Question Tag: Non-Controlling Interest

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 26 Marks

FM – May 2023 – L3 – Q1a – Business Valuation Techniques

Evaluate ZL's valuation using multiple methods and recommend whether KK should acquire ZL. Discuss takeover regulation factors.

KK, a company quoted on the Stock Exchange, has cash balance of ₦230 million which are currently invested in short-term money market deposits. The cash is intended to be used primarily for strategic acquisitions, and the company has formed an acquisition committee with a remit to identify possible acquisition targets. The committee has suggested the purchase of ZL, a company in a different industry that is quoted on the AIM (Alternative Investment Market). Although ZL is quoted, approximately 50% of its shares are still owned by three directors. These directors have stated that they might be prepared to recommend the sale of ZL, but they consider that its shares are worth ₦220 million in total.

Summarised financial data:

Economic data:

  • Risk-free rate of return: 6% p.a.
  • Market return: 14% p.a.
  • Inflation rate: 2.4% p.a., expected to remain stable.

Expected effects of the acquisition:

  1. 50 employees of ZL would immediately be made redundant at an after-tax cost of ₦12 million. Pre-tax annual wage savings are expected to be ₦7.50 million (at current prices) for the foreseeable future.
  2. Some land and buildings of ZL would be sold for ₦8 million (after tax).
  3. Pre-tax advertising and distribution savings of ₦1.50 million per year (at current prices) would be possible.
  4. The three existing directors of ZL would each be paid ₦1 million per year for three years for consultancy services. This amount would not increase with inflation.

Required:

a. Calculate the value of ZL based upon:
i. The use of comparative P/E ratios (3 Marks)
ii. The dividend valuation model (4 Marks)
iii. The present value of relevant operating cash flows over a 10-year period (10 Marks)
iv. Provide an evaluation of each of the three valuation methods in (i) to (iii) above. (7 Marks)
v. Recommend whether KK should go ahead with the offer for ZL. (2 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FM – May 2023 – L3 – Q1a – Business Valuation Techniques"

  • 22 Marks

CR – May 2023 – L3 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Omi PLC and subsidiaries.

The draft statement of financial position of Omi PLC, Ruwa Limited, and Mmili Limited as of November 30, 2020, are as follows:

Additional Information for Consolidated Financial Statements Preparation:

  1. Acquisition of Ruwa Limited:
    • Omi PLC acquired 80% of Ruwa Limited’s ordinary share capital on December 1, 2017.
    • Retained earnings of Ruwa Limited at acquisition: N400 million.
    • Fair value of Ruwa Limited’s net assets: N2,840 million.
    • Any fair value adjustment pertains to net current assets, which had been realized by November 30, 2020.
    • No new issue of shares occurred in the group since the establishment of the current structure.
  2. Acquisition of Mmili Limited:
    • On December 1, 2018, Omi PLC acquired 40% and Ruwa Limited acquired 25% of Mmili Limited’s ordinary share capital.
    • Retained earnings of Mmili Limited at acquisition: N200 million.
    • Retained earnings of Ruwa Limited at acquisition: N600 million.
    • No revaluation surplus existed in Mmili Limited’s books at acquisition, and the fair value of Mmili Limited’s net assets was consistent with their carrying amount.
  3. Development Costs:
    • Significant expenditure incurred on developing internet products. These were initially written off but later reinstated as development inventories upon commercial use.
    • Costs do not meet the recognition criteria of IAS 38 – Intangible Assets.
    • Ruwa Limited included N80 million of these costs in its inventory, of which N20 million relates to expenses from periods before December 1, 2017.
    • The group wishes to ensure compliance with IFRS for this treatment.
  4. Internet Equipment:
    • Ruwa Limited purchased new internet equipment for N200 million, excluding a trade discount of N24 million.
    • The discount was recorded in the income statement.
    • Depreciation is calculated using the straight-line method over six years.
  5. Property, Plant, and Equipment Policy:
    • The group transitioned from the revaluation model to the cost model under IAS 16 – Property, Plant, and Equipment in 2020.
    • Mmili Limited’s assets were revalued on December 1, 2019, creating a revaluation surplus of N280 million.
    • Mmili Limited’s property was originally purchased in December 2018 for N1,200 million, with depreciation over six years.
    • The group does not transfer excess depreciation from revaluation reserves to retained earnings.
  6. Valuation of Non-controlling Interests:
    • The group values non-controlling interests at acquisition using their proportionate share of the subsidiary’s identifiable net assets.
  7. Defined Benefit Pension Scheme:
    • Omi PLC established a defined benefit pension scheme, contributing N400 million to it.
    • Details as of November 30, 2020:
      • Present value of obligation: N520 million.
      • Fair value of plan assets: N500 million.
      • Current service cost: N440 million.
      • Interest cost (scheme liabilities): N80 million.
      • Expected return on pension assets: N40 million.
      • Actuarial gain: N60 million.
    • The only recorded entry was the cash contribution, included in Omi PLC’s trade receivables.
    • Directors propose recognizing actuarial gain immediately in the statement of profit or loss.

