Question Tag: Group Financial Statements

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  • 17 Marks

FR – May 2020 – L2 – Q1a – Consolidated statement of profit or loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for Naa Ltd and its subsidiary, Shormeh Ltd, for the year ended 30 September 2019.

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  • 20 Marks

FR – Mar 2023 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the consolidated statement of financial position for Panin Group as of 31 December 2021, considering various acquisitions and intercompany transactions.

Below are the financial statements of Panin, Kakra, and Tawia.

Additional information:

  1. On 1 January 2021, Panin acquired 27 million equity shares in Kakra, transferring a parcel of land with a carrying value of GH¢90 million and fair value of GH¢96 million. The balances on Kakra’s retained earnings and revaluation reserves at this date were GH¢72 million and GH¢5.5 million respectively.
  2. On 1 January 2021, Kakra’s internally developed brand had a fair value of GH¢11 million. The brand has an indefinite useful life, but at year-end its value-in-use was assessed at GH¢8 million.
  3. On 1 July 2021, Panin also acquired 5 million equity shares in Tawia for GH¢32 million. Tawia earned post-acquisition profit of GH¢10 million after tax and revaluation gains of GH¢500,000.
  4. In 2021, Kakra made intercompany sales to Panin for GH¢7.8 million, with a profit of 25% on cost, and GH¢1.2 million of these goods were in Panin’s inventory as at 31 December 2021. Kakra also sold to Tawia, and all goods remained in Tawia’s inventory.
  5. Dividends payable were declared by Kakra and Tawia, but Panin has not yet taken credit for its share.
  6. On 1 January 2021, Panin sold machines to Kakra for GH¢8 million, with a carrying value of GH¢6 million, depreciating them at 20% per annum.
  7. Goodwill should be impaired by 10%.
  8. Non-controlling interest should be valued at their proportionate share of fair value of the subsidiary’s identifiable net assets.

Required:

Prepare a consolidated statement of financial position for Panin Group as at 31 December 2021.

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  • 20 Marks

FR – July 2023 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the Consolidated Statement of Financial Position for a parent company Tarkwa Ltd and its subsidiary Awaso Ltd, incorporating the acquisition of 80% shares and related adjustments.

Tarkwa Ltd (Tarkwa) has been operating in the clothing and textiles industry in the past decade. On 1 July 2021, it acquired Awaso Ltd (Awaso) which operates in the same industry. The statements of Financial Position of the two companies as at 31 December 2021 are as follows:

Tarkwa GH¢000 Awaso GH¢000
Assets
Non-current assets 185,400 93,000
Current Assets
Inventory 76,200 31,800
Other current assets 58,200 24,000
Total current assets 134,400 55,800
Total assets 319,800 148,800
Equity and Liabilities
Equity
Share capital (issued at GH¢1 each) 120,000 50,000
Retained earnings:
Balance at January 1, 2021 73,200 51,600
Profit/(loss) for the year ended December 31, 2021 30,000 (18,000)
Total equity 223,200 83,600
Non-current liabilities
Deferred tax 30,000 4,000
Current liabilities
Trade payables and accruals 66,600 61,200
Total Equity and Liabilities 319,800 148,800

Additional information:

i) Tarkwa acquired 80% of Awaso’s equity shares by means of immediate cash payment of GH¢1.80 per each acquired share. However, the former shareholders agreed to return some of the consideration by 30 June 2022 if Awaso’s sales growth falls below a defined threshold over the next year. The value of this contingent consideration at the date of acquisition was estimated to be GH¢4 million. At 31 December 2021, in the light of Awaso’s falling sales, the value was revised to GH¢4.5 million. Tarkwa has only recorded the immediate cash payment.

ii) Tarkwa conducted a fair value exercise on Awaso’s net assets, which were equal to their carrying values including Awaso’s investment property with the exception of an item of owner-occupied property which had a fair value of GH¢5 million below its carrying amount. The property had a remaining useful life of 20 years as at 1 July 2021. Awaso has already incorporated the fair value change (together with the depreciation adjustment) in its own financial statements.

iii) At 31 December 2021, Awaso held goods in inventory, which had been supplied by Tarkwa at a mark-up on cost of 35%. The goods had cost Awaso GH¢6.75 million. 50% of the inventory remained unsold.

iv) The investment properties of Tarkwa and Awaso are carried at their fair values at January 1, 2021. However, at 31 December 2021, an item of properties had fair values of GH¢36.6 million and GH¢10.8 million respectively, with the change in Awaso’s investment properties all occurring since acquisition. These properties had carrying amounts at GH¢33,000 and GH¢12,000 respectively at the same date.

v) It is Tarkwa’s group policy to value the non-controlling interest using the fair value method at the acquisition date. For this purpose, a share price for Awaso of GH¢1.50 each is representative of the fair value of the shares held by the non-controlling interest.

