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  • 20 Marks

FR – Nov 2024 – L2 – Q1- Group Financial Statements

Preparation of the consolidated statement of profit or loss and statement of financial position for Yarkpawolo Group, including goodwill calculation and intra-group adjustments.

Yarkpawolo LTD, a company in the healthcare industry, purchased 80% of the ordinary shares of Weah LTD on 1 January 2023. There are three elements to the purchase consideration: an immediate payment of GH¢1,400,000 and two further payments of GH¢100,000 on 31 December 2023 and GH¢120,000 on 31 December 2024 if the return on capital employed (ROCE) exceeds 15% in each of the financial years. All indicators have suggested that the ROCE for the company will be 17% and 16% for the financial years ending 31 December 2023 and 31 December 2024 respectively.

Yarkpawolo uses a discount rate of 10% in any present value calculations. The present value of GH¢ 1 receivable based on 10% are as follows:

Year Present Value
1 0.909
2 0.826

The draft financial statements of both companies as at 31 December 2023 are as follows:

Statement of Profit or Loss for the year ended 31 December 2023

Yarkpawolo (GH¢’000) Weah (GH¢’000)
Sales revenue 14,000
Cost of sales (10,000)
Gross profit 4,000
Operating expenses (2,050)
Profit before tax 1,950
Income tax expense (450)
Profit for the year 1,500
Retained earnings brought forward 3,500
Retained earnings to statement of financial position 5,000

Statement of Financial Position as at 31 December 2023

Yarkpawolo (GH¢’000) Weah (GH¢’000)
Non-current assets:
Property, Plant & Equipment 4,500
Patents 500
Investment in Weah 1,400
Total Non-current assets 6,400
Current assets:
Inventories 5,500
Trade and other receivables 2,000
Cash and cash equivalents 1,200
Total Current assets 8,700
Total Assets 15,100
Equity:
Share capital (GH¢0.20 per ordinary share) 1,500
General reserve 3,000
Retained earnings as at 31 December 2023 5,000
Total Equity 9,500
Non-current liabilities:
Long-term borrowings 1,600
Current liabilities:
Trade and other payables 4,000
Current portion of long-term borrowings –
Total Liabilities 5,600
Total Equity and Liabilities 15,100

Additional Information:

  1. Fair Value Adjustments on PPE:

    • Property: Increase from GH¢200,000 to GH¢250,000 (Depreciation rate 10%)
    • Plant: Increase from GH¢80,000 to GH¢100,000 (Depreciation rate 20%)
    • Equipment: Decrease from GH¢120,000 to GH¢80,000 (Depreciation rate 20%)
    • Weah has not adjusted its PPE values for the fair value assessment.

  2. Intra-Group Trading:

    • Since acquisition, Weah purchased GH¢50,000 worth of goods from Yarkpawolo. Half of these goods remained in inventory at year-end. Yarkpawolo makes a mark-up on cost of 25%.
    • Yarkpawolo also purchased GH¢50,000 of goods from Weah, with one-third remaining in inventory. Weah sells at a margin of 20%.

  3. Intercompany Balances:

    • Yarkpawolo’s trade receivables include GH¢5,000 owed by Weah. The current accounts do not balance due to GH¢2,000 in transit from Weah.

  4. Impairment:

    • A goodwill impairment review identified a loss of GH¢100,000. No adjustment has been made yet.

  5. Non-controlling Interest Valuation:

    • Yarkpawolo values non-controlling interest at fair value at the acquisition date. The share price for Weah was GH¢0.75 per share.

Required:
Prepare for Yarkpawolo LTD:
(a) Consolidated Statement of Profit or Loss for the year ended 31 December 2023
(b) Consolidated Statement of Financial Position as at 31 December 2023

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  • 30 Marks

CR – May 2015 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Barewa Group as of 31 May 2013, considering acquisitions and adjustments.

Barewa Plc has two subsidiary companies and one associate. Since the adoption of International Financial Reporting Standards (IFRS) by companies listed on the Nigeria Stock Exchange, Barewa has been preparing its consolidated financial statements in accordance with the provisions of International Financial Reporting Standards (IFRSs).

The draft Statements of Financial Position of Barewa and its two subsidiaries as at 31 May, 2013 are as follows:

Assets Barewa (N’m) Megida (N’m) Mindara (N’m)
Non-current assets
Plant 2,650 2,300 1,610
Investments – Megida 3,000
Investments – Mindara 1,280
Associate (Calamari) 200
Available for sale 510 60 50
Total Non-current assets 7,640 2,360 1,660
Current assets
Inventory 1,350 550 730
Trade receivables 910 450 320
Cash and cash equivalent 1,020 1,000 80
Total Current assets 3,280 2,000 1,130
Total Assets 10,920 4,360 2,790
Equity and Liabilities
Share capital 5,200 2,200 1,000
Retained earnings 2,400 1,500 800
Other components of equity 120 40 70
Total equity 7,720 3,740 1,870
Non-current liabilities
Long-term loans 1,200 150 50
Deferred tax 250 90 30
Total non-current liabilities 1,450 240 80
Current liabilities
Trade payables 1,150 300 600
Current tax payables 600 80 240
Total current liabilities 1,750 380 840
Total Equity and Liabilities 10,920 4,360 2,790

The following information is relevant to the preparation of the group financial statements:

