- 20 Marks
CR – Dec 2022 – L3 – Q1 – Consolidated Financial Statements
Prepare the consolidated financial statement for Blackstars Ltd, accounting for business combinations and pensions.
Question
Blackstars Ltd is a very successful SME business operating in a very good commercial location in Accra. The following statements of financial position are as at 30 June 2022:
| Blackstars Ltd | Meteors Ltd | Satellite Ltd | |
|---|---|---|---|
| Assets: | |||
| Tangible non-current assets | GH¢1,024m | GH¢352m | GH¢224m |
| Investment in Meteors Ltd | GH¢320m | – | – |
| Investment in Satellite Ltd | GH¢48m | – | – |
| Current assets | GH¢435m | GH¢152m | GH¢104m |
| Total assets | GH¢1,827m | GH¢504m | GH¢328m |
| Equity and liabilities: | |||
| Share capital | GH¢760m | GH¢208m | GH¢184m |
| Revaluation reserve | GH¢72m | – | – |
| Retained earnings | GH¢312m | GH¢168m | GH¢75.2m |
| Total equity | GH¢1,144m | GH¢376m | GH¢259.2m |
| Non-current liabilities | GH¢512m | GH¢24m | GH¢12.8m |
| Current liabilities | GH¢171m | GH¢104m | GH¢56m |
| Total equity and liabilities | GH¢1,827m | GH¢504m | GH¢328m |
Additional information:
- On 1 July 2019, Blackstars Ltd acquired 10% holding of Meteors Ltd when the fair value of the net assets was GH¢260 million at a purchase consideration of GH¢24 million. On 1 July 2021, Blackstars Ltd further acquired 70% holding in Meteors Ltd when the fair value of the net assets was GH¢368 million at a purchase consideration of GH¢296 million.
- The estimated fair value of the initial 10% investment in the shares of Meteors Ltd was GH¢32 million at 30 June 2021.
- Blackstars Ltd wishes to use the full fair value method of accounting for the acquisition of Meteors Ltd. At 1 July 2021, the estimated value of the non-controlling interests was GH¢76 million.
- The difference between the carrying amount of Meteors Ltd’s net assets and their fair value at the date of acquisition was due to land valued at cost, which on 1 July 2021 had a fair value of GH¢20 million in excess of its carrying value. There has been no subsequent significant change in that value.
- On 1 July 2021, Blackstars Ltd acquired 25% holdings in Satellite Ltd when the fair value of the net assets was GH¢160 million for a purchase consideration of GH¢48 million.
- On 1 July 2021, the fair value of Satellite Ltd’s land was GH¢12.8 million in excess of its carrying value. There has been no subsequent significant change in that value.
- Goodwill arising on acquisition is tested for impairment at each year end. The recoverable amount of goodwill in Meteors Ltd at 30 June 2022 was GH¢24 million. There has been no impairment of the investment in Satellite Ltd.
- During the year, the Directors of Blackstars Ltd decided to form a defined benefit pension scheme for its employees. The company contributed cash amounting to GH¢200 million to the scheme but the only accounting entry for this has been to include it in receivables at 30 June 2022. At 30 June 2022, the following details relate to the pension scheme:
| GH¢’million | |
|---|---|
| Present value of obligation | 253.6 |
| Fair value of plan assets | 241.6 |
Required:
Prepare the consolidated statement of financial position of the Blackstars Ltd group as at 30 June 2022.
(Total: 20 marks)
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