Required:
Prepare the Consolidated Statement of Financial Position for Tarkwa as at December 31, 2021.

(Total: 20 marks)

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  • 20 Marks

FR – May 2017 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare consolidated financial statements for a parent and subsidiary, including profit or loss, statement of changes in equity, and statement of financial position.

Ghanbetter is a 90% subsidiary of Asonbata, acquired one year ago for GH¢4 billion, when the retained earnings of Ghanbetter were GH¢800 million. Below are the financial statements of the companies:

Statement of Profit or Loss for the year ended 31 December, 2016

Additional Information:
i) During the year Asonbata sold goods to Ghanbetter for GH¢100 million. These goods were sold at a margin of 20%, and one quarter remained in inventory at the year-end.

ii) During the year Ghanbetter sold goods to Asonbata for GH¢180 million. These goods were sold at a mark-up of 50%, and one half remained in inventory at the year-end.

iii) At the year-end, there were no outstanding inter-company current account balances.

iv) At the date of acquisition, the fair value of Ghanbetter’s net assets was equal to their carrying value, except for an item of plant that had a fair value of GH¢200 million in excess of its carrying value and a remaining useful life of four years.

v) Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose.

vi) Both companies have paid a dividend during the year. The dividend distributed by Asonbata was GH¢200 million, and that of Ghanbetter GH¢100 million. The investment income that Asonbata has recognised is the dividend received from Ghanbetter shortly before the year-end.

Required:
Prepare the Consolidated Statement of Financial Position, Statement of Changes in Equity, and Consolidated Statement of Profit or Loss for Asonbata for the year ended 31 December, 2016.

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  • 20 Marks

FR – March 2024 – L2 – Q1 – Group Financial Statements and Consolidation

Consolidation of Chicha Plc and Wale Plc financial statements, involving adjustments for intra-group transactions, non-controlling interest, and goodwill.

On 1 July 2022, Chicha Plc acquired 80% of the ordinary shares of Wale Plc at a cost of GH¢2,570,000. On the same date, it also acquired 50% of Wale Plc’s 10% loan notes at par. The summarised draft financial statements of both companies are:

Statements of Profit or Loss for the year ended 31 March 2023
Chicha Plc Wale Plc
Sales revenue 15,000 6,000
Cost of sales (10,500) (5,000)
Gross profit 4,500 1,000
Operating expenses (1,500) (50)
Loan interest received/(paid) 18.75 (50)
Profit before tax 3,018.75 900
Income tax expense (750) (150)
Profit for the year 2,268.75 750
Statements of Financial Position as at 31 March 2023
Chicha Plc Wale Plc
Non-current assets
Property, plant and equipment 4,830 2,000
Investments 2,820 –
Total Non-current assets 7,650 2,000
Current assets 3,750 2,000
Total assets 11,400 4,000
Equity and liabilities
Equity
Stated capital 2,500 500
Retained earnings 6,400 2,100
Total equity 8,900 2,600
Non-current liabilities
10% loan notes – 500
Current liabilities 2,500 900
Total equity and liabilities 11,400 4,000

The following information is relevant:

  1. The fair values of Wale Plc’s assets were equal to their book values except for its plant, which had a fair value of GH¢800,000 more than its book value at the date of acquisition. The remaining life of all of Wale Plc’s plant at the acquisition date was four years. Depreciation is on a straight-line basis and charged to cost of sales. Wale Plc has not adjusted the value of its plant as a result of the fair valuation of the assets.
  2. In the post-acquisition period, Chicha Plc sold goods to Wale Plc for GH¢3,000,000. These goods had cost Chicha Plc GH¢2,250,000. During the year, Wale Plc had sold GH¢2,500,000 of these goods for GH¢3,750,000.
  3. The current accounts of the two companies were reconciled at the year-end with Wale Plc owing Chicha Plc GH¢187,500.
  4. The goodwill was reviewed for impairment at the end of the reporting period and had suffered an impairment loss of GH¢75,000, which is to be treated as an operating expense.
  5. Chicha Plc’s and Wale Plc’s retained earnings as at 1 April 2022 were GH¢4,131,250 and GH¢1,350,000, respectively. No dividends were paid or declared by either entity during the year.
  6. It is the group policy to value the non-controlling interest at acquisition at fair value. The directors valued the non-controlling interest at GH¢625,000 at the date of acquisition.
  7. Revenues and profits should be deemed to accrue evenly throughout the year.

Required:
Prepare for Chicha Plc a Consolidated Statement of Profit or Loss for the year ended 31 March 2023 and Statement of Financial Position as at 31 March 2023.