  • Acquisition of Megida Plc
    • Date of Acquisition: 1 June 2012
    • Barewa acquired 80% of the equity interest in Megida Plc.
    • At the date of acquisition, Megida’s retained earnings were N1.36 billion, and other components of equity amounted to N40 million.
    • There had been no new issuance of share capital by Megida since the acquisition date.
    • The consideration for the acquisition was N3 billion in cash.
    • The fair value of Megida’s identifiable net assets at acquisition was N4 billion, with the excess attributed to an increase in the value of non-depreciable land.
    • An independent valuation determined that the fair value of the non-controlling interest (NCI) in Megida on 1 June 2012 was N860 million.
    • Barewa’s policy is to measure NCI based on their proportionate share in the identifiable net assets of the subsidiary, not at fair value (full goodwill method).
  • Acquisition of Mindara Plc
    • Date of Acquisition: 1 June 2012
    • Barewa acquired 70% of the ordinary shares of Mindara Plc.
    • The consideration for the acquisition included:
      • An upfront payment of N1.28 billion.
      • A contingent consideration requiring Barewa to pay the former shareholders 30% of Mindara’s profits on 31 May 2014 for each of the financial years ending 31 May 2013 and 31 May 2014. This arrangement was valued at N120 million as of 1 June 2012 and remains unchanged. It has not been included in the financial statements.
    • The fair value of the identifiable net assets at acquisition was N1.76 billion. This included retained earnings of N550 million and other components of equity of N70 million.
    • There had been no new issuance of share capital by Mindara since the acquisition date.
    • The excess fair value of the net assets was due to an increase in property, plant, and equipment (PPE), which is depreciated on a straight-line basis over seven years.
    • The fair value of the non-controlling interest (NCI) in Mindara was N530 million on the acquisition date.
  • Investment in Calamari Plc
    • On 1 June 2011, Barewa acquired a 10% interest in Calamari Plc for N80 million. This was classified as an available-for-sale investment.
    • As of 31 May 2012, the value of this investment had increased to N90 million.
    • On 1 June 2012, Barewa acquired an additional 15% interest in Calamari for N110 million, achieving significant influence.
    • Calamari recorded profits after dividends of N60 million and N100 million for the financial years ending 31 May 2012 and 31 May 2013, respectively.
  • Equity Instrument Purchase
    • On 1 June 2012, Barewa purchased an equity instrument valued at 100 million pesos, classified as available-for-sale.
    • Relevant exchange rates:
      • 31 May 2012: N5.1 to 1 peso.
      • 31 May 2013: N5.0 to 1 peso.
    • The fair value of the instrument as of 31 May 2013 was 90 million pesos, reflecting an impairment that Barewa has not recorded.
  • Loan to a Director
    • A loan of N10 million to a director has been included in cash and cash equivalents.
    • The loan is repayable on demand with no specific repayment date.
    • The directors believe that this treatment complies with International Financial Reporting Standards (IFRS), as no IFRS explicitly prohibits showing the loan as cash.
  • Goodwill Impairment
    • There is no impairment of goodwill arising from the acquisitions.

Required

Prepare a consolidated statement of financial position for Barewa Group as of 31 May 2013.

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  • 30 Marks

CR – Nov 2016 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare a Consolidated Statement of Financial Position for Bata Plc and subsidiaries; explain IAS 21 principles for translating foreign subsidiaries.

a. Bata Plc, which operates in the manufacturing sector, has been surviving the challenges operating in the Nigerian economic environment. The draft Statements of Financial Position of Bata Plc and its subsidiaries as at October 31, 2016, are as follows:

Bata N’million Jewe N’million Gaba N’million
Non-current assets Property, plant, and equipment 4,320 360 420
Investments in subsidiaries 1,110 600 –
Financial assets 500 – –
Total Non-current assets 5,930 960 420
Current assets 1,050 570 540
Total assets 6,980 1,530 960
Equity Share capital – N1 ordinary shares 2,400 600 300
Retained earnings 3,410 540 390
Other components of equity 450 – –
Total equity 6,260 1,140 690
Current liabilities 720 390 270
Total liabilities and equity 6,980 1,530 960

Additional Information:

  1. Acquisition of Subsidiaries:
    • Bata Plc acquired 60% of the share capital of Jewe Plc on November 1, 2012, and 10% of Gaba Plc on November 1, 2013. The costs of the combinations were N852 million and N258 million, respectively.
    • Jewe Plc acquired 70% of the share capital of Gaba Plc on November 1, 2013.
  2. Retained Earnings Balances:
Date Jewe Plc (N’million) Gaba Plc (N’million)
November 1, 2012 270 –
November 1, 2013 360 240
  1. Fair Value Adjustments:
    • At acquisition dates, the fair value of the net assets was N930 million for Jewe Plc and N660 million for Gaba Plc. The difference in the fair value and book value relates to non-depreciable land.
    • The fair value of non-controlling interest (NCI) was N390 million for Jewe Plc and N330 million for Gaba Plc. Bata Plc adopts the full goodwill method under IFRS 3 to account for NCI.
  2. Impairment Testing:
    • Jewe Plc suffered an impairment loss of N60 million.
    • Gaba Plc did not suffer any impairment loss.
  3. Intra-group Inventory Sales:
    • During the year ended October 31, 2016, Bata Plc sold inventory to Jewe Plc and Gaba Plc.
    • The invoiced prices of the inventories were N480 million and N360 million, respectively.
    • Bata Plc invoices goods to achieve a markup of 25% on cost to all third parties, including group companies.
    • At the year-end, half of the inventory sold to Jewe Plc remained unsold, but the entire inventory sold to Gaba Plc had been sold to third parties.
  4. Financial Asset:
    • Bata Plc purchased a deep discount bond for N500 million on November 1, 2015.
    • The bonds will be redeemed in 3 years for N740.75 million and are carried at amortized cost in line with IAS 39.
    • The Accountant has not passed the correct entries to reflect amortized cost valuation at year-end, and the financial asset is shown at N500 million.

Compound sum of N1: (1 + r)^n

Year 12% 14%
1 1.1200 1.1400
2 1.2544 1.2996
3 1.4049 1.4815
4 1.5735 1.6890

Required:

  1. Prepare a Consolidated Statement of Financial Position for Bata Plc and its subsidiaries as at October 31, 2016.       (25 Marks)
  2. Explain to the directors of Bata Plc how the assets, liabilities, income, and expenses of a foreign subsidiary, including the resulting goodwill, are translated for consolidation purposes under IAS 21. (5 Marks)

(Total: 30 Marks)

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  • 30 Marks

CR – NOV 2017 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Papa Group as at March 31, 2017.

The following are the financial statements of Papa, Tata, and Chebe, all Plcs. as at March 31, 2017:

Papa (N’m) Tata (N’m) Chebe (N’m)
Assets:
Tangible non-current assets 1,280 440 280
Investment in Tata 413 – –
Investment in Chebe 60 – –
Current assets 531 190 130
Total assets 2,284 630 410

Equity and liabilities:

Equity and Liabilities Papa (N’m) Tata (N’m) Chebe (N’m)
Share capital of N1 each 800 240 200
Share premium 150 20 30
Revaluation reserve 90 – –
Retained earnings 390 210 94
Total equity 1,430 470 324
Non-current liabilities 640 30 16
Current liabilities 214 130 70
Total equity and liabilities 2,284 630 410

Papa acquired the following shareholdings in Tata and Chebe:

Date of acquisition Holding acquired Fair value of net assets Purchase consideration
Tata April 1, 2014 30% 325
April 1, 2016 50% 460
Chebe April 1, 2016 25% 200

You are also provided with the following information, which will be relevant to the consolidated financial statements of Papa Plc:

(i) None of the companies has issued any additional share capital since April 1, 2014.
(ii) The financial statements of Papa have not yet been adjusted for the gain or loss arising on gaining control of Tata.
(iii) At April 1, 2014, the carrying value of the net assets of Tata was the same as their fair value of N325 million.
(iv) Papa Plc. wishes to use the full fair value method of accounting for the acquisition of Tata, and at April 1, 2016 the estimated value of goodwill attributable to non-controlling interests was N3 million. The estimated fair value of the initial investment in 30% of the shares of Tata was N150 million at March 31, 2017.
(v) Included in the tangible non-current assets of Tata is land, valued at cost, which on March 31, 2017 had a fair value of N25 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vi) At April 1, 2016, the fair value of Chebe’s land was N16 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vii) Goodwill arising on acquisition is tested for impairment at each year-end. At March 31, 2017, an impairment loss of N15 million was recognised for Tata.
(viii) There has been no impairment of the investment in Chebe.

