CA Sri Lanka Corporate Level Exam cheat sheet

Goodwill on consolidation = consideration transferred + NCI (fair value or proportionate share) + previously held interest − fair value of net identifiable assets acquired; any residual after reassessing measurement is a gain (bargain purchase) in profit or loss.

Control under SLFRS 10 exists when the investor has power over relevant activities, exposure to variable returns, and the ability to use power to affect those returns; holding more than 50% of voting rights is presumptive but not conclusive.

Non-controlling interest may be measured at fair value (full goodwill method) or at the NCI's proportionate share of identifiable net assets; the choice is made transaction by transaction.

Intra-group profits in inventory are eliminated in full against the selling entity's profit; the NCI is affected only when the sale is upstream (subsidiary to parent).

A restructuring provision under LKAS 37 is recognised only when a detailed formal plan exists and a valid expectation has been raised in those affected by starting to implement the plan or announcing its main features.

Deferred tax = temporary difference × expected tax rate on reversal; deferred tax assets are recognised only to the extent taxable profit will be available against which the deductible difference can be utilised.

LKAS 36 impairment: an asset is carried at no more than its recoverable amount, being the higher of fair value less costs of disposal and value in use; goodwill impairment is never reversed.

LKAS 21: monetary items are retranslated at the closing rate with differences in profit or loss; non-monetary items at fair value use the rate at the measurement date.

Related-party disclosures under LKAS 24 are required even when no transactions occurred, covering the parent, key management personnel compensation, and the nature of the relationships.

Residual income = accounting profit − (required rate of return × invested capital); unlike ROI it charges a capital cost, so managers accept projects earning above the required return even if divisional ROI falls.

Return on investment = divisional profit ÷ divisional invested capital; ROI can be manipulated by deferring asset replacement or by disinvesting, which residual income partly corrects.

Economic value added = NOPAT − (WACC × adjusted invested capital), with NOPAT and capital adjusted for accounting distortions such as expensed R&D and non-capitalised leases.

Balanced scorecard perspectives: financial, customer, internal business process, and learning and growth; each objective needs a measure, target and initiative to be actionable.

Ansoff matrix: market penetration, market development, product development and diversification; diversification carries the highest risk because both product and market are new.

Porter's five forces: rivalry, buyer power, supplier power, threat of new entrants and threat of substitutes; the framework assesses industry profitability, not firm-level capability.

Value chain analysis separates primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) from support activities such as procurement, technology development and HR.

Risk response options under a formal framework are avoid, reduce, transfer and accept; residual risk is the exposure remaining after controls, distinct from inherent risk before controls.

Transfer pricing: a minimum transfer price for a division with spare capacity equals variable cost plus any opportunity cost; at full capacity the opportunity cost is the lost external contribution.

Audit risk = inherent risk × control risk × detection risk; detection risk is the component the auditor controls through the nature, timing and extent of procedures.

Materiality for planning is set as a benchmark percentage (commonly 5% of profit before tax, or 1% of revenue or total assets); performance materiality is set lower to reduce the probability that aggregate uncorrected misstatements exceed materiality.

The auditor's report expresses an unmodified opinion, qualified opinion (material but not pervasive), adverse opinion (material and pervasive misstatement) or disclaimer (inability to obtain sufficient appropriate evidence, material and pervasive).

Key audit matters are reported for listed entities under ISA 701; they are selected from matters communicated with those charged with governance and do not modify the opinion.

Independence threats under the IESBA Code are self-interest, self-review, advocacy, familiarity and intimidation; safeguards range from removing the threat to using separate teams or independent quality review.

A self-review threat arises when the firm prepares the financial statements or designs the internal control system it later audits; routine administrative services for non-listed clients may be acceptable with safeguards.

Professional scepticism means questioning contradictory evidence and not accepting management representations without corroboration; it is required even where the client is assessed as low risk.

The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour; confidentiality survives the end of the engagement.

Fraud risk factors are grouped as incentives/pressures, opportunities and rationalisation; revenue recognition is presumed a fraud risk, rebuttable only with documented justification.

Sri Lanka corporate income tax: the standard rate is 30%, with a concessional 14% rate for certain export-oriented and specified undertakings; rates and thresholds change with annual budget legislation, so verify the current year's Act.

Qualifying payments for capital allowances, balancing allowances and balancing charges depend on the tax written-down value and disposal proceeds; a balancing charge arises when disposal proceeds exceed the tax written-down value.

Capital gains on the realisation of investment assets are taxed separately from business income; the gain is disposal proceeds less cost plus allowable enhancement expenditure.