Required:
Prepare the consolidated statement of financial position of Omi Group for the year ended November 30, 2020, in accordance with relevant IFRS.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2023 – L3 – Q1a – Consolidated Financial Statements (IFRS 10)"

  • 30 Marks

CR – Nov 2021 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial position of Makoko Group for the year ended Dec 31, 2021, and discuss accounting implications of significant influence.

Makoko Intercontinental Holdings Limited is a global merchant of cash crops. A policy of strategic acquisitions over the years has placed the company in a position to source for export products competitively. The lockdown arising from the recent pandemic posed a significant challenge for the export of their products throughout the year 2020. At a board meeting to review the performance of the company for that year and discuss the impact of the pandemic, the Managing Director noted the significant drop in the general performance indices. In order to get a greater market presence and higher demand locally, the board decided to acquire the following investments on January 1, 2021:

  • 60% of the equity share of Ojodu Limited;
  • 50% of 10% loan notes of Ojodu Ltd at par;
  • 40% stake in the ordinary shares of Egbeda Confectioneries Limited.

In the opinion of the board, both Ojodu Limited and Egbeda Confectioneries Limited are the biggest local customers of Makoko Intercontinental Holdings Limited and a control through shareholding would give the investing company greater stake in the operational decisions of the investee companies. Importantly, it would also boost revenue by allowing unrestricted access to local markets. It is believed that this will forestall any adverse impact of further lockdowns that may hinder export sales in the future.

The draft financial statements of the companies for the year are as follows:

Statements of financial position as at December 31, 2021

Additional Information:

  1. Makoko Limited paid N90 million for the acquisition of Ojodu Limited when the retained earnings of Ojodu Limited were N13 million.
  2. The fair value of Ojodu’s freehold property was N6.5 million higher than the carrying amount as at the date of acquisition. This valuation has not been reflected in the books of Ojodu Limited.
  3. Makoko Limited paid N41 million for the shareholding in Egbeda Limited when the retained earnings of Egbeda Limited were N12 million.
  4. An impairment test as at December 31, 2021 showed that goodwill was impaired by N3.5 million and the investment in Egbeda Limited was impaired by N0.8 million.
  5. During the year, Makoko Limited sold products to Egbeda Limited at a price of N8 million. These goods had cost Makoko Limited N5 million. Half of the goods were still in the inventory of Egbeda Limited as at December 31, 2021.
  6. The companies issued share capital has not changed since the date of acquisition.
  7. No dividends were paid during the year.
  8. Non-controlling interests in subsidiaries are to be measured at the appropriate proportion of the subsidiary’s identifiable net assets.

Required: a. Prepare the consolidated statement of financial position for the Makoko Group for the year ended December 31, 2021. (20 Marks)

b. The Directors of Makoko Intercontinental Holdings Limited are concerned about getting significant influence, if not absolute control, of all entities they intend to buy into. The five-year strategic plan of the company (2020 – 2024) focuses on having control of the cash crops segment of the agribusiness sector of the economy. This is in order to make them ready to roll out the next developmental phase of the business, which is to migrate from exporting raw products to finished products for industrial and household use.

Towards this goal, the board requires the Group Accountant to make a presentation on the accounting implications of gaining significant influence in another entity.

Required: Discuss the issues involved in the requirements of the Board as specified above. (5 Marks)

c. A friend to the Chief Accountant of Makoko Intercontinental Holdings Limited, who is a consultant to Ojodu Limited and Egbeda Confectionaries Limited, is requesting for information on the new acquisitions from his friend, the Chief Accountant.

Required: Identify the ethical issues involved in the above scenarios and their implications. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2021 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)"

  • 30 Marks

CR – May 2018 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

repare consolidated financial statements for Komolafe Group including profit or loss and statement of financial position for year-end 2016.

Komolafe Group carries on business as a distributor of warehouse equipment and importer of fruit into the country. Komolafe was incorporated in 2008 to distribute warehouse equipment. It diversified its activities during the year 2010 to include the import and distribution of fruit, and expanded its operations by the acquisition of shares in Kelvins in 2012 and Kelly in 2014.

Accounts for all companies are made up to December 31.

The draft statements of profit or loss and other comprehensive income for Komolafe, Kelvins, and Kelly for the year ended December 31, 2016 are as follows:

Komolafe Kelvins Kelly
Revenue 91,200 49,400 45,600
Cost of sales (36,100) (10,926) (10,640)
Gross profit 55,100 38,474 34,960
Distribution costs (6,650) (4,274) (3,800)
Administrative expenses (6,950) (1,900) (3,800)
Finance costs (650) – –
Profit before tax 40,850 32,300 27,360
Income tax expense (16,600) (10,780) (8,482)
Profit for the year 24,250 21,520 18,878
Other comprehensive income for the year:
Items that will not be reclassified to profit or loss in subsequent period
Revaluation of property 400 200 –
Total Comprehensive Income 24,650 21,720 18,878