Required:
Prepare the consolidated statement of financial position of Papa Group as at March 31, 2017.
(Total 30 Marks)

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  • 15 Marks

FR – Nov 2022 – L2 – Q3a – Consolidated Statement of Financial Position

Preparation of the consolidated statement of financial position for Food Plc and its subsidiary Eba Ltd as of September 30, 2020.

a. Food Plc has a subsidiary, Eba Limited. The statements of financial position of the companies as at September 30, 2020 are presented below:


Additional Information:
(i) Food PLC acquired four hundred and eighty million shares in Eba Limited two years ago when the balances in retained earnings and general
reserves were N60,000,000 and N48,000,000 respectively.
(ii) The fair value of non-controlling interests in Eba limited as at the acquisition date was N158,000,000.
(iii) During the year, goods costing N80,000,000 to Food PLC were transferred to Eba Limited. It is the policy of Food PLC to transfer goods at cost plus 25%. A quarter of these goods have been sold by Eba Limited at year end.
(iv) Part of the bills receivable have been discounted by Food PLC.
(v) The sum of N8,000,000 transferred by Eba Limited to Food PLC as part payment for indebtedness was received after the reporting date.
(vi) An impairment test revealed a loss of N16,000,000 on the goodwill arising on the acquisition of Eba Limited.
(vii) The carrying amount of the net assets of Eba Limited is N20,000,000 more than the fair value at acquisition date. This was due to the loss in value of the company’s machinery occasioned by change in technology. The machinery is depreciated at a flat rate of 15% on cost.
(viii) The nominal value of the ordinary shares of Food PLC are denominated in 50 kobo per share, while those of Eba Limited are 25 kobo each.

Required:
a. Prepare the consolidated statement of financial position of Food group as at September 30, 2020. (15 Marks)

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  • 20 Marks

FR – May 2024 – L2 – SB – Q2 – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Sokoto Nig. PLC as at October 31, 2023, and explain how the investment in the subsidiary should be accounted for in the parent’s separate financial statements.

The following are the statements of financial position of Sokoto Nig. PLC and Niger Nig. LTD for the year ended October 31, 2023:

Additional Information:

  1. Sokoto Nig. PLC purchased 70% of the issued ordinary share capital of Niger Nig. LTD four years ago when the retained earnings of Niger Nig. LTD were N160,000. There has been no impairment of goodwill.
  2. For the purpose of the acquisition, plant and machinery in Niger Nig. LTD with a carrying amount of N400,000 were revalued to a fair value of N480,000. The revaluation was not recorded in the accounts of Niger Nig. LTD. Depreciation is charged at 20% using the straight-line method.
  3. Sokoto Nig. PLC sells goods to Niger Nig. LTD at a mark-up of 25%. At October 31, 2023, the inventories of Niger Nig. LTD included N360,000 of goods purchased from Sokoto Nig. PLC.
  4. Niger Nig. LTD owes Sokoto Nig. PLC N280,000 for goods purchased, and Sokoto Nig. PLC owes Niger Nig. LTD N120,000.
  5. It is the group policy to value non-controlling interests at fair value.
  6. The market price of the shares of the non-controlling shareholders just before the acquisition was N1.50 per share.

You are required to:
a. Prepare the consolidated statement of financial position of Sokoto group as at October 31, 2023. (17 Marks)
b. Explain how investment in a subsidiary should be accounted for in the separate financial statements of the parent. (3 Marks)

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  • 10 Marks

FR – Nov 2020 – L2 – Q1a – Consolidated Statement of Profit or Loss

Prepare the consolidated statement of profit or loss and other comprehensive income for Kingdom Ltd Group for the year ending 31 December 2019.

Statement of profit or loss and other comprehensive income for the year ended 31 December 2019 of Kingdom Ltd and Paradise Ltd.

Description Kingdom Ltd (GH¢000) Paradise Ltd (GH¢000)
Revenue 125,200 60,000
Cost of sales (91,600) (48,000)
Gross profit 33,600 12,000
Distribution costs (4,000) (2,400)
Administrative expenses (7,000) (3,600)
Finance costs (400) 0
Profit before tax 22,200 6,000
Income tax expenses (6,200) (2,000)
Profit for the year 16,000 4,000
Other comprehensive income: Gain on revaluation of property 3,000 0
Total comprehensive income 19,000 4,000

Statement of financial position as at 31 December 2019

Description Kingdom Ltd (GH¢000) Paradise Ltd (GH¢000)
Assets
Non-current assets:
Property, plant, and equipment (PPE) 37,400 27,800
10% loan note 2,000 0
Total non-current assets 39,400 27,800
Current assets:
Inventory 8,600 2,400
Trade receivables 9,400 5,000
Bank 0 600
Total current assets 18,000 8,000
Total assets 57,400 35,800

Additional relevant information:
i) Kingdom Ltd acquired 60% of the share capital of Paradise Ltd on 1 April 2019. The purchase consideration was settled by a share exchange transaction of two shares in Kingdom Ltd for every three acquired shares in Paradise Ltd. The share price of Kingdom Ltd at the acquisition date was GH¢3 per share. In addition, Kingdom Ltd will also pay cash consideration of GH¢0.275 on 1 April 2020 for each acquired share in Paradise Ltd. Kingdom Ltd’s cost of capital is 10% per annum. None of the consideration has been recorded by Kingdom Ltd.

ii) The fair values of Paradise Ltd’s net assets and liabilities were equal to their carrying amounts at the date of acquisition with the exception of Paradise’s property, which had a fair value of GH¢8 million above its carrying amount. For the purpose of consolidation, this led to an increase in depreciation charges (in cost of sales) of GH¢200,000 in the post-acquisition period to 31 December 2019. Paradise Ltd has not incorporated the fair value of property increase into its entity’s financial statements.

iii) The policy of Kingdom Ltd group is to value all properties to fair value at each year end. On 31 December 2019, the increase in Kingdom Ltd’s property has already been recorded. However, a further increase of GH¢1.2 million in the value of Paradise Ltd’s property since its value at acquisition to 31 December 2019 has not yet been recorded.

iv) Kingdom Ltd made sales to Paradise Ltd throughout the year 2019 and it had consistently been GH¢600,000 per month. Kingdom Ltd made a mark-up of 25% on all of these sales. A total of GH¢1.2 million (at cost to Paradise) of Paradise Ltd’s inventory at 31 December 2019 had been supplied by Kingdom Ltd during the post-acquisition period.