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  • 20 Marks

FR – Aug 2022 – L2 – Q1 – Group Financial Statements and Consolidation

Preparation of consolidated statement of financial position for Adanse Group, considering intercompany transactions, fair value adjustments, and goodwill impairment.

Below are the statements of financial position of two entities: Adanse Plc (Adanse) and Fomena Plc (Fomena).

Statement of financial position as at 31 August 2021

Additional information:
i) All ordinary shares were issued at GH¢2 per share. There have been no movements in the share capital of Fomena since its acquisition.
ii) On 1 September 2020, Adanse acquired 80% ordinary shares in Fomena when Fomena’s retained earnings balance was GH¢45 million. The purchase and sale agreement provided that the shares should be settled as follows:

  • Immediate issue of Adanse’s 25 million 15% cumulative redeemable preference shares, issued at GH¢3 per share. Adanse has not yet recorded this consideration.
  • Immediate transfer of a parcel of land with a carrying amount and fair value of GH¢17 million and GH¢20 million respectively. Adanse has only debited “Investment in shares” and credited “Property, Plant and Equipment” with the carrying amount of the land.

Goodwill in Fomena has been impaired by 10%. Goodwill is valued using full fair value method. Each ordinary share of Fomena had a fair market price of GH¢6 at acquisition and GH¢7.5 at the current year-end.

iii) At acquisition date, the carrying amount of Fomena’s identifiable net assets were equal to their fair value except the following two items:

  • Intangible asset (purchased franchise right) has a fair value of GH¢12 million and carrying amount of GH¢8 million. Its remaining useful life was estimated at 5 years. The recoverable amount of the right at 31 August 2021 was estimated at GH¢9 million. Fomena has not incorporated the fair values in its separate financial statements. (Ignore deferred tax for this adjustment)
  • An item of equipment has its fair value of GH¢5 million in excess of its carrying amount. It had a remaining useful life of 5 years. This fair value adjustment should be deemed as a temporary difference which suffers tax of 20%.

iv) Fomena sold goods to Adanse for GH¢3.2 million in July 2021. Adanse held a half of these items in its year-end inventory. Fomena bought the goods sold to Adanse for GH¢5 million from an outside supplier. At year-end, Fomena still owed the supplier 40% of the purchase cost. At year-end, Adanse did not owe Fomena in respect of the above transactions. All items were in good condition at the date of transfer. Ignore any deferred tax implications.

v) Adanse accounts for all passive equity investments at fair value through other comprehensive income. The fair value of Adanse’s investment in Fomena was GH¢110 million as at 31 August 2021.

Required:
Prepare a Consolidated Statement of Financial Position as at 31 August 2021.

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  • 20 Marks

CR – Nov 2018 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of financial position for Accra Ltd, considering acquisitions, goodwill, impairments, revaluation, and pension obligations.

Accra Ltd, a public limited liability company in Ghana, operates in the manufacturing sector.

Accra Ltd has investments in two other Ghanaian companies.

The draft statement of financial position as at 31 March 2018 are as follows:

Additional information:

i) On 1 April 2016, Accra Ltd acquired 14% of the equity interest of Takoradi Ltd for a cash consideration of GH¢130 million, and Bawku Ltd acquired 70% of the equity interest of Takoradi Ltd for a cash consideration of GH¢635 million. At 1 April 2016, the identifiable net assets of Takoradi Ltd had a fair value of GH¢495 million, retained earnings were GH¢95 million, and other components of equity were GH¢26 million. At 1 April 2017, the identifiable net assets of Takoradi Ltd had a fair value of GH¢575 million, retained earnings were GH¢120 million, and other components of equity were GH¢35 million. The excess in fair value is due to non-depreciable land. The fair value of the 14% holding of Accra Ltd in Takoradi Ltd, which was classified as fair value through profit or loss, was GH¢140 million at 31 March 2017 and GH¢155 million at 31 March 2018. However, the fair value of Bawku Ltd’s interest in Takoradi Ltd had not changed since acquisition.

ii) On 1 April 2017, Accra Ltd acquired 60% of the equity interests of Bawku Ltd, a public limited liability company in Ghana. The cost of investment comprised cash of GH¢625 million. On 1 April 2017, the fair value of the identifiable net assets acquired was GH¢975 million, retained earnings of Bawku Ltd were GH¢325 million, and other components of equity were GH¢27.5 million. The excess in fair value is due to non-depreciable land. It is the group’s policy to measure the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary’s net assets.

iii) Goodwill of Bawku Ltd and Takoradi Ltd were tested for impairment at 31 March 2018 and found that there was no impairment relating to Takoradi Ltd. However, the goodwill of Bawku Ltd was fully impaired by the reporting date.

