to
materialise.
• Offer transparency to acquiring company shareholders. There is a

requirement to disclose to the stock exchange when a listed company makes an
offer for another listed company. This puts the offer details into the public domain
which will be visible to Singing Sauces shareholders. Should the shareholders be
dissatisfied then they are able to contact Singing Sauces to register their opinion
on the offer or sell their shares if they disagree and wish to limit downside risk.
• Offers must be shared with target company shareholders. Merger and

acquisition rules ensure that an offer for a company is taken seriously by a target

company and is not ignored as the Board of Directors are required under the
rules to put an offer to the company’s shareholders for their evaluation. This will
protect the interests of Singing Sauces’ shareholders where they stand to benefit
from the synergy which may be generated by an acquisition.
Shareholders of Food Express (seller) perspective

• Shareholders vote to accept or reject a bid, not Directors. Regulations
ensures that it is Food Express shareholders, as owners of a company, who vote
on whether or not they agree that offer made by an acquiring company, such as
Singing Sauces, should be accepted and not the Directors of the company. This
puts the power into the hands of Food Express shareholders, and not the
company’s Directors who may have self-interest and would decide differently.
• Fairness through equality. Regulations ensure that each class of Food Express
shareholder is treated equally in a vote to accept an offer for the company. This
prevents a situation where more powerful institutional shareholders are granted
greater voting rights or a preferential price compared with other shareholders.
• Avoids wasting target company time and resources. The regulatory

framework for mergers and acquisitions sets out rules which act as a filter to
reduce unsupported or speculative offers which waste company time and could
otherwise be spent on growing the company.
• Prevents withdrawal of an offer once issued. Regulations protect Food

Express shareholders preventing an acquiring company, such as Singing
Sauces, from withdrawing an offer for a listed company once it has been made
formally to the market unless for reasons set out in the merger and acquisition
regulations. This prevents Food Express shareholders from losing an offer for
Food Express shares which the current management of Food Express cannot
match through continued stewardship.

Question 4 cont.
(d) Under this share-for-share exchange offer proposed by Singing Sauces to

acquire Food Express, calculate the number of new Singing Sauces shares
which will be awarded in exchange for existing Food Express shares and
determine the percentage holding in the new group by Singing Sauces
shareholders and by Food Express shareholders, respectively.
(2 marks)
5,000 Food Express shares are cancelled and replaced with 3,750 Singing Sauces
shares under the three for four offer (5,000 x 3/4), as follows:
SS FE
No of equity shares 20,000 5,000
4:3 Share Offer 20,000 3,750
Control in new group 84% 16%

Question 4 cont.
(e) Using discounting techniques and the assumptions made by the Directors of
Singing Sauces, calculate the estimated value synergy arising from the
acquisition of Food Express and explain your result.
(5 marks)
S$'m S$'m
2023 Singing Sauces Revenue 22,500
5% increase in Singing Sauces revenue in
1,125
2024
2023 Singing Sauces Operating costs (19,125)
4% increase in Singing Sauces operating
(765)
costs in 2024
Increase in 2024 profit as result of acquisition 360
Increase in profits after 17% Singapore tax 299
WACC 8.7%
Annual Growth 2.0%
Present Value of Synergy (S$'m) = 299/
4,429
(0.087-0.02)
Synergy is additional profits and cashflows which are generated directly as a result
of an acquisition or merger. For Singing Sauces, revenue synergy represents the
opportunity to increase sales as a result of being able to expand its export sales of
its Singing Sauces range of products in Malaysia by accessing existing customer
base and brand loyalty of Food Express.

Question 4 cont.
(f) Discuss other potential sources for further synergy which have not currently
been identified by the Directors, which could be realised if Singing Sauces
proceeds with the acquisition of Food Express, as follows:
i. ONE source of potential revenue synergy.

(1 mark)
ii. ONE source of potential cost synergy.
(1 mark)
Revenue synergy: Food Express range of products are currently not widely
available in Singapore. This could change if Food Express products are distributed
with Singing Sauce products in Singapore or repackaged and renamed using Singing
Sauce’s recognisable branding.
Cost synergy: Singing Sauces will have access to Food Express’ supply chain and
as a result they may be able to source cheaper suppliers for Singing Sources, or
may be able to manufacture Singing Sauces range of products more cheaply using
existing Food Express manufacturing facilities. Furthermore, Singing Sauces could
reduce costs by consolidating functions such as human resources, finance and
procurement.
END OF PAPER