v) At 31 December 2019, Kingdom Ltd had a trade receivable balance owing from Paradise Ltd of GH¢2.4 million. However, this did not agree to the equivalent trade payable of Paradise Ltd as a result of a payment by Paradise Ltd of GH¢800,000 made in December 2019, which did not reflect in Kingdom Ltd’s bank account until 4 January 2020. Kingdom Ltd’s policy for cash timing differences is to adjust the parent’s financial statements.

vi) Kingdom Ltd on December 2019, accepted a GH¢1 million 10% loan note from Paradise Ltd.

vii) At 31 December 2019, the goodwill that arose on acquisition was impaired by GH¢1 million. Kingdom Ltd has a policy of treating goodwill impairment as part of administrative expense.

viii) It is the policy of Kingdom Ltd group to value the non-controlling interest at fair value. For this purpose, Paradise Ltd’s share price was trading at GH¢2.50 each at the acquisition date.

ix) Assume that all items of income and expenditure accrue evenly throughout the year except where indicated otherwise.

Required:
a) Prepare the consolidated statement of profit or loss and other comprehensive income for Kingdom Ltd group for the year ended 31 December 2019. (10 marks)

 

 

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  • 13 Marks

FR – Mar/Jul 2020 – L2 – Q3b – Consolidated Statement of Financial Position for Papa Limited Group

Preparation of consolidated statement of financial position for Papa Limited group as at December 31, 2018.

The following information relates to financial statements included in the annual report of Papa Limited and Mama Limited as at December 31, 2018. Papa Limited acquired 80% of the ordinary shares of Mama Limited for N1,200m on January 1, 2014:

Additional Information:
1. At the date of acquisition, Mama Limited retained earnings were N600m. Non-controlling interest fair value in Mama Limited on the date of acquisition was N320m.
2. Papa Limited sold goods worth N200m to Mama Limited during the year making 25% gross profit margin. 40% of the goods are still included in the inventories of Mama Limited as at December 31, 2018.
3. The fair values of the net assets of Mama Limited at the date of acquisition are the same as their carrying amounts, with the exception of land and buildings. The cost of these land and buildings is N600m, and it was estimated to have a fair value of N720m.
Required:
Prepare the consolidated statement of financial position for the Papa Limited group as at December 31, 2018. (13 Marks)

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  • 5 Marks

CR – Aug 2022 – L3 – Q4c – Consolidated Financial Statements

This question discusses the consolidation implications of changes in group structure that do not result in a loss of control.

Explain the consolidation implication of a change in group structure that does not result in a loss of control.

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  • 20 Marks

CR – Aug 2022 – L3 – Q1 – Consolidated Financial Statements

This question requires the preparation of a consolidated statement of financial position for Labone Group, considering investments in subsidiaries and intercompany transactions.

Below are the summarised statements of financial position of three entities: Labone Ltd (Labone), Nungua Ltd (Nungua), and Teshie Ltd (Teshie) as at 31 December 2021.

Statements of financial position as at 31 December 2021 Labone Nungua Teshie
Assets GH¢million GH¢million GH¢million
Non-current assets
Property, plant, and equipment 1,150 800 400
Investment in Nungua 560 – –
Investment in Teshie 60 – –
Other investment 140 – –
Total non-current assets 1,910 800 400
Current assets 490 200 100
Total assets 2,400 1,000 500
Equity and liabilities
Equity
Equity shares of GH¢1 each 400 320 200
Retained earnings 1,225 440 200
Other reserves 95 – –
Total equity 1,720 760 400
Non-current liabilities 300 80 40
Current liabilities 380 160 60
Total equity and liabilities 2,400 1,000 500

Additional information:

i) On 1 January 2018, Labone acquired 80% of the equity share capital of Nungua for cash consideration of GH¢560 million. At the same date, Labone acquired 70% of the equity share capital of Teshie for cash consideration. Labone has correctly recorded both transactions. At this time, the balances on the retained earnings, the fair values of non-controlling interests, and fair values of the identifiable net assets of Nungua and Teshie were as follows:

Nungua Teshie
Retained earnings GH¢300 million GH¢120 million
Fair value of non-controlling interests GH¢140 million GH¢80 million
Fair value of net assets GH¢640 million GH¢310 million

Any difference between the acquisition date fair value and book value of the identifiable net assets of both investees was due to land. Fair value adjustments should be deemed as temporary differences which are subject to tax of 20%. The fair values of identifiable net assets above are not yet adjusted for tax. Shortly after acquisition, Teshie incorporated the fair values (together with any tax effects) into its separate financial statements, but Nungua had not yet incorporated the fair values into its separate financial statements.

ii) On 1 October 2021, Labone disposed of 40% out of the 70% equity shares of Teshie for GH¢220 million. Labone credited the proceeds received to its “Investment in Teshie” and debited “Cash.” At this time, it was determined that the fair value of the remaining interest was GH¢180 million. Following the sale, Labone could only exert significant influence over Teshie.

iii) During the financial year, Labone transferred goods worth GH¢5 million every month to Teshie. By 31 December 2021, Teshie had not sold the last two months’ deliveries and had included them in its year-end inventory. Labone charges three-seventh (3/7) mark-up on all sales.

iv) Labone’s receivable balance includes GH¢12 million owed by Teshie in respect of the last three months’ sales. This balance agreed with the corresponding payables in Teshie’s financial statements.

v) In its separate financial statements, Labone has accounted for its investments in both Nungua and Teshie at cost. It is the policy of Labone group to measure goodwill in full and to record non-controlling interests at fair value at acquisition. Neither goodwill of Nungua nor that of Teshie has suffered any impairment since acquisition.

vi) Labone has two internal business segments: Construction Division and Merchandise Division. On 1 July 2021, the Construction Division entered into a 1-year fixed price contract to construct an ultra-modern office complex at a contract sum of GH¢60 million for a district government agency located in the Eastern zone of Ghana. Total estimated costs at the time the contract was concluded were GH¢52 million. Actual costs incurred up to 31 December 2021 amounted to GH¢32 million. At 31 December 2021, the Directors of Labone revised its total construction costs on the project to GH¢64 million. No progress payments have been received from the agency. The only entries made have been to include the costs incurred in Labone’s inventory. Labone measures progress to completion on the basis of cost.

vii) During the current year, Nungua and Teshie reported profits after tax of GH¢48 million and GH¢40 million respectively. Unless otherwise stated, it may be assumed that profits accrued evenly over the year and that no dividends were paid during the year.

(Note: Deferred tax adjustment should be ignored, unless otherwise indicated.)

Required:

Prepare the consolidated statement of financial position of the Labone Group as at 31 December 2021.