iv) On 1 April 2016, Accra Ltd acquired office accommodation at a cost of GH¢45 million with a 30-year estimated useful life. During the year, the property market in the area slumped, and the fair value of accommodation fell to GH¢37.5 million at 31 March 2017, which was reflected in the financial statements. However, the market unexpectedly recovered quickly due to the announcement of major government investment in the area’s transport infrastructure. On 31 March 2018, the valuer advised Accra Ltd that the offices should now be valued at GH¢52.5 million. Accra Ltd has charged depreciation for the year but has not taken account of the upward valuation of the offices. Accra Ltd uses the revaluation model and records any valuation change when advised to do so.

v) Accra Ltd has announced two major restructuring plans during the year. The first plan is to reduce its capacity by the closure of some of its smaller factories, which have already been identified. This will lead to the redundancy of 500 employees, who have all individually been selected and communicated to. The costs of this plan are GH¢4.5 million in redundancy costs, GH¢2.5 million in retraining costs, and GH¢2.5 million in lease termination costs. The second plan is to re-organize the finance and information technology department over a one-year period but it does not commence until two years’ time. The plan will result in 20% of finance staff losing their jobs during the restructuring. The costs of this plan are GH¢5 million in redundancy costs, GH¢3 million in retraining costs, and GH¢3.5 million in equipment lease termination costs. There are no entries made in the financial statements for the above plans.

vi) The following information relates to the group pension plan of Accra Ltd:

1 April 2017 GH¢ million 31 March 2018 GH¢ million
Fair value of plan assets 14 14.5
Actuarial value of defined benefit obligation 15 17.5

The contributions for the period received by the fund were GH¢1 million, and the employee benefits paid in the year amounted to GH¢1.5 million. The discount rate to be used in any calculation is 5%. The current service cost for the period based on actuarial calculations is GH¢0.5 million. The above figures have not been taken into account for the year ended 31 March 2018 except for the contributions paid, which have been entered in cash and the defined benefit obligation.

Required:
Prepare the group consolidated statement of financial position of Accra Ltd as at 31 March 2018.
(Total: 20 marks)

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  • 20 Marks

CR – Mar 2023 – L3 – Q1 – Consolidated Financial Statements

Prepare a consolidated statement of financial position for Abuakwa Group as at 31 December 2021.

Below are statements of financial position of three companies: Abuakwa, Tanoso, and Kwadaso as at 31 December 2021:

Statements of Financial Position as at 31 December 2021

Abuakwa (GH¢ million) Tanoso (GH¢ million) Kwadaso (GH¢ million)
Non-current assets
Tangible assets 358.0 169.5 120.0
Investments 170.0 6.5 –
Total Non-current assets 528.0 176.0 120.0
Current assets 264.0 172.0 116.0
Total assets 792.0 348.0 236.0

Equity and Liabilities

Abuakwa (GH¢ million) Tanoso (GH¢ million) Kwadaso (GH¢ million)
Equity
Share capital – Ordinary shares (GH¢2 each) 180.0 50.0 30.0
Preference shares (GH¢2 each) – 40.0 13.0
Retained earnings 330.0 66.0 56.0
Other reserves 50.0 23.0 8.0
Total equity 560.0 179.0 107.0
Current liabilities 232.0 169.0 129.0
Total equity and liabilities 792.0 348.0 236.0

Additional Information:

  1. Abuakwa acquired 20 million shares in Tanoso on 1 January 2019. The consideration, which has been correctly accounted for, was settled by Abuakwa issuing its own ordinary shares of 7.5 million. The fair value of non-controlling interest of Tanoso at the date of acquisition was GH¢25 million.
  2. The brand name of Tanoso had a fair value of GH¢2 million with a useful life of 5 years. At 31 December 2021, the brand’s recoverable amount was GH¢1.1 million.
  3. Abuakwa acquired 10.5 million shares in Kwadaso on 31 December 2019. Abuakwa satisfied this consideration by deferring cash payment for a year.
  4. Kwadaso’s net assets were uplifted by GH¢3 million on a non-depreciable land.
  5. Tanoso acquired 1.5 million shares of Kwadaso for immediate cash consideration of GH¢6.5 million.
  6. On 1 January 2021, Tanoso sold machinery to Abuakwa at a 20% profit on cost. Abuakwa depreciates this type of machinery at 10% per annum.
  7. Goodwill in Tanoso was impaired by 10%.
  8. Trade payables in Abuakwa include GH¢7 million due to foreign suppliers, with an unaccounted exchange loss of GH¢2 million.

Required:
Prepare the consolidated statement of financial position as at 31 December 2021 for the Abuakwa Group. (All figures should be stated in nearest GH¢0.1 million).

