- 4 Marks
AAA – May 2019 – L3 – Q1c – Group Audits
Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.
Question
Abuakwa Ltd acquired a property in April 2018 at a cost of GH¢2.64 million. The property was not in a good state of repair, but Abuakwa needed office space for critical administration functions in a central location and moved some staff in immediately. In January 2019, more suitable accommodation became available for the staff, who were quickly relocated. A decision was taken to sell the property. Hence, it was decided not to provide any depreciation on the property in respect of the year under review.
However, significant remedial work was needed before the sale could be completed. This was commenced in early February 2019. The cost of this work is being expensed as ‘Repairs and Maintenance’ as incurred.
The property has a reserve price of at least GH¢4.2 million at a public auction scheduled for 30 June 2019. The property is classified as ‘Held for Sale’ at the year-end under IFRS 5: Non-current Assets held for Sale and Discontinued Operations at a value of GH¢4.2 million, and a gain of GH¢1.56 million has been recognised in the draft Consolidated Statement of Profit or Loss and Other Comprehensive Income.
(8 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Consolidation, Equity Method, IFRS Compliance, Subsidiary Accounting
- Level: Level 3
- Topic: Group audit
- Series: MAY 2019