The draft statement of financial position as at December 31, 2016, is as follows:

Komolafe Kelvins Kelly
Non-current assets
Property, plant, and equipment (carrying amount) 70,966 48,546 26,126
Investments
Shares in Kelvins 13,300 – –
Shares in Kelly – 7,600 –
Total Non-current assets 84,266 56,146 26,126
Current assets 3,136 18,050 17,766
Total assets 87,402 74,196 43,892
Equity
Ordinary shares 16,000 6,000 4,000
Retained earnings 45,276 48,150 39,796
Current liabilities 26,126 20,046 96
Total equity and liabilities 87,402 74,196 43,892

The following information is available relating to Komolafe, Kelvins, and Kelly:

  1. On January 1, 2012, Komolafe acquired 5,400,000 N1 ordinary shares in Kelvins for N13,300,000, at which date there was a credit balance on the retained earnings of Kelvins of N2,850,000. No shares have been issued by Kelvin since Komolafe acquired its interest.
  2. At the date of acquisition, the fair value of the identifiable net assets of Kelvins was N10 million. The excess of the fair value of net assets is due to an increase in the value of non-depreciable land.
  3. On January 1, 2014, Kelvins acquired 3,200,000 N1 ordinary shares in Kelly for N7,600,000, at which date there was a credit balance on the retained earnings of Kelly of N1,900,000. No shares have been issued by Kelly since Kelvins acquired its interest. The fair value of the identifiable net assets of Kelly at the date of acquisition approximates their book values.
  4. During 2016, Kelly made intra-group sales to Kelvins of N960,000, making a profit of 25% on cost. N150,000 of these goods were in inventories at December 31, 2016.
  5. During 2016, Kelvins made intra-group sales to Komolafe of N520,000, making a profit of 25% on sales. N120,000 of these goods were in inventories at December 31, 2016.
  6. An impairment test conducted at the year-end did not reveal any impairment losses.
  7. It is the group’s policy to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests in Kelvins on January 1, 2012, was N1,000,000. The fair value of the 28% non-controlling interest (direct and indirect) in Kelly on January 1, 2014, was N1,800,000.

Required:
Prepare for Komolafe Group:

a. A consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2016. (13 Marks)

b. A consolidated statement of financial position as at December 31, 2016. (12 Marks)

c. In business combination, the consideration given by the acquirer to gain control of the acquiree can be in different forms, including deferred and contingent considerations. While deferred and contingent considerations represent amounts of consideration to be transferred in the future, the two differ in nature and form.

Required:
Briefly distinguish between deferred and contingent consideration. (5 Marks)

Total: 30 Marks

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)"

  • 30 Marks

CR – Nov 2018 – L3 – SA – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Adegaga Laboratories Plc., including the effects of an acquisition and goodwill impairment.

Adegaga Laboratories Plc (“AdeLabs”) is one of the largest companies in Nigeria engaged in cosmetic development and manufacturing. Its largest customer base is in the healthcare sector for post-surgery patients and the Nigeria movie industry (aka Nollywood). In the prior financial period, AdeLabs’ expansion strategy has been largely focused on growth by acquisition and joint ventures.

Additional Information:

  1. As part of this, AdeLabs acquired 80% of the equity share capital of Bodegas Limited (“Bodegas”) on January 1, 2015, when the retained earnings of Bodegas was N93.75 million. Following the share acquisition, AdeLabs had control over Bodegas – no shares have been issued by Bodegas following the acquisition. The non-controlling interest in Bodegas was measured at its fair value of N20 million at the date of acquisition.
  2. On January 1, 2016, AdeLabs acquired 50% of the equity share capital of ChidePlastics Limited (“ChidePlast”) when the retained earnings of ChidePlast was N41.25 million. This acquisition was classified as a joint venture in accordance with IFRS 11 Joint Arrangements. ChidePlast has not issued any shares since the acquisition date.
  3. The balance on “other reserves” relates to movements in the values of investments in Bodegas and ChidePlast in the books of AdeLabs. N18.75 million relates to Bodegas, and the remainder to ChidePlast.
  4. AdeLabs’ non-current liabilities relate to a borrowing (long-term) taken out on January 1, 2017. This borrowing has an agreed coupon rate of 4% p.a., and the interest expense due in respect of 2017 has been paid and accounted for in profit for the year. The effective interest rate estimated with this financial liability is 8% p.a.
  5. As part of its annual impairment review, AdeLabs concluded that the goodwill on the acquisition of Bodegas was impaired by 20% at December 31, 2017. No other impairments of goodwill have arisen.
  6. AdeLabs sold goods to ChidePlast with a value of N75 million and a selling margin of 40% in November 2017. As at year-end December 31, 2017, 75% of these items are unsold.

Accounts for all companies are made up to December 31 annually.