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  • 17 Marks

FR – May 2020 – L2 – Q1a – Consolidated statement of profit or loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for Naa Ltd and its subsidiary, Shormeh Ltd, for the year ended 30 September 2019.

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  • 20 Marks

FR – Mar 2023 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the consolidated statement of financial position for Panin Group as of 31 December 2021, considering various acquisitions and intercompany transactions.

Below are the financial statements of Panin, Kakra, and Tawia.

Additional information:

  1. On 1 January 2021, Panin acquired 27 million equity shares in Kakra, transferring a parcel of land with a carrying value of GH¢90 million and fair value of GH¢96 million. The balances on Kakra’s retained earnings and revaluation reserves at this date were GH¢72 million and GH¢5.5 million respectively.
  2. On 1 January 2021, Kakra’s internally developed brand had a fair value of GH¢11 million. The brand has an indefinite useful life, but at year-end its value-in-use was assessed at GH¢8 million.
  3. On 1 July 2021, Panin also acquired 5 million equity shares in Tawia for GH¢32 million. Tawia earned post-acquisition profit of GH¢10 million after tax and revaluation gains of GH¢500,000.
  4. In 2021, Kakra made intercompany sales to Panin for GH¢7.8 million, with a profit of 25% on cost, and GH¢1.2 million of these goods were in Panin’s inventory as at 31 December 2021. Kakra also sold to Tawia, and all goods remained in Tawia’s inventory.
  5. Dividends payable were declared by Kakra and Tawia, but Panin has not yet taken credit for its share.
  6. On 1 January 2021, Panin sold machines to Kakra for GH¢8 million, with a carrying value of GH¢6 million, depreciating them at 20% per annum.
  7. Goodwill should be impaired by 10%.
  8. Non-controlling interest should be valued at their proportionate share of fair value of the subsidiary’s identifiable net assets.

Required:

Prepare a consolidated statement of financial position for Panin Group as at 31 December 2021.

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  • 20 Marks

FR – July 2023 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the Consolidated Statement of Financial Position for a parent company Tarkwa Ltd and its subsidiary Awaso Ltd, incorporating the acquisition of 80% shares and related adjustments.

Tarkwa Ltd (Tarkwa) has been operating in the clothing and textiles industry in the past decade. On 1 July 2021, it acquired Awaso Ltd (Awaso) which operates in the same industry. The statements of Financial Position of the two companies as at 31 December 2021 are as follows:

Tarkwa GH¢000 Awaso GH¢000
Assets
Non-current assets 185,400 93,000
Current Assets
Inventory 76,200 31,800
Other current assets 58,200 24,000
Total current assets 134,400 55,800
Total assets 319,800 148,800
Equity and Liabilities
Equity
Share capital (issued at GH¢1 each) 120,000 50,000
Retained earnings:
Balance at January 1, 2021 73,200 51,600
Profit/(loss) for the year ended December 31, 2021 30,000 (18,000)
Total equity 223,200 83,600
Non-current liabilities
Deferred tax 30,000 4,000
Current liabilities
Trade payables and accruals 66,600 61,200
Total Equity and Liabilities 319,800 148,800

Additional information:

i) Tarkwa acquired 80% of Awaso’s equity shares by means of immediate cash payment of GH¢1.80 per each acquired share. However, the former shareholders agreed to return some of the consideration by 30 June 2022 if Awaso’s sales growth falls below a defined threshold over the next year. The value of this contingent consideration at the date of acquisition was estimated to be GH¢4 million. At 31 December 2021, in the light of Awaso’s falling sales, the value was revised to GH¢4.5 million. Tarkwa has only recorded the immediate cash payment.

ii) Tarkwa conducted a fair value exercise on Awaso’s net assets, which were equal to their carrying values including Awaso’s investment property with the exception of an item of owner-occupied property which had a fair value of GH¢5 million below its carrying amount. The property had a remaining useful life of 20 years as at 1 July 2021. Awaso has already incorporated the fair value change (together with the depreciation adjustment) in its own financial statements.

iii) At 31 December 2021, Awaso held goods in inventory, which had been supplied by Tarkwa at a mark-up on cost of 35%. The goods had cost Awaso GH¢6.75 million. 50% of the inventory remained unsold.

iv) The investment properties of Tarkwa and Awaso are carried at their fair values at January 1, 2021. However, at 31 December 2021, an item of properties had fair values of GH¢36.6 million and GH¢10.8 million respectively, with the change in Awaso’s investment properties all occurring since acquisition. These properties had carrying amounts at GH¢33,000 and GH¢12,000 respectively at the same date.

v) It is Tarkwa’s group policy to value the non-controlling interest using the fair value method at the acquisition date. For this purpose, a share price for Awaso of GH¢1.50 each is representative of the fair value of the shares held by the non-controlling interest.

