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.g 经 ao A du CC
n. A cn Professional
Accountant

Paper P1

Professional Level – Essentials Module

Monday 10 December 2007

Time allowed
Reading and planning:
Writing:

15 minutes
3 hours

This paper is divided into two sections:

Section A – This ONE question is compulsory and MUST be attempted
Section B – TWO questions ONLY to be attempted

Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Section A – This ONE question is compulsory and MUST be attempted
The board of Worldwide Minerals (WM) was meeting for the last monthly meeting before the publication of the yearend results. There were two points of discussion on the agenda. First was the discussion of the year-end results; second was the crucial latest minerals reserves report.
WM is a large listed multinational company that deals with natural minerals that are extracted from the ground, processed and sold to a wide range of industrial and construction companies. In order to maintain a consistent supply of minerals into its principal markets, an essential part of WM’s business strategy is the seeking out of new sources and the measurement of known reserves. Investment analysts have often pointed out that WM’s value rests principally upon the accuracy of its reserve reports as these are the best indicators of future cash flows and earnings. In order to support this key part of its strategy, WM has a large and well-funded geological survey department which, according to the company website, contains ‘some of the world’s best geologists and minerals scientists’. In its investor