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  • 20 Marks

FR – Nov 2024 – L2 – Q1- Group Financial Statements

Preparation of the consolidated statement of profit or loss and statement of financial position for Yarkpawolo Group, including goodwill calculation and intra-group adjustments.

Yarkpawolo LTD, a company in the healthcare industry, purchased 80% of the ordinary shares of Weah LTD on 1 January 2023. There are three elements to the purchase consideration: an immediate payment of GH¢1,400,000 and two further payments of GH¢100,000 on 31 December 2023 and GH¢120,000 on 31 December 2024 if the return on capital employed (ROCE) exceeds 15% in each of the financial years. All indicators have suggested that the ROCE for the company will be 17% and 16% for the financial years ending 31 December 2023 and 31 December 2024 respectively.

Yarkpawolo uses a discount rate of 10% in any present value calculations. The present value of GH¢ 1 receivable based on 10% are as follows:

Year Present Value
1 0.909
2 0.826

The draft financial statements of both companies as at 31 December 2023 are as follows:

Statement of Profit or Loss for the year ended 31 December 2023

Yarkpawolo (GH¢’000) Weah (GH¢’000)
Sales revenue 14,000
Cost of sales (10,000)
Gross profit 4,000
Operating expenses (2,050)
Profit before tax 1,950
Income tax expense (450)
Profit for the year 1,500
Retained earnings brought forward 3,500
Retained earnings to statement of financial position 5,000

Statement of Financial Position as at 31 December 2023

Yarkpawolo (GH¢’000) Weah (GH¢’000)
Non-current assets:
Property, Plant & Equipment 4,500
Patents 500
Investment in Weah 1,400
Total Non-current assets 6,400
Current assets:
Inventories 5,500
Trade and other receivables 2,000
Cash and cash equivalents 1,200
Total Current assets 8,700
Total Assets 15,100
Equity:
Share capital (GH¢0.20 per ordinary share) 1,500
General reserve 3,000
Retained earnings as at 31 December 2023 5,000
Total Equity 9,500
Non-current liabilities:
Long-term borrowings 1,600
Current liabilities:
Trade and other payables 4,000
Current portion of long-term borrowings –
Total Liabilities 5,600
Total Equity and Liabilities 15,100

Additional Information:

  1. Fair Value Adjustments on PPE:

    • Property: Increase from GH¢200,000 to GH¢250,000 (Depreciation rate 10%)
    • Plant: Increase from GH¢80,000 to GH¢100,000 (Depreciation rate 20%)
    • Equipment: Decrease from GH¢120,000 to GH¢80,000 (Depreciation rate 20%)
    • Weah has not adjusted its PPE values for the fair value assessment.

  2. Intra-Group Trading:

    • Since acquisition, Weah purchased GH¢50,000 worth of goods from Yarkpawolo. Half of these goods remained in inventory at year-end. Yarkpawolo makes a mark-up on cost of 25%.
    • Yarkpawolo also purchased GH¢50,000 of goods from Weah, with one-third remaining in inventory. Weah sells at a margin of 20%.

  3. Intercompany Balances:

    • Yarkpawolo’s trade receivables include GH¢5,000 owed by Weah. The current accounts do not balance due to GH¢2,000 in transit from Weah.

  4. Impairment:

    • A goodwill impairment review identified a loss of GH¢100,000. No adjustment has been made yet.

  5. Non-controlling Interest Valuation:

    • Yarkpawolo values non-controlling interest at fair value at the acquisition date. The share price for Weah was GH¢0.75 per share.

Required:
Prepare for Yarkpawolo LTD:
(a) Consolidated Statement of Profit or Loss for the year ended 31 December 2023
(b) Consolidated Statement of Financial Position as at 31 December 2023

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  • 30 Marks

CR – May 2015 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Barewa Group as of 31 May 2013, considering acquisitions and adjustments.

Barewa Plc has two subsidiary companies and one associate. Since the adoption of International Financial Reporting Standards (IFRS) by companies listed on the Nigeria Stock Exchange, Barewa has been preparing its consolidated financial statements in accordance with the provisions of International Financial Reporting Standards (IFRSs).

The draft Statements of Financial Position of Barewa and its two subsidiaries as at 31 May, 2013 are as follows:

Assets Barewa (N’m) Megida (N’m) Mindara (N’m)
Non-current assets
Plant 2,650 2,300 1,610
Investments – Megida 3,000
Investments – Mindara 1,280
Associate (Calamari) 200
Available for sale 510 60 50
Total Non-current assets 7,640 2,360 1,660
Current assets
Inventory 1,350 550 730
Trade receivables 910 450 320
Cash and cash equivalent 1,020 1,000 80
Total Current assets 3,280 2,000 1,130
Total Assets 10,920 4,360 2,790
Equity and Liabilities
Share capital 5,200 2,200 1,000
Retained earnings 2,400 1,500 800
Other components of equity 120 40 70
Total equity 7,720 3,740 1,870
Non-current liabilities
Long-term loans 1,200 150 50
Deferred tax 250 90 30
Total non-current liabilities 1,450 240 80
Current liabilities
Trade payables 1,150 300 600
Current tax payables 600 80 240
Total current liabilities 1,750 380 840
Total Equity and Liabilities 10,920 4,360 2,790

The following information is relevant to the preparation of the group financial statements:

  • Acquisition of Megida Plc
    • Date of Acquisition: 1 June 2012
    • Barewa acquired 80% of the equity interest in Megida Plc.
    • At the date of acquisition, Megida’s retained earnings were N1.36 billion, and other components of equity amounted to N40 million.
    • There had been no new issuance of share capital by Megida since the acquisition date.
    • The consideration for the acquisition was N3 billion in cash.
    • The fair value of Megida’s identifiable net assets at acquisition was N4 billion, with the excess attributed to an increase in the value of non-depreciable land.
    • An independent valuation determined that the fair value of the non-controlling interest (NCI) in Megida on 1 June 2012 was N860 million.
    • Barewa’s policy is to measure NCI based on their proportionate share in the identifiable net assets of the subsidiary, not at fair value (full goodwill method).
  • Acquisition of Mindara Plc
    • Date of Acquisition: 1 June 2012
    • Barewa acquired 70% of the ordinary shares of Mindara Plc.
    • The consideration for the acquisition included:
      • An upfront payment of N1.28 billion.
      • A contingent consideration requiring Barewa to pay the former shareholders 30% of Mindara’s profits on 31 May 2014 for each of the financial years ending 31 May 2013 and 31 May 2014. This arrangement was valued at N120 million as of 1 June 2012 and remains unchanged. It has not been included in the financial statements.
    • The fair value of the identifiable net assets at acquisition was N1.76 billion. This included retained earnings of N550 million and other components of equity of N70 million.
    • There had been no new issuance of share capital by Mindara since the acquisition date.
    • The excess fair value of the net assets was due to an increase in property, plant, and equipment (PPE), which is depreciated on a straight-line basis over seven years.
    • The fair value of the non-controlling interest (NCI) in Mindara was N530 million on the acquisition date.
  • Investment in Calamari Plc
    • On 1 June 2011, Barewa acquired a 10% interest in Calamari Plc for N80 million. This was classified as an available-for-sale investment.
    • As of 31 May 2012, the value of this investment had increased to N90 million.
    • On 1 June 2012, Barewa acquired an additional 15% interest in Calamari for N110 million, achieving significant influence.
    • Calamari recorded profits after dividends of N60 million and N100 million for the financial years ending 31 May 2012 and 31 May 2013, respectively.
  • Equity Instrument Purchase
    • On 1 June 2012, Barewa purchased an equity instrument valued at 100 million pesos, classified as available-for-sale.
    • Relevant exchange rates:
      • 31 May 2012: N5.1 to 1 peso.
      • 31 May 2013: N5.0 to 1 peso.
    • The fair value of the instrument as of 31 May 2013 was 90 million pesos, reflecting an impairment that Barewa has not recorded.
  • Loan to a Director
    • A loan of N10 million to a director has been included in cash and cash equivalents.
    • The loan is repayable on demand with no specific repayment date.
    • The directors believe that this treatment complies with International Financial Reporting Standards (IFRS), as no IFRS explicitly prohibits showing the loan as cash.
  • Goodwill Impairment
    • There is no impairment of goodwill arising from the acquisitions.

Required

Prepare a consolidated statement of financial position for Barewa Group as of 31 May 2013.

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  • 30 Marks

CR – Nov 2016 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare a Consolidated Statement of Financial Position for Bata Plc and subsidiaries; explain IAS 21 principles for translating foreign subsidiaries.

a. Bata Plc, which operates in the manufacturing sector, has been surviving the challenges operating in the Nigerian economic environment. The draft Statements of Financial Position of Bata Plc and its subsidiaries as at October 31, 2016, are as follows:

Bata N’million Jewe N’million Gaba N’million
Non-current assets Property, plant, and equipment 4,320 360 420
Investments in subsidiaries 1,110 600 –
Financial assets 500 – –
Total Non-current assets 5,930 960 420
Current assets 1,050 570 540
Total assets 6,980 1,530 960
Equity Share capital – N1 ordinary shares 2,400 600 300
Retained earnings 3,410 540 390
Other components of equity 450 – –
Total equity 6,260 1,140 690
Current liabilities 720 390 270
Total liabilities and equity 6,980 1,530 960

Additional Information:

  1. Acquisition of Subsidiaries:
    • Bata Plc acquired 60% of the share capital of Jewe Plc on November 1, 2012, and 10% of Gaba Plc on November 1, 2013. The costs of the combinations were N852 million and N258 million, respectively.
    • Jewe Plc acquired 70% of the share capital of Gaba Plc on November 1, 2013.
  2. Retained Earnings Balances:
Date Jewe Plc (N’million) Gaba Plc (N’million)
November 1, 2012 270 –
November 1, 2013 360 240
  1. Fair Value Adjustments:
    • At acquisition dates, the fair value of the net assets was N930 million for Jewe Plc and N660 million for Gaba Plc. The difference in the fair value and book value relates to non-depreciable land.
    • The fair value of non-controlling interest (NCI) was N390 million for Jewe Plc and N330 million for Gaba Plc. Bata Plc adopts the full goodwill method under IFRS 3 to account for NCI.
  2. Impairment Testing:
    • Jewe Plc suffered an impairment loss of N60 million.
    • Gaba Plc did not suffer any impairment loss.
  3. Intra-group Inventory Sales:
    • During the year ended October 31, 2016, Bata Plc sold inventory to Jewe Plc and Gaba Plc.
    • The invoiced prices of the inventories were N480 million and N360 million, respectively.
    • Bata Plc invoices goods to achieve a markup of 25% on cost to all third parties, including group companies.
    • At the year-end, half of the inventory sold to Jewe Plc remained unsold, but the entire inventory sold to Gaba Plc had been sold to third parties.
  4. Financial Asset:
    • Bata Plc purchased a deep discount bond for N500 million on November 1, 2015.
    • The bonds will be redeemed in 3 years for N740.75 million and are carried at amortized cost in line with IAS 39.
    • The Accountant has not passed the correct entries to reflect amortized cost valuation at year-end, and the financial asset is shown at N500 million.

Compound sum of N1: (1 + r)^n

Year 12% 14%
1 1.1200 1.1400
2 1.2544 1.2996
3 1.4049 1.4815
4 1.5735 1.6890

Required:

  1. Prepare a Consolidated Statement of Financial Position for Bata Plc and its subsidiaries as at October 31, 2016.       (25 Marks)
  2. Explain to the directors of Bata Plc how the assets, liabilities, income, and expenses of a foreign subsidiary, including the resulting goodwill, are translated for consolidation purposes under IAS 21. (5 Marks)

(Total: 30 Marks)

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  • 30 Marks

CR – NOV 2017 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Papa Group as at March 31, 2017.

The following are the financial statements of Papa, Tata, and Chebe, all Plcs. as at March 31, 2017:

Papa (N’m) Tata (N’m) Chebe (N’m)
Assets:
Tangible non-current assets 1,280 440 280
Investment in Tata 413 – –
Investment in Chebe 60 – –
Current assets 531 190 130
Total assets 2,284 630 410

Equity and liabilities:

Equity and Liabilities Papa (N’m) Tata (N’m) Chebe (N’m)
Share capital of N1 each 800 240 200
Share premium 150 20 30
Revaluation reserve 90 – –
Retained earnings 390 210 94
Total equity 1,430 470 324
Non-current liabilities 640 30 16
Current liabilities 214 130 70
Total equity and liabilities 2,284 630 410

Papa acquired the following shareholdings in Tata and Chebe:

Date of acquisition Holding acquired Fair value of net assets Purchase consideration
Tata April 1, 2014 30% 325
April 1, 2016 50% 460
Chebe April 1, 2016 25% 200

You are also provided with the following information, which will be relevant to the consolidated financial statements of Papa Plc:

(i) None of the companies has issued any additional share capital since April 1, 2014.
(ii) The financial statements of Papa have not yet been adjusted for the gain or loss arising on gaining control of Tata.
(iii) At April 1, 2014, the carrying value of the net assets of Tata was the same as their fair value of N325 million.
(iv) Papa Plc. wishes to use the full fair value method of accounting for the acquisition of Tata, and at April 1, 2016 the estimated value of goodwill attributable to non-controlling interests was N3 million. The estimated fair value of the initial investment in 30% of the shares of Tata was N150 million at March 31, 2017.
(v) Included in the tangible non-current assets of Tata is land, valued at cost, which on March 31, 2017 had a fair value of N25 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vi) At April 1, 2016, the fair value of Chebe’s land was N16 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vii) Goodwill arising on acquisition is tested for impairment at each year-end. At March 31, 2017, an impairment loss of N15 million was recognised for Tata.
(viii) There has been no impairment of the investment in Chebe.