Required:
Prepare the Consolidated Statement of Financial Position for Tarkwa as at December 31, 2021.

(Total: 20 marks)

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  • 20 Marks

FR – May 2017 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare consolidated financial statements for a parent and subsidiary, including profit or loss, statement of changes in equity, and statement of financial position.

Ghanbetter is a 90% subsidiary of Asonbata, acquired one year ago for GH¢4 billion, when the retained earnings of Ghanbetter were GH¢800 million. Below are the financial statements of the companies:

Statement of Profit or Loss for the year ended 31 December, 2016

Additional Information:
i) During the year Asonbata sold goods to Ghanbetter for GH¢100 million. These goods were sold at a margin of 20%, and one quarter remained in inventory at the year-end.

ii) During the year Ghanbetter sold goods to Asonbata for GH¢180 million. These goods were sold at a mark-up of 50%, and one half remained in inventory at the year-end.

iii) At the year-end, there were no outstanding inter-company current account balances.

iv) At the date of acquisition, the fair value of Ghanbetter’s net assets was equal to their carrying value, except for an item of plant that had a fair value of GH¢200 million in excess of its carrying value and a remaining useful life of four years.

v) Goodwill is to be calculated using the proportionate basis. An impairment review at the year-end reveals that no impairment loss arose.

vi) Both companies have paid a dividend during the year. The dividend distributed by Asonbata was GH¢200 million, and that of Ghanbetter GH¢100 million. The investment income that Asonbata has recognised is the dividend received from Ghanbetter shortly before the year-end.

Required:
Prepare the Consolidated Statement of Financial Position, Statement of Changes in Equity, and Consolidated Statement of Profit or Loss for Asonbata for the year ended 31 December, 2016.

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  • 20 Marks

FR – March 2024 – L2 – Q1 – Group Financial Statements and Consolidation

Consolidation of Chicha Plc and Wale Plc financial statements, involving adjustments for intra-group transactions, non-controlling interest, and goodwill.

On 1 July 2022, Chicha Plc acquired 80% of the ordinary shares of Wale Plc at a cost of GH¢2,570,000. On the same date, it also acquired 50% of Wale Plc’s 10% loan notes at par. The summarised draft financial statements of both companies are:

Statements of Profit or Loss for the year ended 31 March 2023
Chicha Plc Wale Plc
Sales revenue 15,000 6,000
Cost of sales (10,500) (5,000)
Gross profit 4,500 1,000
Operating expenses (1,500) (50)
Loan interest received/(paid) 18.75 (50)
Profit before tax 3,018.75 900
Income tax expense (750) (150)
Profit for the year 2,268.75 750
Statements of Financial Position as at 31 March 2023
Chicha Plc Wale Plc
Non-current assets
Property, plant and equipment 4,830 2,000
Investments 2,820 –
Total Non-current assets 7,650 2,000
Current assets 3,750 2,000
Total assets 11,400 4,000
Equity and liabilities
Equity
Stated capital 2,500 500
Retained earnings 6,400 2,100
Total equity 8,900 2,600
Non-current liabilities
10% loan notes – 500
Current liabilities 2,500 900
Total equity and liabilities 11,400 4,000

The following information is relevant:

  1. The fair values of Wale Plc’s assets were equal to their book values except for its plant, which had a fair value of GH¢800,000 more than its book value at the date of acquisition. The remaining life of all of Wale Plc’s plant at the acquisition date was four years. Depreciation is on a straight-line basis and charged to cost of sales. Wale Plc has not adjusted the value of its plant as a result of the fair valuation of the assets.
  2. In the post-acquisition period, Chicha Plc sold goods to Wale Plc for GH¢3,000,000. These goods had cost Chicha Plc GH¢2,250,000. During the year, Wale Plc had sold GH¢2,500,000 of these goods for GH¢3,750,000.
  3. The current accounts of the two companies were reconciled at the year-end with Wale Plc owing Chicha Plc GH¢187,500.
  4. The goodwill was reviewed for impairment at the end of the reporting period and had suffered an impairment loss of GH¢75,000, which is to be treated as an operating expense.
  5. Chicha Plc’s and Wale Plc’s retained earnings as at 1 April 2022 were GH¢4,131,250 and GH¢1,350,000, respectively. No dividends were paid or declared by either entity during the year.
  6. It is the group policy to value the non-controlling interest at acquisition at fair value. The directors valued the non-controlling interest at GH¢625,000 at the date of acquisition.
  7. Revenues and profits should be deemed to accrue evenly throughout the year.

Required:
Prepare for Chicha Plc a Consolidated Statement of Profit or Loss for the year ended 31 March 2023 and Statement of Financial Position as at 31 March 2023.