Section 6
Common Examination Verbs
To assist Candidates to best formulate their answers they will be given the following
list of common verbs and their descriptions.
As an aspiring Chartered Accountant of Singapore, you must be able to

communicate clearly, concisely, and professionally in order to work effectively with
others.
Apart from testing your technical ability, the Singapore CA Qualification

examinations are also assessing your communication skills, in particular, your ability
to frame your answers using language that is clear to a layperson. Obviously, when
marking the answer scripts, markers are looking for accurate answers that are
focused on the question asked, but they are also looking for answers that convey
information in a way that others can easily understand and that show a deep
appreciation for any ethical and professional issues posed.
The following list of commonly used verbs ("action" words) will help you identify what
the examiner expects from your answer and how you can maximise your marks.
You will see that some of these verbs are quite similar and some are even
interchangeable. The irony is that most questions in an examination paper will not
contain a question mark, so you have to be able to determine what the examiner
wants by picking out the verb in the instruction.
Account Account requires you to show how to record an element in the

financial statements appropriately. This might be by means of a
journal entry, T-account, or an extract from the financial
statements. Remember, a journal or a T-account is only
complete if it shows the date of the entry, the correct accounts,
the correct amounts, and has a description (narration) - easy
marks are often thrown away through carelessness.
Advise / Give As a Chartered Accountant of Singapore, your work will invariably

advice require you to form an opinion about the most appropriate course
of action, or offer alternative courses of action depending upon
the situation. This type of question requires you to give specific
guidance to an individual or a group (e.g. a taxpayer, audit client,
management, etc.), so your answer must provide specific
information or make a recommendation tailored to the individual
or group.
Analyse Identify the key components, look for similarities and differences,
look for patterns or outliers, and weight up the issues. If there is
numerical data, you might need to provide a range of answers

depending on how you substitute the data into your model. Make
sure you state any implications of your answer and any
assumptions that you make.
Apply This instruction requires you to relate your answer back to a

specific document/s or set of facts. Alternatively, you may be
required to use a specific formulae, model, or process. For
instance, "Apply the relevant Singapore Financial Accounting
Standard to …". Another example would be "Apply the rules for
recording and reporting foreign currency transactions …". Apply
and With reference to are similar.
Appraise Make a judgment about the value, quality, outcomes, results, or

size. Often there will be a qualifier in the instruction, which will
tell you exactly what to appraise. For instance, "Appraise
Company X's credit worthiness …". Professional scepticism and
professional judgment are called for when making an appraisal.
Appraise and Assess are interchangeable.
Assess Make a judgment about the value, quality, outcomes, results, or

size. Often there will be a qualifier in the instruction, which will
tell you exactly what to assess. For instance, "Assess the
adequacy of the disclosures in the financial statements relating
to …". Professional scepticism and professional judgment are
called for when making an assessment. Appraise and Assess
are interchangeable.
Bullet points Unless specifically asked for, only use bullet points in your
answer as an absolute last resort if you are running out of time.
A quarter of a mark is better than zero.
Calculate / Do the number crunching and derive the correct answer. Make
Compute sure that you write down your workings and crosscheck your
numbers.
Comment Comment is similar to evaluate in that you are required to make

a judgment or provide your opinion based on the facts at hand.
Professional scepticism and professional judgment are called for
when commenting.
Compare and Compare requires you to show how things are similar and/or
Contrast different while contrast requires you to show how things are
different or opposite. Even if you are asked just to compare, you
must indicate both the similarities and differences.

Critically Critically requires that your answer be more extensive than if

(analyse / you were asked to analyse or evaluate the data. Your answer
evaluate) must add a greater degree or level of accuracy, depth,
knowledge, understanding, logic, questioning, reflection, and
quality to your analysis or evaluation.
Remember, critically requires you to consider both the positive

and negative points and apply professional scepticism (a
questioning mind) in conjunction with professional judgment.
Often when an examiner asks you to critically evaluate or
analyse something it is because there can be more than one
right answer, so you have to convincingly defend your opinion as
part of your answer.
Define Like list, you are most unlikely to ever be asked just to define a
term, particularly in an open-book examination unless it is a term
that requires you to communicate your understanding rather than
copying down someone else's definition. For instance, "Define
in your own words …".
Demonstrate Demonstrate requires you to prove or disprove something

beyond any doubt, or show that it applies in the situation
described by giving evidence (for instance, provide an example).
The evidence can be from the facts given or from your general
knowledge and experience. Demonstrate and Illustrate are
similar.
Describe Describe requires you to provide the characteristics and features

of an item or situation. For instance, "Describe the audit
procedures to verify …" requires you to state the specific audit
procedure/s that you would use without going into step-by-step
detail of how to perform that procedure.
Detail Detail requires you to give very specific instructions or advice.

