SL 1 – June 2025 (Model Questions) Onlineaccouting.
lk #ChamathSiriwardana#
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Strategic Level
Advanced Business Reporting
Instructions to candidates
(1) Time allowed: Reading and planning – 15 minutes
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Writing – 3 hours
(2) Total: 100 marks
(3) All questions are compulsory.
(4) This paper consists of three sections.
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Section 1: 2 questions
Section 2: 1 questions (Common pre-seen provided prior to the examination is in
relation to this question)
(5) Begin each answer in Section 2 and Section 3 on a separate page in the answer
1
booklet.
(6) The examination will be conducted as an open book examination and only the
following publications of CA Sri Lanka will be permitted to be used at the
examination hall:
• Sri Lanka Accounting Standards 2020
• Open Book Referential ‒ Student Version (Sri Lanka Statement of
Recommended Practice, IFRICs and SICs)
• Code of Best Practice on Corporate Governance 2023
• A Guide to Corporate Governance in Small and Medium Enterprises 2019
• Code of Ethics 2016 JUNE
• Sri Lanka Accounting Standard for SMEs 2015 2025
• Sri Lanka Accounting Standard for Smaller Entities - 2015
• Supplement – SL 1 Advanced Business Reporting (Model Questions)
(7) Candidates are allowed to bring or use the above permitted publications subject to
the following:
• Highlighting, sidelining and underlining relevant sections in the publications
are allowed. Short notes in the permitted publications are allowed, only if they
are handwritten and are relevant to a particular paragraph or section in the
publication which explains that paragraph or section. Any other notes written
on the publications are not allowed.
• Attaching, pasting or inserting any other documents to the permitted
publications are not allowed.
• Page tabs to refer the pages are allowed.
(8) Notes, textbooks (other than permitted publications) or any other materials will not
be allowed. Photocopies/extracts of the above publications will not be allowed.
(9) All answers should be in the English language in the answer booklet/s given to
you.
(10) Answers written on the answer booklets, graph papers and any other stationery
distributed at the examination hall, only, are considered in marking of the answer
scripts. Any other attached documents are not taken into account at the time of
marking the answer scripts
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Question 1
STL offers a bundled package to its customers that includes the following services for a
fixed monthly fee of Rs. 2,000 per customer:
• Mobile telephony service
• Broadband internet service
• Digital pay television service
The standalone selling prices for each service are estimated as follows:
Service Standalone Selling Price (Rs.)
Mobile telephony 1,200
Broadband internet 1,000
Digital pay television 800
In January 2025, STL signs a contract with a customer for a 12-month subscription to
the bundled package, paying Rs. 2,000 per month in advance at the start of each month.
Additionally, STL sells a satellite receiver required for the digital television service at a
one-time price of Rs. 3,000, delivered and billed immediately.
Required:
Advise the management of STP how the revenue should be recognized as per the
requirements of SLFRS 15
Question 2
IFRS S1 and S2 provide standardized frameworks for companies to disclose
sustainability and climate-related information. Their purpose is to help investors
understand how environmental and social factors affect financial performance and risks.
This improves transparency, supports better decision-making, and encourages
businesses to manage sustainability impacts effectively.
Required:
Based on the information given in pre-seen materials You are required to analyse the
gaps in STL’s sustainability practices, propose a comprehensive roadmap for STL to
fully align with IFRS S1 and S2 within the next 3 years. Include governance, strategy,
risk management, and metrics.
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Question 3
The finance director of STL is required to see the performance of the group against the
industry averages.
Key industry statistics and financial ratios for the telecommunications industry are
presented below.
Industry
Total cellular mobile telephone subscribers 29
No. of direct employment in the telecommunication
sector 9,428
Debt-to-equity ratio (Debt/Equity) 1.4
Interest coverage ratio 1.5
Net profit as a share of debt obligations 7.60%
Revenue growth 3.60%
Net profit growth 167.90%
Required:
Compute the ratios and comment on the performance of the Company with respect to industry
averages. (All calculations should be based exclusively on the group financial statements presented
in the pre-seen materials, without making any adjustments for the data in the Unseen materials).
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Section 2
Question 1
The management of SingTel Lanka PLC (STL) now focused on corporate-level service
diversification by expanding into new industries and a board paper was submitted to
seek initial approval for a significant investment in the education sector. Two investment
opportunities were identified, and chairman of STL requested the finance director to
further evaluate the Option 1 - Acquisition of the 80% stake in Bristol College Colombo
(BCC) by considering the immediate impact on the net assets of the group as at 31
December 2024. The following information relates to BCC as at 31 December 2024.