VAT registration is compulsory once taxable supplies exceed the prescribed threshold in any taxable period or twelve-month period; voluntary registration is available below the threshold.

Under the Companies Act No. 7 of 2007, a director owes duties of good faith and skill and care; the business judgment rule protects decisions made honestly, on reasonable grounds and in the company's best interests.

A company may pay a dividend only out of distributable profits, and the solvency test must be satisfied immediately after the distribution.

A special resolution requires not less than 75% of votes cast; an ordinary resolution requires a simple majority of votes cast at a duly convened meeting.

A contract requires offer, acceptance, consideration, intention to create legal relations and capacity; consideration must be sufficient but need not be adequate.

The doctrine of separate legal personality (Salomon) means the company is distinct from its members; the veil is lifted only in narrow cases such as fraud, agency or statutory provisions.

Net present value = present value of cash inflows − present value of cash outflows, discounted at the project's cost of capital; accept projects with NPV greater than zero.

Internal rate of return is the discount rate at which NPV equals zero; use interpolation between two rates and note that IRR can give multiple answers where cash flows change sign more than once.

WACC = (E/V × Ke) + (D/V × Kd × (1 − t)); use market values for weights, and a project-specific WACC where the project's business risk differs from the firm's.

Cost of equity via CAPM = risk-free rate + beta × market risk premium; the dividend growth model is Ke = D1/P0 + g, using the ex-dividend price.

Weighted average cost of capital rises with gearing because the cost of equity increases with financial risk, partly offset by the tax shield on debt interest.

Working capital cycle = inventory days + receivable days − payable days; shortening the cycle releases cash but may damage supplier relationships or sales if credit terms tighten.

Interest rate risk can be hedged with forward rate agreements, interest rate futures, swaps or options; a swap exchanges fixed for floating interest obligations without exchanging principal.

Purchasing power parity links exchange rates to relative inflation: the currency of the higher-inflation country is expected to depreciate by approximately the inflation differential.

Sensitivity of a project = (NPV ÷ present value of the variable's cash flows) × 100; it shows the percentage change in a variable that reduces NPV to zero.

Transformational leadership influences through idealised influence, inspirational motivation, intellectual stimulation and individualised consideration; transactional leadership relies on contingent reward and management by exception.

Tuckman's stages of group development are forming, storming, norming, performing and adjourning; conflict is expected in storming and is not necessarily dysfunctional.

Belbin team roles distinguish action-oriented (shaper, implementer, completer-finisher), people-oriented (coordinator, team worker, resource investigator) and thought-oriented (plant, monitor-evaluator, specialist) roles.

Handy's culture types are power, role, task and person; a role culture relies on rules and job descriptions and struggles in fast-changing environments.

Mintzberg's organisational configurations include simple structure, machine bureaucracy, professional bureaucracy, divisionalised form and adhocracy; coordination mechanisms differ across them.

Hofstede's cultural dimensions include power distance, individualism versus collectivism, uncertainty avoidance, masculinity versus femininity, long-term orientation and indulgence.

Stakeholder mapping by power and interest: high power and high interest are key players to engage closely; high power and low interest need to be kept satisfied.

Kotter's eight-step change model begins with creating urgency and forming a guiding coalition, and ends with anchoring new approaches in the culture.

Corporate governance codes emphasise board independence, separation of chair and CEO roles, audit committee competence and disclosure of remuneration policy.

COSO internal control components: control environment, risk assessment, control activities, information and communication, and monitoring activities; the control environment is the foundation.

Segregation of duties separates authorisation, custody of assets, recording and reconciliation; the combination of custody and record-keeping is the classic control weakness.

A general IT control applies to all applications (access management, change management, IT operations); an application control applies to a specific business process (input, processing, output controls).

Input controls include edit checks, field validation, batch totals and hash totals; processing controls include run-to-run totals and reasonableness checks; output controls include distribution logs and reconciliation to source.

A disaster recovery plan covers restoring IT infrastructure after an incident; business continuity planning covers the whole organisation; recovery time objective and recovery point objective set the design targets.

Data analytics for audit: population testing replaces sampling, but completeness and accuracy of the source data must be validated before conclusions are drawn.

A computer-assisted audit technique such as test data or embedded audit modules must not contaminate live data; use a copy of the production environment or a controlled test period.

Cybersecurity controls follow defence in depth: identity and access management, encryption, patching, logging and monitoring, incident response and periodic penetration testing.

Cloud computing shifts control responsibility: the provider secures the infrastructure, but the client remains responsible for access rights, data classification and configuration.