Required:
Prepare the consolidated statement of financial position of Papa Group as at March 31, 2017.
(Total 30 Marks)

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  • 15 Marks

FR – Nov 2022 – L2 – Q3a – Consolidated Statement of Financial Position

Preparation of the consolidated statement of financial position for Food Plc and its subsidiary Eba Ltd as of September 30, 2020.

a. Food Plc has a subsidiary, Eba Limited. The statements of financial position of the companies as at September 30, 2020 are presented below:


Additional Information:
(i) Food PLC acquired four hundred and eighty million shares in Eba Limited two years ago when the balances in retained earnings and general
reserves were N60,000,000 and N48,000,000 respectively.
(ii) The fair value of non-controlling interests in Eba limited as at the acquisition date was N158,000,000.
(iii) During the year, goods costing N80,000,000 to Food PLC were transferred to Eba Limited. It is the policy of Food PLC to transfer goods at cost plus 25%. A quarter of these goods have been sold by Eba Limited at year end.
(iv) Part of the bills receivable have been discounted by Food PLC.
(v) The sum of N8,000,000 transferred by Eba Limited to Food PLC as part payment for indebtedness was received after the reporting date.
(vi) An impairment test revealed a loss of N16,000,000 on the goodwill arising on the acquisition of Eba Limited.
(vii) The carrying amount of the net assets of Eba Limited is N20,000,000 more than the fair value at acquisition date. This was due to the loss in value of the company’s machinery occasioned by change in technology. The machinery is depreciated at a flat rate of 15% on cost.
(viii) The nominal value of the ordinary shares of Food PLC are denominated in 50 kobo per share, while those of Eba Limited are 25 kobo each.

Required:
a. Prepare the consolidated statement of financial position of Food group as at September 30, 2020. (15 Marks)

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  • 20 Marks

FR – May 2024 – L2 – SB – Q2 – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Sokoto Nig. PLC as at October 31, 2023, and explain how the investment in the subsidiary should be accounted for in the parent’s separate financial statements.

The following are the statements of financial position of Sokoto Nig. PLC and Niger Nig. LTD for the year ended October 31, 2023:

Additional Information:

  1. Sokoto Nig. PLC purchased 70% of the issued ordinary share capital of Niger Nig. LTD four years ago when the retained earnings of Niger Nig. LTD were N160,000. There has been no impairment of goodwill.
  2. For the purpose of the acquisition, plant and machinery in Niger Nig. LTD with a carrying amount of N400,000 were revalued to a fair value of N480,000. The revaluation was not recorded in the accounts of Niger Nig. LTD. Depreciation is charged at 20% using the straight-line method.
  3. Sokoto Nig. PLC sells goods to Niger Nig. LTD at a mark-up of 25%. At October 31, 2023, the inventories of Niger Nig. LTD included N360,000 of goods purchased from Sokoto Nig. PLC.
  4. Niger Nig. LTD owes Sokoto Nig. PLC N280,000 for goods purchased, and Sokoto Nig. PLC owes Niger Nig. LTD N120,000.
  5. It is the group policy to value non-controlling interests at fair value.
  6. The market price of the shares of the non-controlling shareholders just before the acquisition was N1.50 per share.

You are required to:
a. Prepare the consolidated statement of financial position of Sokoto group as at October 31, 2023. (17 Marks)
b. Explain how investment in a subsidiary should be accounted for in the separate financial statements of the parent. (3 Marks)

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  • 10 Marks

FR – Nov 2020 – L2 – Q1a – Consolidated Statement of Profit or Loss

Prepare the consolidated statement of profit or loss and other comprehensive income for Kingdom Ltd Group for the year ending 31 December 2019.

Statement of profit or loss and other comprehensive income for the year ended 31 December 2019 of Kingdom Ltd and Paradise Ltd.

Description Kingdom Ltd (GH¢000) Paradise Ltd (GH¢000)
Revenue 125,200 60,000
Cost of sales (91,600) (48,000)
Gross profit 33,600 12,000
Distribution costs (4,000) (2,400)
Administrative expenses (7,000) (3,600)
Finance costs (400) 0
Profit before tax 22,200 6,000
Income tax expenses (6,200) (2,000)
Profit for the year 16,000 4,000
Other comprehensive income: Gain on revaluation of property 3,000 0
Total comprehensive income 19,000 4,000

Statement of financial position as at 31 December 2019

Description Kingdom Ltd (GH¢000) Paradise Ltd (GH¢000)
Assets
Non-current assets:
Property, plant, and equipment (PPE) 37,400 27,800
10% loan note 2,000 0
Total non-current assets 39,400 27,800
Current assets:
Inventory 8,600 2,400
Trade receivables 9,400 5,000
Bank 0 600
Total current assets 18,000 8,000
Total assets 57,400 35,800

Additional relevant information:
i) Kingdom Ltd acquired 60% of the share capital of Paradise Ltd on 1 April 2019. The purchase consideration was settled by a share exchange transaction of two shares in Kingdom Ltd for every three acquired shares in Paradise Ltd. The share price of Kingdom Ltd at the acquisition date was GH¢3 per share. In addition, Kingdom Ltd will also pay cash consideration of GH¢0.275 on 1 April 2020 for each acquired share in Paradise Ltd. Kingdom Ltd’s cost of capital is 10% per annum. None of the consideration has been recorded by Kingdom Ltd.

ii) The fair values of Paradise Ltd’s net assets and liabilities were equal to their carrying amounts at the date of acquisition with the exception of Paradise’s property, which had a fair value of GH¢8 million above its carrying amount. For the purpose of consolidation, this led to an increase in depreciation charges (in cost of sales) of GH¢200,000 in the post-acquisition period to 31 December 2019. Paradise Ltd has not incorporated the fair value of property increase into its entity’s financial statements.

iii) The policy of Kingdom Ltd group is to value all properties to fair value at each year end. On 31 December 2019, the increase in Kingdom Ltd’s property has already been recorded. However, a further increase of GH¢1.2 million in the value of Paradise Ltd’s property since its value at acquisition to 31 December 2019 has not yet been recorded.

iv) Kingdom Ltd made sales to Paradise Ltd throughout the year 2019 and it had consistently been GH¢600,000 per month. Kingdom Ltd made a mark-up of 25% on all of these sales. A total of GH¢1.2 million (at cost to Paradise) of Paradise Ltd’s inventory at 31 December 2019 had been supplied by Kingdom Ltd during the post-acquisition period.