The purchase consideration of the respective acquisition of BCC includes an immediate
cash payment equivalent to 75% of the applicable share of the fair value of net assets of
the Company acquired (after incorporating required adjustments given in the un-seen)
with a 25% premium to it, and one share of STL will be issued for every 100 shares
acquired in BCC. Moreover, STL will need to pay an extra 10% of the initial cash
consideration paid one year after the acquisition if BCC achieves a 15% revenue growth,
which is having a probability of 50% to pay. The market value of an STL share on the
acquisition date will be Rs. 25 and the stated capital of BCC includes 100 million shares.
The professional fees related to this acquisition 1% of the initial cash purchase
consideration and this is paid out of STL’s cash.
On 31 December 2024, the fair value of the net assets of BCC was equivalent to their book
values with the following exceptions.
• The company has a well-established trade name registered with the relevant
authorities and the fair value of the trade name has been assessed as Rs. 15
million. Per the existing income tax regulations, the amortisation expense of this
asset is claimable in the income tax calculation.
• BCC possesses a building (Useful life 10 years) with a carrying amount of Rs. 120
million which currently holds a fair value of Rs. 140 million. Per the existing
income tax regulations 20% capital allowance can be claimable in the income tax
calculation.
• BCC possesses a land with a fair value of Rs. 10 million in excess of its carrying
amount. Fair value gains are taxable at 10% tax rate at the time of realization.
• An assessment has been issued under the Inland Revenue Act No. 24 of 2017 in
relation to Y/A 2021/22, amounting to Rs. 20 million including the penalty and
interest.
• Trade debtors have impaired by Rs. 5 million. BCC has not recognized this
impairment in its financial statements. The impairment is deductible for tax
purposes only at the time of writing off the debtors’ balance from the accounts in
future.
A discount rate of 15% to be used for any calculations required and there is no changes
doe the basis of measurement.
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STL has received a new investment opportunity involving the immediate acquisition of
a 45% equity stake in Health Man (Pvt) Ltd (HML), a small-scale hospital located in
Colombo. The remaining 55% of HML is owned by another investor, with both parties
agreeing to make decisions on a unanimous basis. As such, neither party will have direct
rights to the assets nor direct obligations for the liabilities of HML; instead, they will
hold an interest in the net assets of the entity. The total investment by STL amounts to
Rs. 50 million. At the time of investment, HML’s net assets were valued at Rs. 100
million, with the book value reflecting their fair value.
Cash required for all acquisition will be funded through bank borrowings.
Required:
Advise the management of STL, with required calculations and explanations based
on Sri Lanka Accounting Standards (full SLFRSs), how the transactions referred to
above would impact the group net assets/equity attributable to the shareholders of
STL and non-controlling interest if the acquisitions happened on 31 December 2024.
Prepare the summarised consolidated statement of financial position of STL as at 31
December 2024, subsequent to the acquisition of BCC and HML.
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Question 2
The management of SingTel Lanka PLC (STL) now focused on corporate-level service
diversification by expanding into new industries and a board paper was submitted to
seek initial approval for a significant investment in the education sector. Two investment
opportunities were identified, and chairman of STL requested the finance director to
further evaluate the Option 2 - Acquisition of the 75% stake in Oline Education (Pvt)
Limited (OEL) in republic of Maldives by considering the immediate impact on the net
assets of the group as at 31 December 2024. The following information relates to BCC as
at 31 December 2024.
STL will acquire an 75% stake in OEL. At present, the price earnings (PE) ratio of OEL
stands at 9, based on its annual earnings of MVR 2 million. The acquisition price is to be
determined using the same PE ratio, considering anticipated annual earnings MVR 2.5
million. Further the company has invested MVR 2 Mn in a Convertible bond Convertible
into an additional 10% of OEL’s voting shares.
The financial statements of OEL as at 31 December 2024 is as follows
As at 31 December 2024 OEL
Assets MYR ‘000
Property, plant and equipment 17,500
Inventories 1,500
Trade and other receivables 500
Cash and cash equivalents 1,500
Total assets 21,000
Equity
Stated capital 16,500
Retained earnings 3,000
Total equity 19,500
Liabilities
Deferred tax liabilities 200
Trade and other payables 1,000
Loans and borrowings 300
Total liabilities 1,500
Total equity and liabilities 21,000
The presentation currency of the consolidated financial statements is LKR (Rs.) Exchange
rates are as follows:
MYR to LKR
As of 31 December 2024 1 MYR = 20 LKR
Average Rate 1 MYR = 18 LKR
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To fund this acquisition STL decided to disposal of a 10% stake in PPL and thereby keep
only a 90% stake. Disposal of the shares can happen at a 10% premium.
Required:
Advise the management of STL, with required calculations and explanations based
on Sri Lanka Accounting Standards (full SLFRSs), how the transactions referred to
above would impact the group net assets/equity attributable to the shareholders of
STL and non-controlling interest if the acquisitions happened on 31 December 2024.
Prepare the summarised consolidated statement of financial position of STL as of 31
December 2024, after the acquisition of HML.