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  • 20 Marks

FR – Aug 2022 – L2 – Q1 – Group Financial Statements and Consolidation

Preparation of consolidated statement of financial position for Adanse Group, considering intercompany transactions, fair value adjustments, and goodwill impairment.

Below are the statements of financial position of two entities: Adanse Plc (Adanse) and Fomena Plc (Fomena).

Statement of financial position as at 31 August 2021

Additional information:
i) All ordinary shares were issued at GH¢2 per share. There have been no movements in the share capital of Fomena since its acquisition.
ii) On 1 September 2020, Adanse acquired 80% ordinary shares in Fomena when Fomena’s retained earnings balance was GH¢45 million. The purchase and sale agreement provided that the shares should be settled as follows:

  • Immediate issue of Adanse’s 25 million 15% cumulative redeemable preference shares, issued at GH¢3 per share. Adanse has not yet recorded this consideration.
  • Immediate transfer of a parcel of land with a carrying amount and fair value of GH¢17 million and GH¢20 million respectively. Adanse has only debited “Investment in shares” and credited “Property, Plant and Equipment” with the carrying amount of the land.

Goodwill in Fomena has been impaired by 10%. Goodwill is valued using full fair value method. Each ordinary share of Fomena had a fair market price of GH¢6 at acquisition and GH¢7.5 at the current year-end.

iii) At acquisition date, the carrying amount of Fomena’s identifiable net assets were equal to their fair value except the following two items:

  • Intangible asset (purchased franchise right) has a fair value of GH¢12 million and carrying amount of GH¢8 million. Its remaining useful life was estimated at 5 years. The recoverable amount of the right at 31 August 2021 was estimated at GH¢9 million. Fomena has not incorporated the fair values in its separate financial statements. (Ignore deferred tax for this adjustment)
  • An item of equipment has its fair value of GH¢5 million in excess of its carrying amount. It had a remaining useful life of 5 years. This fair value adjustment should be deemed as a temporary difference which suffers tax of 20%.

iv) Fomena sold goods to Adanse for GH¢3.2 million in July 2021. Adanse held a half of these items in its year-end inventory. Fomena bought the goods sold to Adanse for GH¢5 million from an outside supplier. At year-end, Fomena still owed the supplier 40% of the purchase cost. At year-end, Adanse did not owe Fomena in respect of the above transactions. All items were in good condition at the date of transfer. Ignore any deferred tax implications.

v) Adanse accounts for all passive equity investments at fair value through other comprehensive income. The fair value of Adanse’s investment in Fomena was GH¢110 million as at 31 August 2021.

Required:
Prepare a Consolidated Statement of Financial Position as at 31 August 2021.

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  • 20 Marks

CR – Nov 2018 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of financial position for Accra Ltd, considering acquisitions, goodwill, impairments, revaluation, and pension obligations.

Accra Ltd, a public limited liability company in Ghana, operates in the manufacturing sector.

Accra Ltd has investments in two other Ghanaian companies.

The draft statement of financial position as at 31 March 2018 are as follows:

Additional information:

i) On 1 April 2016, Accra Ltd acquired 14% of the equity interest of Takoradi Ltd for a cash consideration of GH¢130 million, and Bawku Ltd acquired 70% of the equity interest of Takoradi Ltd for a cash consideration of GH¢635 million. At 1 April 2016, the identifiable net assets of Takoradi Ltd had a fair value of GH¢495 million, retained earnings were GH¢95 million, and other components of equity were GH¢26 million. At 1 April 2017, the identifiable net assets of Takoradi Ltd had a fair value of GH¢575 million, retained earnings were GH¢120 million, and other components of equity were GH¢35 million. The excess in fair value is due to non-depreciable land. The fair value of the 14% holding of Accra Ltd in Takoradi Ltd, which was classified as fair value through profit or loss, was GH¢140 million at 31 March 2017 and GH¢155 million at 31 March 2018. However, the fair value of Bawku Ltd’s interest in Takoradi Ltd had not changed since acquisition.

ii) On 1 April 2017, Accra Ltd acquired 60% of the equity interests of Bawku Ltd, a public limited liability company in Ghana. The cost of investment comprised cash of GH¢625 million. On 1 April 2017, the fair value of the identifiable net assets acquired was GH¢975 million, retained earnings of Bawku Ltd were GH¢325 million, and other components of equity were GH¢27.5 million. The excess in fair value is due to non-depreciable land. It is the group’s policy to measure the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary’s net assets.

iii) Goodwill of Bawku Ltd and Takoradi Ltd were tested for impairment at 31 March 2018 and found that there was no impairment relating to Takoradi Ltd. However, the goodwill of Bawku Ltd was fully impaired by the reporting date.