Required:

Prepare for Adegaga Laboratories Plc:

  1. A consolidated statement of financial position as at December 31, 2017. (20 Marks)
  2. On January 1, 2018, AdeLabs acquired an additional 10% of the equity shares of Bodegas. The purchase consideration for this additional acquisition was N52,500,000.

    i. Briefly explain how this additional acquisition will impact the preparation of AdeLabs’ consolidated financial statements for the year ended December 31, 2017. (4 Marks)

    ii. Calculate the adjustment that will be required to be made to AdeLabs’ statement of financial position as a result of this acquisition. (6 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2018 – L3 – SA – Q1a – Consolidated Financial Statements (IFRS 10)"

  • 30 Marks

CR – Nov 2023 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Sports PLC Group, considering goodwill, non-controlling interests, impairments, and disposals.

Sports PLC is a company which operates in the service sector. Sports PLC has a business relationship with Football PLC and Volleyball PLC. The financial positions of these companies as at September 30, 2020, are stated below:

Item Sports PLC Football PLC Volleyball PLC
Non-current assets: N’m N’m N’m
Property, plants, and equipment 1,840 600 620
Investment in subsidiaries:
– Football PLC 1,460 – –
– Volleyball PLC 640 – –
Investment in Handball PLC 96 – –
Intangible assets 396 60 70
Total Non-current assets 3,792 1,300 690
Current assets 1,790 960 500
Total assets 5,582 2,260 1,190

Equity and liabilities

Item Sports PLC Football PLC Volleyball PLC
Ordinary share capital 1,840 800 400
Other components of equity 146 74 50
Retained earnings 1,790 884 278
Total equity 3,776 1,758 728
Non-current liabilities 990 246 186
Current liabilities 816 256 276
Total liabilities 1,806 502 462
Total equity and liabilities 5,582 2,260 1,190

Additional Information

  1. Acquisition of Football PLC:
    • On October 1, 2018, Sports PLC acquired 70% of the equity interest in Football PLC. The purchase consideration was cash of N1,460 million. At the acquisition date, the fair value of the non-controlling interests (NCI) in Football PLC was N590 million. The fair value of the identifiable net assets acquired was N1,670 million. Retained earnings of Football PLC were N638 million, and other components of equity were N54 million. The excess in fair value is due to non-depreciable land.
  2. Acquisition of Volleyball PLC:
    • On October 1, 2019, Football PLC acquired 80% of the equity interest in Volleyball PLC for a cash consideration of N640 million. The fair value of the non-controlling interests for 20%, 30%, and 44% holdings was N144 million, N216 million, and N322 million, respectively. At the date of acquisition, the fair value of the identifiable net assets of Volleyball PLC was N724 million. Retained earnings were N212 million, and other components of equity were N40 million. The excess in fair value is due to non-depreciable land. The group’s policy is to measure the non-controlling interests at fair value at the acquisition date.
  3. Impairment Testing:
    • As of September 30, 2020, both Football PLC and Volleyball PLC were tested for impairment. The recoverable amounts for Football PLC and Volleyball PLC were N2,850 million and N1,208 million, respectively. Directors determined that impairment was due to poor performance of intangible assets.
  4. Investment in Handball PLC:
    • On October 1, 2018, Sports PLC acquired a 14% interest in Handball PLC for N36 million, classified as fair value through other comprehensive income (FVTOCI). On April 1, 2020, Sports PLC acquired an additional 16% interest for N54 million, achieving significant influence. The value of the original 14% investment on April 1, 2020, was N42 million. Handball PLC reported after-tax profits of N40 million for the year ending September 30, 2019, and N60 million for the year ending September 30, 2020. In September 2020, Sports PLC received a dividend of N4 million from Handball PLC, credited to other components of equity.
  5. Project Development Costs:
    • Sports PLC purchased patents costing N20 million on October 1, 2019, to develop new products. An additional investigative cost of N14 million was incurred, and a working prototype was created at a cost of N8 million. Another N6 million was spent to prepare the product for sale, and marketing costs amounted to N4 million. All costs were included in intangible assets.
  6. Disposal Plan:
    • Sports PLC intends to dispose of a major patent line. At the date the criteria for “held for sale” were met, the carrying amounts were:
      • Property, Plant, and Equipment: N36 million
      • Inventories: N98 million
      • Current Liabilities (Trade Payables): N6 million
    • Expected proceeds are N60 million. No adjustments have been made to the financial statements for this decision.

Required: Prepare the consolidated statement of financial position for Sports PLC Group as of September 30, 2020. (30 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2023 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)"

  • 30 Marks

CR – Nov 2022 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated statement of financial position for RAM, DAM, and TAM as at April 30, 2021, including adjustments for goodwill, revaluation, and retained earnings.