For instance, "Detail the audit procedures to verify ..." requires
you to provide step-by-step instructions. Another example is
"Detail how the findings from the site visit will affect the planning
of the statutory audit". This instruction requires you to state the
positive and negative consequences in relation to the site visit
and the planning of the audit. Don't forget to think about the
future and the past, not just the present when stating the
consequences.

Discuss Discuss requires you to provide the for and against arguments,
you cannot have a discussion without opposing views otherwise
it would be just a conversation. If discuss is placed near the
front of the instruction, then it requires you to provide an answer
that is similar to explain, but addresses the for and against
arguments. For instance, "Discuss why numerical valuation is
essential when buying or selling a small business".
However, if there is a statement and discuss is placed at the

end, your answer must be in the form of an essay with the
following elements:
• An introduction, which declares whether you agree,

disagree, partly agree, or partly disagree with the
statement;
• The body of your answer, stating: i) Why it is possible to
agree and ii) why it is possible to disagree with the
statement. You should provide examples to support both
points of view; and
• A conclusion that proves your original position.
An example of a discuss question that requires an essay style
answer would be "Numerical valuation is not essential when
buying or selling a small business because the actual selling
price is the outcome of negotiation. Discuss".
Distinguish To note differences between. For instance, "Describe what is

meant by the term tax planning and distinguish it from tax
evasion". Apart from describing what tax planning involves (1-2
marks max), you need to explain how the two terms are different
and how they are similar. However, providing a list of differences
and similarities is insufficient - complete sentences are essential.
In addition, it is important that you also mention any other
relevant factors (e.g. the ethical and legal issues).
Evaluate Pass judgment on or provide your opinion based on the facts at

hand. When making an evaluation, there are often
predetermined criteria that you will use to base your opinion on.
The key here is to give your opinion or make a judgment of the
facts, but providing just a description of the facts is insufficient.

when making an evaluation. Examine and Evaluate are

interchangeable.
Explain As a Chartered Accountant of Singapore, you will be frequently

called upon in your work to explain difficult concepts and
technical issues to people who are not accounting trained. This
is where your ability to share your knowledge using simple
everyday terms will be most needed.
Explain requires you to write at least several sentences

conveying how you have analysed and synthesised the
information in a way that a layperson can easily understand the
concept or grasp the technical issue at hand. For instance,
"Explain whether an 'emphasis of matter' paragraph or an 'other
matter' paragraph would be most appropriate in this instance", or
"Explain how a partnership is assessed for tax".
Examine Pass judgment on or provide your opinion based on the facts at

hand. When examining the facts given, there are often
predetermined criteria that you will use to base your opinion on.
The key here is to give your opinion or make a judgment of the
facts, but providing just a description of the facts is insufficient.
when making an evaluation. Examine and Evaluate are
interchangeable.
Identify Identify is similar to list, but requires you to also provide an

explanation as to why the item that you have identified is
relevant to the facts given in the question.
Often identify will require you to select a specific issue or issues,
but not all issues, so you need to look out for any qualifying
words. For instance, "Identify the Board Matters …" is asking
you to focus solely on issues that relate to Board Matters so if
you digress and identify remuneration issues, you will not score
well. Another example is "Identify the companies that qualify as
members of the group for the purposes of group tax relief". In
order to score well in this second example, you need to identify
the companies and state why they are included in the group. You
also need to state if a company is not included and why.
Justify Whenever you see the word justify you must provide reasons for
your answer, in other words, provide support for your argument

or conclusion. If you fail to justify your answer, you will lose

valuable marks.
Illustrate / Give Illustrate requires you to provide an example, either from the
examples facts given, a real-life example or a made up example to
illustrate the point you are trying to make. Illustrate and
Demonstrate have similarities.
List Prepare an itemised list. Although you are unlikely to ever be

asked just for a list of items, it is important to remember that
many of the common verbs used by examiners require you to
begin with a mental list of issues to address.
Outline Outline requires you to provide a general overview of the

situation and indicate the main features. Outline is used when
the question is worth only a couple of marks, but a single
sentence is usually never enough to achieve full marks.
Prepare Prepare requires you to produce your answer using a specific

format. For instance, "Prepare the Statement of Cash Flows
for …" or "Prepare all the relevant journals …". Remember, a
journal is only complete if it shows the date of the entry, the
correct accounts, the correct amounts, and has a description
(narration) - easy marks are often thrown away through
carelessness.
Propose Put forward (for example, a point of view, idea, argument,

alternatives, etc.) for consideration or action. For instance,
"Based on the facts of the case, propose the most tax-effective
vehicle …", or "Propose audit adjusting entries to correct …".
Quantify Provide a numerical value (an exact calculation) or a range of

values (upper/lower limits, average, likely values, etc.). For
instance, "Quantify the misstatement in the 'investment in
subsidiary' in the Statement of Financial Position". As with
calculate and compute, you should always show your workings
and crosscheck your numbers.
Record Record is similar to prepare in that you may need to perform a

calculation and show the specific components in an appropriate
format. For instance, "Record the fair value gain/loss and
indicate if the gain/loss is recognised as profit or loss or other
comprehensive income".

