The following Statements of Financial Position relate to Banky Ltd (Banky), Zinko Ltd (Zinko), and Tooli Ltd (Tooli):
| Statements of Financial Position as at 28 February 2023 |
Banky |
Zinko |
Tooli |
| Assets |
GH¢ million |
GH¢ million |
GH¢ million |
| Non-current assets |
1,500 |
1,040 |
960 |
| Deferred tax |
– |
80 |
– |
| Current assets |
1,188 |
584 |
600 |
| Total assets |
2,688 |
1,704 |
1,560 |
| Equity and liabilities |
Banky |
Zinko |
Tooli |
| Equity |
|
|
|
| Equity shares of GH¢5 each |
600 |
500 |
500 |
| Other reserves |
150 |
90 |
60 |
| Retained earnings |
976 |
390 |
355 |
| Total equity |
1,726 |
980 |
915 |
| Current liabilities |
962 |
724 |
645 |
| Total equity and liabilities |
2,688 |
1,704 |
1,560 |
Additional Information: i) On 1 March 2022, Banky purchased 80 million equity shares in Zinko through a share exchange of three shares in Banky for every two shares in Zinko. The fair values of each share of Banky and Zinko were GH¢7 and GH¢10.5 respectively at acquisition date. Shares issued by Banky have not yet been recorded in the books.
ii) On acquisition date, Zinko’s retained earnings and other reserves were GH¢230 million and GH¢60 million respectively. Fair value of Zinko’s identifiable net assets was equal to their carrying value except that Zinko had a disclosed contingent liability with a fair value of GH¢8 million at acquisition. Provision in respect of this contingent liability has been recognised by Zinko at GH¢7.2 million as at 28 February 2023.
iii) On the same date Zinko was acquired, Zinko also purchased 60% equity holding in Tooli. The purchase and sale agreement for this transaction provided that Zinko would pay cash amount of GH¢500 million (excluding GH¢2 million consultancy costs which Zinko settled immediately and charged against its other comprehensive income) to the former shareholders of Tooli in two years’ time on condition that Zinko’s sales growth exceeds 20% per annum. The fair value of this consideration was estimated at GH¢450 million at acquisition and GH¢438 million at 28 February 2023. Zinko has not yet recorded this transaction. Both values were deemed as final on the two given dates.
iv) However, the professional valuation of Tooli’s identifiable net assets was not finalised at acquisition so a provisional fair valuation of GH¢845 million for the net assets was applied to arrive at the purchase consideration. The final valuation report which was released on 31 January 2023 showed a revised fair value of GH¢860 million for Tooli’s identifiable net assets. Any fair value adjustment was due to an item of plant whose remaining useful life was 5 years at acquisition. On this date, Tooli’s retained earnings and other reserves were GH¢275 million and GH¢55 million respectively.
v) Banky’s closing inventories include goods sold by Zinko at a margin of 20%. These items were invoiced at GH¢5 million but are currently included in Banky’s inventories at their net realisable value of GH¢4.2 million.
vi) The policy of the group is to measure non-controlling interests using their proportion of the fair value of identifiable net assets. An impairment review carried out revealed that goodwill in Zinko at this year-end had a “gross” recoverable amount of GH¢230 million.
vii) Ignore deferred tax adjustments unless otherwise indicated.
Required: Prepare the Consolidated Statement of Financial Position for Banky Ltd as at 28 February 2023.
(All figures should be approximated to the nearest GH¢0.1 million)
(Total: 20 marks)