The following draft statements of financial position of RAM, DAM, and TAM, all of which are public limited companies as at April 30, 2021, are provided:

RAM Plc (N’m) DAM Plc (N’m) TAM Plc (N’m)
Non-current assets:
Property, plant, and equipment 2,030 705 356
Investment in DAM 690 – –
Investment in TAM 180 110 –
Total non-current assets 2,900 815 356
Current assets:
Inventories 450 185 75
Trade receivables 270 115 60
Cash and cash equivalents 105 65 85
Total current assets 825 365 220
Total assets 3,725 1,180 576
Equity and liabilities
Equity:
Ordinary share capital 2,400 620 220
Share premium 300 105 56
Revaluation reserves 60 – –
Retained earnings 685 280 76
Total equity 3,385 1,005 412
Non-current liabilities 200 65 64
Current liabilities 140 110 100
Total equity and liabilities 3,725 1,180 576

Additional Information:

  1. Three years ago, on May 1, 2018, RAM Plc acquired 80% of the ordinary share capital of DAM Plc when DAM’s retained earnings were N110m. There were no new share issues since the group structure was created. The fair value of non-controlling interests at acquisition was N160m, and the fair value of DAM Plc’s net assets was N850m at that date. Any fair value adjustments related to inventory were realized by the current year-end.
  2. Two years ago, to veil the identity of the true owner of TAM Plc, RAM Plc acquired 40%, while DAM Plc acquired 25% of TAM’s ordinary share capital on the same date, when the retained earnings of TAM Plc were N65m and those of DAM Plc were N160m. The fair value of non-controlling interest in TAM Plc was N155m as at acquisition, with no revaluation reserve in TAM’s books at that time. The fair values of TAM Plc’s net assets as at acquisition were not materially different from their carrying amount.
  3. The group operates in the oil industry and incurs expenditure on research and development. These costs, previously written off to the statement of profit or loss and other comprehensive income as incurred, are reinstated when the related products are commercialized. The reinstated costs are shown as ‘Development Inventory.’ The costs do not meet IAS 38 criteria for classification as intangibles, and net cash inflows are unlikely to exceed development costs. DAM Plc included N22m of these costs in inventory this year.
  4. DAM Plc purchased significant new production equipment this year. Its cost before a trade discount was N60m, with a discount of N12m taken to the income statement. Depreciation is on a straight-line basis over six years.
  5. The group policy now states tangible non-current assets at depreciated historical cost. This year, the group changed from the revaluation model to the cost model under IAS 16, except for TAM Plc’s tangible non-current assets, which were revalued by TAM Plc’s directors on the first day of the current year, creating an N80m revaluation reserve. TAM Plc’s assets were initially purchased on May 1, two years prior, at N320m, depreciated over six years. The group does not transfer revaluation reserves to retained earnings annually for excess depreciation. There were no additions or disposals in TAM’s assets over the last two years.
  6. Goodwill from DAM Plc’s acquisition was impairment tested each year; the current year-end revealed a recoverable value of N900m for DAM Plc. TAM Plc’s goodwill has not been impaired since acquisition.
  7. The group policy is to value non-controlling interests at fair value.

Required:
Prepare a consolidated statement of financial position for the RAM Group as at April 30, 2021.
(Total: 30 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – Nov 2022 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)"

  • 15 Marks

FR – May 2016 – L2 – Q2b – Consolidated Financial Statements (IFRS 10)

Preparation of consolidated financial position statement, considering goodwill and NCI.

The statement of financial position of PAPA Pie and MAMA Pie as at December 31, 2015, were as follows:

PAPA PLC N’000 MAMA PLC N’000
Property Plant & Equipment 9,000 Property Plant & Equipment 5,000
Investment in MAMA Pie 5,000 Other Assets 1,500
Other Assets 2,000
Total Assets 16,000 Total Assets 6,500
Share Capital 500 Share Capital 500
Retained Earnings 14,500 Retained Earnings 5,000
Other Liabilities 1,000 Other Liabilities 1,000
Total Equity & Liabilities 16,000 Total Equity & Liabilities 6,500

PAPA Plc acquired 80% equity interest in MAMA Plc two years ago.

At the date of acquisition, MAMA’s retained earnings stood at N3 million, and the fair value of its net assets was N5 million. This was N1.5 million above the carrying amount of the net assets at this date. The fair value adjustment related to an asset that had a remaining useful economic life of 10 years as at the date of acquisition.

The goodwill arising on consolidation has not suffered any impairment.

Required:

Prepare the consolidated statement of financial position of PAPA Pie Group as at December 31, 2015, on the assumption that non-controlling interest is valued at fair value (the full goodwill method). (15 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2016 – L2 – Q2b – Consolidated Financial Statements (IFRS 10)"

  • 5 Marks

FR – May 2016 – L2 – Q2a – Business Combinations (IFRS 3)

Calculate goodwill for a parent company's acquisition using both proportionate share and fair value methods.

A Parent Company acquired 60% equity interest in a subsidiary company for N440 million. The market value of the net assets of the subsidiary on the acquisition date was N400 million. The parent company estimates that the full 100% interest in the subsidiary company would have cost N640 million.

Required:

Calculate the goodwill at acquisition date where non-controlling interest is measured:

i. As a proportionate share of the net assets of the subsidiary company.
ii. At fair value (the full goodwill method).