iv) On 1 April 2016, Accra Ltd acquired office accommodation at a cost of GH¢45 million with a 30-year estimated useful life. During the year, the property market in the area slumped, and the fair value of accommodation fell to GH¢37.5 million at 31 March 2017, which was reflected in the financial statements. However, the market unexpectedly recovered quickly due to the announcement of major government investment in the area’s transport infrastructure. On 31 March 2018, the valuer advised Accra Ltd that the offices should now be valued at GH¢52.5 million. Accra Ltd has charged depreciation for the year but has not taken account of the upward valuation of the offices. Accra Ltd uses the revaluation model and records any valuation change when advised to do so.

v) Accra Ltd has announced two major restructuring plans during the year. The first plan is to reduce its capacity by the closure of some of its smaller factories, which have already been identified. This will lead to the redundancy of 500 employees, who have all individually been selected and communicated to. The costs of this plan are GH¢4.5 million in redundancy costs, GH¢2.5 million in retraining costs, and GH¢2.5 million in lease termination costs. The second plan is to re-organize the finance and information technology department over a one-year period but it does not commence until two years’ time. The plan will result in 20% of finance staff losing their jobs during the restructuring. The costs of this plan are GH¢5 million in redundancy costs, GH¢3 million in retraining costs, and GH¢3.5 million in equipment lease termination costs. There are no entries made in the financial statements for the above plans.

vi) The following information relates to the group pension plan of Accra Ltd:

1 April 2017 GH¢ million 31 March 2018 GH¢ million
Fair value of plan assets 14 14.5
Actuarial value of defined benefit obligation 15 17.5

The contributions for the period received by the fund were GH¢1 million, and the employee benefits paid in the year amounted to GH¢1.5 million. The discount rate to be used in any calculation is 5%. The current service cost for the period based on actuarial calculations is GH¢0.5 million. The above figures have not been taken into account for the year ended 31 March 2018 except for the contributions paid, which have been entered in cash and the defined benefit obligation.

Required:
Prepare the group consolidated statement of financial position of Accra Ltd as at 31 March 2018.
(Total: 20 marks)

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  • 20 Marks

CR – Mar 2023 – L3 – Q1 – Consolidated Financial Statements

Prepare a consolidated statement of financial position for Abuakwa Group as at 31 December 2021.

Below are statements of financial position of three companies: Abuakwa, Tanoso, and Kwadaso as at 31 December 2021:

Statements of Financial Position as at 31 December 2021

Abuakwa (GH¢ million) Tanoso (GH¢ million) Kwadaso (GH¢ million)
Non-current assets
Tangible assets 358.0 169.5 120.0
Investments 170.0 6.5 –
Total Non-current assets 528.0 176.0 120.0
Current assets 264.0 172.0 116.0
Total assets 792.0 348.0 236.0

Equity and Liabilities

Abuakwa (GH¢ million) Tanoso (GH¢ million) Kwadaso (GH¢ million)
Equity
Share capital – Ordinary shares (GH¢2 each) 180.0 50.0 30.0
Preference shares (GH¢2 each) – 40.0 13.0
Retained earnings 330.0 66.0 56.0
Other reserves 50.0 23.0 8.0
Total equity 560.0 179.0 107.0
Current liabilities 232.0 169.0 129.0
Total equity and liabilities 792.0 348.0 236.0

Additional Information:

  1. Abuakwa acquired 20 million shares in Tanoso on 1 January 2019. The consideration, which has been correctly accounted for, was settled by Abuakwa issuing its own ordinary shares of 7.5 million. The fair value of non-controlling interest of Tanoso at the date of acquisition was GH¢25 million.
  2. The brand name of Tanoso had a fair value of GH¢2 million with a useful life of 5 years. At 31 December 2021, the brand’s recoverable amount was GH¢1.1 million.
  3. Abuakwa acquired 10.5 million shares in Kwadaso on 31 December 2019. Abuakwa satisfied this consideration by deferring cash payment for a year.
  4. Kwadaso’s net assets were uplifted by GH¢3 million on a non-depreciable land.
  5. Tanoso acquired 1.5 million shares of Kwadaso for immediate cash consideration of GH¢6.5 million.
  6. On 1 January 2021, Tanoso sold machinery to Abuakwa at a 20% profit on cost. Abuakwa depreciates this type of machinery at 10% per annum.
  7. Goodwill in Tanoso was impaired by 10%.
  8. Trade payables in Abuakwa include GH¢7 million due to foreign suppliers, with an unaccounted exchange loss of GH¢2 million.

Required:
Prepare the consolidated statement of financial position as at 31 December 2021 for the Abuakwa Group. (All figures should be stated in nearest GH¢0.1 million).

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