Recognise Recognise requires you to distinguish between various

components and to be able to state how each component should
be treated. For instance, "… and indicate if the gain/loss is
recognised as profit or loss or other comprehensive income".
Identify and Recognise have similarities.
Recommend Make a statement about the most appropriate course of action.

If there is more than one possible course of action, state which
action you would choose and why (justify your choice). Your
professional judgment and your ability to analyse and synthesis
the wider situation are critical to scoring well in these types of
questions. Don't forget to think about the future and the past, not
just the present when making a recommendation.
Respond / This is your right of reply. When you are asked to respond, it is
Reply usually in reply to a comment made by someone else (although
you can also be asked how you would respond in a particular
situation). For instance, "Respond to the Chairperson regarding
her comment on impairment". Whenever you are asked to
respond, you must always justify your opinion or the actions you
would take.
Use / Using This instruction tells you the type of model that you must use
when formulating your answer. For instance, "Using the Market
Approach, …".
State State is similar to list, but the items require your professional
judgement. For instance, "State any restrictions that apply". One
of the easiest ways to make sure that you state comprehensively
is to think, "list AND justify". You will note that state appears in
many of the verb descriptions given.
Summarise Provide a concise description. Summarise is similar to

describe, but in a condensed format.
Synthesise Bring together the relevant elements to make a whole.

Synthesis is always required as part of an evaluation.
Synthesis is how you have made sense of (comprehended) the
facts of the case.
To what extent This instruction requires you to advance arguments in favour of

a position or point of view and respond to or take into
consideration the opposing arguments or points of view. You
must always justify your answer.

Translate For the purposes of the Singapore CA Qualification

examinations, translate refers to the conversion of data from one
currency into another currency (although translate can refer to
spoken and written language as well).
With reference This instruction requires you to relate your answer back to a
to specific document/s or set of facts. For instance, "With reference
to relevant Singapore Financial Reporting Standards, explain the
risk of material misstatements relating to …". Failure to make
specific mention of the document/s or facts in your answer will
result in a substantial loss of marks.
END OF EXAMINER’S GUIDE

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For educational purposes, the suggested solutions are intended to be more

The Examiner’s Guide

Candidates are advised to approach the Registered Learning Organisations (RLOs)

About the Accounting and Corporate Regulatory Authority (ACRA)

For more information, please visit https://www.acra.gov.sg

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About the Institute of Singapore Chartered Accountants (ISCA)

Established in 1963, ISCA is an advocate of the interests of the profession.

ISCA is a member of Chartered Accountants Worldwide, a global family that brings

For more information, please visit www.isca.org.sg.

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Question 1 – (a), (b) and (c) 31 marks

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Please click here (https://www.acra.gov.sg/docs/default-source/default-document-

Please click here (https://www.acra.gov.sg/docs/default-source/default-document-

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Question 1 – (a), (b) and (c) (Total: 31 marks)

Similar food processing company with Malaysian interests is 2.28.

Step 1: Ungear proxy company equity beta

Step 2: Regear the asset beta to Singing Sauces gearing level

Value of Debt of Singing Sauces (VD) at par value = S$’ 20,000m

ßg = ßu [1 + (1 – t) VD/VE] = 1.611 x [1 + (1 – 0.17) 20,000 / 70,000] = 1.993

Step 3: Calculate the cost of equity (Ke%) using CAPM

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BB 249 284 296 319 326 343 390

Calculation of Credit Risk Premium

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Estimate additional 5 years of risk premium = 5 years x 3.4 = 17 basis points.

This is quoted before corporation tax, so deduction tax relief on interest.

The estimated post-tax cost of debt (KD%) = 3.26% x (1 - 0.17) = 2.71%

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2023 Annual 2024 2025 2026 2027 2028 and

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Other operating expenses (427.7) 2.5% (438.4) (449.4) (460.6) (472.1)

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Present Value 892.4 907.2 922.8 938.3 14,186.6

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Working 1: Depreciation calculation

Working 3: Terminal value for years 2024 and onwards

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• Adjust credit risk premium from A to BBB as follows:

• Increase risk free rate from 2% to 3% in Kd calculation.

• State the new valuation and numerical change in valuation.

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Question 2 – (a), (b) and (c) (Total: 24 marks)

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Part (a) - Risk Part (b) - Potential Part (c) - Mitigation

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Singing Sauces required to reassure should be carried out