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2016 – L2 – Q2a – Business Combinations (IFRS 3)"

  • 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)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2022 – L2 – Q3a – Consolidated Statement of Financial Position"

  • 4 Marks

FR – May 2018 – L2 – Q1b – Business Combinations (IFRS 3)

Calculate goodwill on acquisition based on fair value measurement of the non-controlling interest.

A parent acquired 600,000 equity shares of its subsidiary three years ago for N1,200,000. The subsidiary’s issued equity share capital on that date was N250,000, with each share having a nominal value of 25 kobo. Other components of the subsidiary’s net assets at the acquisition date included share premium of N550,000 and retained earnings of N680,000. The subsidiary’s shares were quoted at N1.80 per share when the parent took control.

Required: Calculate the goodwill on acquisition if the parent measures non-controlling interest at its fair value.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2018 – L2 – Q1b – Business Combinations (IFRS 3)"

  • 20 Marks

FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated profit or loss and other comprehensive income for Adanna Plc and its subsidiary Ebuka Ltd for the year ended December 31, 2017.

Adanna Plc has a subsidiary, Ebuka Limited. The statement of profit or loss and other comprehensive income for the companies is as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2017

Adanna Plc (N’000) Ebuka Limited (N’000)
Revenue 986,546 614,206
Cost of Sales (593,204) (365,903)
Gross Profit 393,342 248,303
Other Income 57,850 12,420
Distribution Costs (69,496) (40,562)
Administrative Expenses (158,624) (95,036)
Other Expenses (32,108) (15,814)
Finance Costs (20,600) (10,220)
Profit Before Tax 170,364 99,091
Income Tax Expense (51,110) (26,727)
Profit for the Year 119,254 72,364
Other Comprehensive Income:
Gain on Revaluation 68,166 29,202
Total Comprehensive Income 187,420 101,566

Additional Information:

  1. Adanna Plc acquired 75% of the issued equity shares of Ebuka Limited three years ago. Goodwill on acquisition was N280 million. The recoverable amount of goodwill at the year-end was N268 million, marking the first time the recoverable amount had fallen below the initial recognition.
  2. During the year, Ebuka Limited invoiced goods worth N300 million to Adanna Plc. A quarter of these goods were included in Adanna Plc’s inventory at the year-end. Ebuka Limited invoices goods at cost plus 25%.
  3. Ebuka Limited’s distribution costs include depreciation of an asset subject to a fair value increase of N155 million on acquisition. The asset is being depreciated on a straight-line basis over ten years.
  4. Adanna Plc’s other income includes an intercompany management charge of N10 million to Ebuka Limited, which was recognized as administrative expenses by Ebuka Limited.

Required: Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for Adanna Plc Group for the year ended December 31, 2017.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)"

  • 20 Marks

FR – May 2019 – L2 – Q1b – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position of Ajakaye Group Ltd, considering fair value adjustments and intra-group transactions.

You are provided with the following statement of financial position for Ajakaye Limited and Ajalorun Limited.

Statement of Financial Position as at 31 March 2019 Ajakaye Ltd (₦’000) Ajalorun Ltd (₦’000)
Non-current assets
Property, Plant & Equipment 367,500 84,000
Investment 140,000 –
Total non-current assets 507,500 84,000
Current assets
Inventory at cost 154,000 49,000
Trade receivables 101,500 73,500
Bank balance 70,000 –
Total current assets 325,500 122,500
Total assets 833,000 206,500
Equity and liabilities
Ordinary shares at ₦1 each 490,000 119,000
Retained earnings 150,500 35,000
Total equity 640,500 154,000
Current liabilities
Trade payables 192,500 38,500
Bank overdraft – 14,000
Total current liabilities 192,500 52,500
Total equity and liabilities 833,000 206,500

Additional Information:

  • Ajakaye Ltd acquired 70% of the issued ordinary share capital of Ajalorun Ltd four years ago, when the retained earnings of Ajalorun were ₦14 million. There has been no impairment of goodwill.
  • For the purpose of the acquisition, property, plant & equipment with a carrying amount of ₦35 million was revalued to its fair value of ₦42 million. The revaluation was not recorded in the accounts of Ajalorun Ltd. Depreciation is charged at 20% using the straight-line method.
  • It is the group’s policy to value non-controlling interest at fair value.
  • The market price of the shares of the non-controlling shareholders just before the acquisition was ₦1.50.
  • Ajakaye Ltd sells goods to Ajalorun Ltd at a markup of 25%. At 31 March 2019, the inventories of Ajalorun Ltd included ₦31.5 million of goods purchased from Ajakaye Ltd.
  • Ajalorun Ltd owes Ajakaye Ltd ₦24.5 million for goods purchased, and Ajakaye Ltd owes Ajalorun Ltd ₦10.5 million.

Required:
Prepare the consolidated statement of financial position of Ajakaye Group Ltd as at 31 March 2019.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2019 – L2 – Q1b – Consolidated Financial Statements (IFRS 10)"

  • 14 Marks

FR – Nov 2018 – L2 – SB – Q2b – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position for Anambra Ltd and Omambala Ltd.