v) At 31 December 2019, Kingdom Ltd had a trade receivable balance owing from Paradise Ltd of GH¢2.4 million. However, this did not agree to the equivalent trade payable of Paradise Ltd as a result of a payment by Paradise Ltd of GH¢800,000 made in December 2019, which did not reflect in Kingdom Ltd’s bank account until 4 January 2020. Kingdom Ltd’s policy for cash timing differences is to adjust the parent’s financial statements.

vi) Kingdom Ltd on December 2019, accepted a GH¢1 million 10% loan note from Paradise Ltd.

vii) At 31 December 2019, the goodwill that arose on acquisition was impaired by GH¢1 million. Kingdom Ltd has a policy of treating goodwill impairment as part of administrative expense.

viii) It is the policy of Kingdom Ltd group to value the non-controlling interest at fair value. For this purpose, Paradise Ltd’s share price was trading at GH¢2.50 each at the acquisition date.

ix) Assume that all items of income and expenditure accrue evenly throughout the year except where indicated otherwise.

Required:
a) Prepare the consolidated statement of profit or loss and other comprehensive income for Kingdom Ltd group for the year ended 31 December 2019. (10 marks)

 

 

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  • 13 Marks

FR – Mar/Jul 2020 – L2 – Q3b – Consolidated Statement of Financial Position for Papa Limited Group

Preparation of consolidated statement of financial position for Papa Limited group as at December 31, 2018.

The following information relates to financial statements included in the annual report of Papa Limited and Mama Limited as at December 31, 2018. Papa Limited acquired 80% of the ordinary shares of Mama Limited for N1,200m on January 1, 2014:

Additional Information:
1. At the date of acquisition, Mama Limited retained earnings were N600m. Non-controlling interest fair value in Mama Limited on the date of acquisition was N320m.
2. Papa Limited sold goods worth N200m to Mama Limited during the year making 25% gross profit margin. 40% of the goods are still included in the inventories of Mama Limited as at December 31, 2018.
3. The fair values of the net assets of Mama Limited at the date of acquisition are the same as their carrying amounts, with the exception of land and buildings. The cost of these land and buildings is N600m, and it was estimated to have a fair value of N720m.
Required:
Prepare the consolidated statement of financial position for the Papa Limited group as at December 31, 2018. (13 Marks)

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  • 5 Marks

CR – Aug 2022 – L3 – Q4c – Consolidated Financial Statements

This question discusses the consolidation implications of changes in group structure that do not result in a loss of control.

Explain the consolidation implication of a change in group structure that does not result in a loss of control.

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  • 20 Marks

CR – Aug 2022 – L3 – Q1 – Consolidated Financial Statements

This question requires the preparation of a consolidated statement of financial position for Labone Group, considering investments in subsidiaries and intercompany transactions.

Below are the summarised statements of financial position of three entities: Labone Ltd (Labone), Nungua Ltd (Nungua), and Teshie Ltd (Teshie) as at 31 December 2021.

Statements of financial position as at 31 December 2021 Labone Nungua Teshie
Assets GH¢million GH¢million GH¢million
Non-current assets
Property, plant, and equipment 1,150 800 400
Investment in Nungua 560 – –
Investment in Teshie 60 – –
Other investment 140 – –
Total non-current assets 1,910 800 400
Current assets 490 200 100
Total assets 2,400 1,000 500
Equity and liabilities
Equity
Equity shares of GH¢1 each 400 320 200
Retained earnings 1,225 440 200
Other reserves 95 – –
Total equity 1,720 760 400
Non-current liabilities 300 80 40
Current liabilities 380 160 60
Total equity and liabilities 2,400 1,000 500

Additional information:

i) On 1 January 2018, Labone acquired 80% of the equity share capital of Nungua for cash consideration of GH¢560 million. At the same date, Labone acquired 70% of the equity share capital of Teshie for cash consideration. Labone has correctly recorded both transactions. At this time, the balances on the retained earnings, the fair values of non-controlling interests, and fair values of the identifiable net assets of Nungua and Teshie were as follows:

Nungua Teshie
Retained earnings GH¢300 million GH¢120 million
Fair value of non-controlling interests GH¢140 million GH¢80 million
Fair value of net assets GH¢640 million GH¢310 million

Any difference between the acquisition date fair value and book value of the identifiable net assets of both investees was due to land. Fair value adjustments should be deemed as temporary differences which are subject to tax of 20%. The fair values of identifiable net assets above are not yet adjusted for tax. Shortly after acquisition, Teshie incorporated the fair values (together with any tax effects) into its separate financial statements, but Nungua had not yet incorporated the fair values into its separate financial statements.

ii) On 1 October 2021, Labone disposed of 40% out of the 70% equity shares of Teshie for GH¢220 million. Labone credited the proceeds received to its “Investment in Teshie” and debited “Cash.” At this time, it was determined that the fair value of the remaining interest was GH¢180 million. Following the sale, Labone could only exert significant influence over Teshie.

iii) During the financial year, Labone transferred goods worth GH¢5 million every month to Teshie. By 31 December 2021, Teshie had not sold the last two months’ deliveries and had included them in its year-end inventory. Labone charges three-seventh (3/7) mark-up on all sales.

iv) Labone’s receivable balance includes GH¢12 million owed by Teshie in respect of the last three months’ sales. This balance agreed with the corresponding payables in Teshie’s financial statements.

v) In its separate financial statements, Labone has accounted for its investments in both Nungua and Teshie at cost. It is the policy of Labone group to measure goodwill in full and to record non-controlling interests at fair value at acquisition. Neither goodwill of Nungua nor that of Teshie has suffered any impairment since acquisition.

vi) Labone has two internal business segments: Construction Division and Merchandise Division. On 1 July 2021, the Construction Division entered into a 1-year fixed price contract to construct an ultra-modern office complex at a contract sum of GH¢60 million for a district government agency located in the Eastern zone of Ghana. Total estimated costs at the time the contract was concluded were GH¢52 million. Actual costs incurred up to 31 December 2021 amounted to GH¢32 million. At 31 December 2021, the Directors of Labone revised its total construction costs on the project to GH¢64 million. No progress payments have been received from the agency. The only entries made have been to include the costs incurred in Labone’s inventory. Labone measures progress to completion on the basis of cost.

vii) During the current year, Nungua and Teshie reported profits after tax of GH¢48 million and GH¢40 million respectively. Unless otherwise stated, it may be assumed that profits accrued evenly over the year and that no dividends were paid during the year.

(Note: Deferred tax adjustment should be ignored, unless otherwise indicated.)

Required:

Prepare the consolidated statement of financial position of the Labone Group as at 31 December 2021.

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