- 30 Marks
FR – May 2015 – L2 – SA – Q1 – Consolidated Financial Statements
Prepare consolidated financial statements for Unitarisation Plc and compute Gain on Bargain Purchase.
Question
Unitarisation Plc is a successful Nigerian Company that recently amended its objects clause to promote national unity and encourage anti-terrorism compliance. The company acquired 60% of the equity share capital of Famous Plc to further this mission. Summarised draft financial statements of the two companies are as follows:
Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 October 2014
| Unitarisation Plc (N’m) | Famous Plc (N’m) | |
|---|---|---|
| Revenue | 51,000 | 25,200 |
| Cost of Sales | (37,800) | (19,200) |
| Gross Profit | 13,200 | 6,000 |
| Distribution Costs | (1,200) | (1,200) |
| Administrative Expenses | (3,600) | (1,920) |
| Finance Costs | (180) | (240) |
| Profit before Tax | 8,220 | 2,640 |
| Income Tax Expense | (2,820) | (840) |
| Profit for the Year | 5,400 | 1,800 |
Statement of Financial Position as at 31 October 2014
| Unitarisation Plc (N’m) | Famous Plc (N’m) | |
|---|---|---|
| Non-current assets: | ||
| Property, Plant & Equipment | 24,360 | 7,560 |
| Current Assets | 9,600 | 3,960 |
| Total Assets | 33,960 | 11,520 |
| Equity & Liabilities: | ||
| Equity Shares of N1 each | 6,000 | 2,400 |
| Retained Earnings | 21,240 | 3,900 |
| Total Equity | 27,240 | 6,300 |
| Non-current Liabilities: | ||
| 12% Loan Notes | 1,800 | 2,400 |
| Current Liabilities | 4,920 | 2,820 |
| Total Equity & Liabilities | 33,960 | 11,520 |
Additional Information:
- Shares of Famous Plc were acquired on 1 May 2014, and the issue of shares was not recorded by Unitarisation Plc.
- There is cash in transit of N120,000,000 due from Unitarisation Plc to Famous Plc.
- Non-controlling interests are valued at full fair value; at acquisition, the fair value of non-controlling interests in Famous Plc was N3,540,000,000.
- Famous Plc’s assets’ fair value equaled carrying amounts at acquisition except for one equipment valued N1,200,000,000 above its carrying amount with a 5-year remaining life, using straight-line depreciation.
- The acquisition of 60% of Famous Plc’s shares was settled via a share exchange of two shares in Unitarisation Plc for three shares in Famous Plc, valued at N6 per share.
- Post-acquisition, Unitarisation Plc bought goods from Famous Plc for N4,800,000,000 with a 40% markup; N3,120,000,000 of these goods were unsold by year-end.
- Famous Plc’s trade receivables included N360,000,000 from Unitarisation Plc, with a discrepancy in Unitarisation’s payable ledger.
- Profits or losses are assumed to accrue evenly.
Required:
- Prepare Unitarisation Plc Consolidated Profit or Loss and Other Comprehensive Income for the year ended 31 October 2014. (10 Marks)
- Prepare Unitarisation Plc Consolidated Statement of Financial Position as at 31 October 2014. (10 Marks)
- Prepare the Consolidated Statement of Changes in Equity for the year ended 31 October 2014. (6 Marks)
- Explain “Gain on Bargain Purchase” according to IFRS 3 on Business Combinations. (4 Marks)
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