Anambra Limited acquired 80% of Omambala Limited’s ordinary shares for N210 million on January 1, 2013. On the acquisition date, the retained earnings of Omambala Limited were N105 million. The fair value of non-controlling interest in Omambala Limited at the date of acquisition was N56 million. The financial statements of the two companies for the year ended December 31, 2017, are as follows:

Anambra Limited:

Item N’000
Non-current Assets 210,000
Investments 280,000
Current Assets:
Inventories 56,000
Trade and other receivables 42,000
Cash and cash equivalents 7,000
Total Assets 595,000
Share Capital 56,000
Share Premium 14,000
Retained Earnings 206,500
Loan Notes 210,000
Trade Payables 108,500
Total Equity and Liabilities 595,000

Omambala Limited:

Item N’000
Non-current Assets 157,500
Current Assets:
Inventories 52,500
Trade and other receivables 98,000
Cash and cash equivalents 17,500
Total Assets 325,500
Share Capital 42,000
Share Premium 7,000
Retained Earnings 175,000
Loan Notes 59,500
Trade Payables 42,000
Total Equity and Liabilities 325,500

Additional information:

  1. Anambra Limited sold goods to Omambala Limited for N35 million with a gross profit margin of 25%. As of December 31, 2017, 40% of the goods were still in Omambala Limited’s inventory.
  2. The fair values of Omambala’s net assets are equal to their carrying amounts at the acquisition date, except for land, which was included at a cost of N105 million and had a fair value of N126 million.

Required:
Prepare the consolidated statement of financial position for Anambra Limited group as at December 31, 2017.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2018 – L2 – SB – Q2b – Consolidated Financial Statements (IFRS 10)"

  • 20 Marks

FR – Nov 2019 – L2 – Q1 – Group Financial Statements and Consolidation

Consolidated statement of financial position of Atia Ltd and Santana Ltd as at 30 June 2019.

The draft statements of financial position of Atia Ltd and that of Santana Ltd as at 30 June 2019 are as follows:

Additional relevant information:
1) On July 1, 2018, Atia Ltd purchased 21 million shares of Santana Ltd. At this date, the retained earnings of Santana Ltd were estimated at GH¢17 million, and the revaluation surplus was GH¢2 million.
2) Atia Ltd paid an initial cash amount of GH¢46 million and agreed to pay Santana Ltd’s shareholders a further GH¢14 million on July 1, 2020. The financial accountant has recorded both elements of the consideration in investments.
3) Atia Ltd has a cost of capital of 8% per annum.
4) During the accounting period, Atia Ltd sold goods totaling GH¢4 million to Santana Ltd at a gross profit margin of 25%. As of 30 June 2019, Santana Ltd still had GH¢0.5 million of these goods in inventory. Atia Ltd has a normal margin of 45%.
5) On the acquisition date, the fair values of Santana Ltd’s net assets were equal to their carrying amounts, except for inventory, which had a cost of GH¢1.5 million but a fair value of GH¢1.8 million. As of 30 June 2019, 10% of these goods remained in Santana Ltd’s inventory.
6) Atia Ltd values non-controlling interest (NCI) at fair value. The NCI’s value at acquisition is estimated at GH¢7.5 million.
7) No impairment was recognized for goodwill.

Required: Prepare the consolidated statement of financial position of the Atia group as at 30 June 2019.
(20 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2019 – L2 – Q1 – Group Financial Statements and Consolidation"

  • 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)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – July 2023 – L2 – Q1 – Group Financial Statements and Consolidation"

  • 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.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2017 – L2 – Q1 – Group Financial Statements and Consolidation"

  • 20 Marks

FR – Nov 2021 – L2 – Q1 – Group Financial Statements and Consolidation

Prepare the Consolidated Statement of Financial Position for Sankofa Group considering investments, goodwill, and intra-group transactions.

The following statement of financial position relates to Sankofa and Kaakyire as at 31 October 2020.

Statement of Financial Position Sankofa (GH¢’000) Kaakyire (GH¢’000)
Non-current assets
Property, Plant and Equipment 37,000 30,000
Investment Property 5,000 –
Investments 24,000 –
Total Non-current assets 66,000 30,000
Current assets
Inventory 9,000 8,000
Other current assets 21,000 14,000
Total Current assets 30,000 22,000
Total assets 96,000 52,000
Equity and liabilities
Ordinary shares (issued @ GH¢2.50) 20,000 8,000
Retained earnings 26,000 16,000
Total Equity 46,000 24,000
Non-current liabilities
10% debentures 11,900 12,000
Current liabilities
Payables 38,100 16,000
Total Equity and liabilities 96,000 52,000

Additional information:
i) On 1 November 2018, Sankofa purchased 2.4 million of the ordinary shares of Kaakyire when Kaakyire’s retained earnings balance stood at GH¢11 million. There have been no movements in share capital since the acquisition. As part of the consideration given for the shares acquired, the shareholders of Kaakyire accepted 1 million shares worth GH¢7 million in Sankofa at acquisition. The remaining consideration was agreed to be paid on 31 October 2020 for GH¢12.1 million. The present values of GH¢1 receivable based on 10% (considered to be an appropriate discount rate for Sankofa) are as follows:

Present Value of GH¢1 receivable
In one year’s time:
In two years’ time:

Entries have been correctly passed for the effects of all of the above, including any unwound discounts, except for the final payment made on 31 October 2020.

ii) At acquisition, the fair values of Kaakyire’s assets, liabilities, and contingencies were equal to their carrying amounts, with the exception of the following assets:

Carrying amount (GH¢’000) Fair value (GH¢’000)
Trade receivables 1,250
Inventory 1,500
Properties 14,000

The properties had a remaining useful life of 10 years. No items of property were sold during the two years to 31 October 2020. The inventory and the receivable were realised during the post-acquisition period.

iii) On 1 November 2019, Kaakyire sold an item of plant to Sankofa for GH¢5 million. Kaakyire originally bought the plant from Gyidie for GH¢6 million, and Kaakyire had provided accumulated depreciation of GH¢2.2 million up to the date of sale. Kaakyire considered the plant to have a remaining useful life of 5 years at the date of transfer.

iv) The Investment Property in the books of Sankofa represents an office facility that was completed on 1 November 2018 at the cost of GH¢3.5 million. The useful economic life of the facility was estimated at 20 years. Immediately after the acquisition of Kaakyire, Sankofa began to rent this property out to Kaakyire under a lease agreement. Sankofa Group values its investment properties using the fair value model under IAS 40 Investment Properties and its owner-occupied properties using the cost model under IAS 16 Property, Plant and Equipment.

v) On 1 November 2019, Sankofa acquired 30% of the ordinary shares of Kaboom at the cost of GH¢6 million. During the year ended 31 October 2020, Kaboom reported a profit after tax of GH¢2 million. No dividends were paid or declared by Kaboom during the period. At year-end, Kaboom’s inventory included GH¢1.2 million worth of goods bought from Sankofa during the year to October 2020. Sankofa charges a 25% margin on all sales.

On 31 October 2019, Goodwill acquired in Kaakyire was attributed with an impairment loss of GH¢0.5 million. The group’s policy is to measure non-controlling interest at the proportion of the fair value of the subsidiary’s net assets.

Required:
Prepare the Consolidated Statement of Financial Position for the Sankofa Group as at 31 October 2020.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Nov 2021 – L2 – Q1 – Group Financial Statements and Consolidation"

  • 20 Marks

FR – May 2016 – L2 – Q2 – Group Financial Statements and Consolidation

Prepare a consolidated statement of financial position and calculate the non-controlling interest for H Plc, and explain the need to consolidate fair values.

On 1st April 2014, H Plc. acquired four million of the ordinary shares of S Ltd, paying GH¢4.50 each. At the same time, H Plc also purchased GH¢500,000 of S Ltd 10% redeemable preference shares. At the acquisition date, the retained earnings of S Ltd were GH¢8,400,000.

Reproduced below are the draft statements of financial positions of the two companies at 31st March 2015:

Extracts from the statement of profit or loss of S Ltd, before intra group
adjustments, for the year to 31st March 2015 are:

The following information is relevant:

  1. Included in the land and buildings of S Ltd is a large area of development land at a cost of GH¢5 million. Its fair value at the date S Ltd was acquired was GH¢7 million, and by 31st March 2015, this had risen to GH¢8.5 million. The group valuation policy for development land is to carry it at fair value and not depreciate it.
  2. At the date of acquisition of S Ltd, its plant and equipment included plant that had a fair value of GH¢4 million in excess of its carrying value. This plant had a remaining life of 5 years. Depreciation is calculated on a straight-line basis.
  3. During the year, S Ltd sold goods to H Plc. for GH¢1.8 million. S Ltd adds a 20% mark-up on cost to all its sales. Goods with a transfer price of GH¢450,000 were included in the inventory of H Plc. at 31st March 2015. The balance on the current accounts between H Plc. and S Ltd was GH¢240,000 on 31st March 2015.
  4. An impairment test carried out at 31st March 2015 showed that consolidated goodwill was impaired by GH¢1,488,000.
  5. S Ltd had paid its preference dividends in full and ordinary dividends of GH¢500,000.

Required:

  1. Prepare the consolidated statement of financial position of H Plc. as at 31st March 2015.
  2. Calculate the non-controlling interest in the adjusted profit of S Ltd for the year to 31st March 2015.
  3. Explain why IFRS 3 Business Combinations requires an acquirer to consolidate the fair values of the assets and liabilities of an acquired subsidiary, at the acquisition date.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2016 – L2 – Q2 – Group Financial Statements and Consolidation"

  • 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.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – March 2024 – L2 – Q1 – Group Financial Statements and Consolidation"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@nbcinstitute.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
error: Content is protected !!
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan